Exhibit 10.3
SECURITY INTEREST IN INVENTORY UNDER UNIFORM
COMMERCIAL CODE SUPPLEMENT TO FINANCING
OR FACTORING CONTRACT
To: Xxxxxxx Factors, Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Gentlemen:
This is a supplement to our Factoring Agreement with you bearing the
effective date of February 9, 2004. It is hereby incorporated therein, shall
have a term concurrent therewith and is deemed in all respects a part thereof.
1. In addition to your other security, we hereby grant you a continuing
security interest under the Uniform Commercial Code in all Inventory now and
hereafter owned by us. The term "Inventory" means and includes all merchandise
intended for sale by us and all raw materials, goods in process, finished goods,
materials and supplies of every nature used or useable in connection with the
manufacture, packing, shipping, advertising or sale of such merchandise, all of
which may be described generally (but without limitation) as:
Karaoke machines, CD plus graphics, audiocassette tapes, recorded music and
all products incidental to the manufacture and shipping thereof
We warrant that all Inventory is and will be owned by us, free of all other
liens, encumbrances and security interests.
2. Your security interests in the Inventory shall continue through all
stages of manufacture and shall, without further act, attach to goods in
process, to the finished goods, to the accounts receivable or other proceeds
resulting from the sale or other disposition thereof and to all such Inventory
as may be returned to us by customers.
3. The Inventory shall be security for all Advances made pursuant to
the Factoring Agreement and/or loans and advances to the undersigned under the
Factoring Agreement, as originally existing and as hereby and at any time
heretofore or hereafter supplemented or amended as well as for all other loans
and advances to us or for our account by you or your subsidiaries and for all
commissions, obligations, indebtedness, interest, charges and expenses
chargeable to our account or due from us from time to time, however arising, and
whether or not evidenced by notes or other instruments. Until all such
obligations have been paid in full, your security interest in the Inventory and
all proceeds thereof, shall continue in full force and effect and you will at
all times have the right to take possession of the Inventory and to maintain
such possession on our premises or to remove the Inventory or any part thereof
to such other places as you may desire. If you exercise your right to take
possession of the Inventory, we shall, upon your demand, assemble the Inventory
and make it available to you at a place reasonably convenient to you. In
addition, with respect to all Inventory as well as all Receivables and other
security, you shall be entitled to all of the rights and remedies set forth in
the Factoring Agreement and all of the rights provided by the Uniform Commercial
Code.
4. Upon our request, you may make Advances to us prior to our sale of
Inventory. Any such Advances will be made at your sole discretion, will be
charged by you to our account and will bear interest payable in the manner and
at the rate specified in the Factoring Agreement. All such Advances shall be
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payable by us on demand and recourse to the security therefor will not be
required at any time. Their amounts and the relation thereof to the value of the
Inventory will be determined by you alone.
5. Except for sales made in the regular course of our business, we
shall not sell, encumber or dispose of or permit the sale, encumbrance or
disposal of any Inventory without your prior written consent. As sales are made
in the regular course of business, we shall, in accordance with the provisions
of the Factoring Agreement, immediately execute and deliver to you schedules and
assignments of all Receivables created thereby. If sales are made for cash, we
shall immediately deliver to you the identical checks, cash or other forms of
payment which we receive. All payments received by you on account of cash sales
of Inventory as well as on account of Receivables will be credited to our
account in accordance with the provisions of the Factoring Agreement.
6. We shall perform any and all steps requested by you to perfect your
security interest in the Inventory, such as leasing warehouses to you, placing
and maintaining signs, appointing custodians, executing and filing financing or
continuation statements in form and substance satisfactory to you, maintaining
stock records and transferring Inventory to warehouses. If any Inventory remains
in the possession or control of any of our agents or processors, we shall notify
such agents or processors of your security interest therein, and upon request,
instruct them to hold all such Inventory for your account and subject to your
instructions. A physical listing of all Inventory, wherever located, shall be
taken by us at least annually, and a copy of each such physical listing shall be
supplied to you. A perpetual inventory shall be maintained by us by location and
product, and a copy of such perpetual inventory shall be supplied to you monthly
and at such other times as you may request. You may examine and inspect the
Inventory at any time.
7. We shall have the Inventory insured in your name against loss or
damage by fire, theft, burglary, pilferage, loss in transportation and such
other hazards as you shall specify, by insurers, in amounts and under policies
acceptable to you, and all premiums thereon shall be paid by us and the policies
delivered to you. If we fail to do so, you may procure such insurance and charge
the cost to us.
Attest: Very truly yours,
THE SINGING MACHINE COMPANY, INC.
/s/ Xxxxx Xxxxx By: /s/ Xx Xxxx Xxxx
------------------------ ------------------------------
Xx Xxxx Xxxx, Interim CEO & COO
(Seal) Dated: February 9, 2004
Accepted at New York, N.Y.
Attest: on February 9, 2004
XXXXXXX FACTORS, INC.
/s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxxx
------------------------ -------------------------
Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxxx,
Senior Vice President, Senior Vice President
Secretary & Treasurer
(Seal)
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