EXHIBIT 10.22
September 1, 2006
Xxxxx Xxxx, LLC d/b/a Xxxxxxx Xxxx
000 Xxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxxx Xxxx
Re: Inventory Loan Facility
Dear Xxxxx:
Reference is made to (i) the Factoring Agreement between FTC Commercial Corp.
("FTC") and Xxxxx Xxxx, LLC d/b/a Xxxxxxx Xxxx (the "Company") dated October 12,
2005 (as supplemented or amended from time to time, the "Factoring Agreement")
and (ii) the Continuing Security Agreement between FTC and the Company of the
date herewith (as supplemented or amended from time to time, the "Security
Agreement"). The Factoring Agreement, the Security Agreement, and all agreements
now or hereafter entered into between FTC and the Company shall be referred to
herein collectively as the "Company Agreements."
Except as otherwise provided in this letter agreement (this "Agreement"), any
capitalized terms used herein but not defined in this Agreement shall have the
meanings assigned to such terms in the Factoring Agreement.
For purposes of this Agreement:
"Inventory" as used herein shall have the meaning set forth in the
Security Agreement.
"Inventory Base" means up to fifty percent (50.0%) of the value (the
lesser of cost or market) of the Company's raw material and finished
goods Inventory which FTC determines, in its sole discretion, to be
eligible for inclusion in the Inventory Base. Without limiting the
generality of the foregoing, the following Inventory shall not be
eligible for inclusion in the Inventory Base if (i) such Inventory is
over one hundred eighty (180) days old; (ii) such Inventory is
defective or damaged; (iii) such Inventory is not located at the
Company's premises at 000 X. Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000;
(iv) such Inventory is located at any real property leased by the
Company or at any contract warehouse, unless such Inventory is subject
to a collateral access agreement acceptable to FTC and executed by the
lessor or warehouseman, as the case may be, and unless such Inventory
is separately identifiable from the goods of others, if any, stored on
the premises; (v) the Company does not have good, valid, and marketable
title to such Inventory; (vi) such Inventory is not subject to a valid
and perfected first priority security interest in favor of FTC; (vii)
such Inventory consists of xxxx and hold goods or goods acquired on
consignment or (viii) such Inventory consists of work in process.
"Obligations" means the any and all obligations of the Company under
this Agreement and the Company Agreements.
This Agreement shall confirm our mutual understanding and agreement that,
subject to the terms and conditions of the Company Agreements, and provided that
no default or Event of Default under any of the Company Agreements and no
termination of the Factoring Agreement has occurred, FTC may, in its sole and
absolute discretion, extend an inventory loan facility to the Company in an
aggregate principal amount outstanding at any time not to exceed the lesser of
(a) the Inventory Base or (b) up to $1,000,000 MINUS the aggregate amount of
then outstanding inventory loans made to (i) Versatile Entertainment,
Inc.("Versatile") under the Inventory Loan Facility between BRL and FTC of even
date herewith (as amended from time to time, the "Versatile Facility Agreement")
and (ii) any subsidiaries of the Company (the "Company Subsidiaries") which
enter into factoring and inventory loan arrangements with FTC (the "Company
Subsidiaries Agreements")
The interest rate charged on outstanding inventory loans under this Agreement
will be the same rate charged in Section 23 of the Factoring Agreement and will
be calculated, computed and payable in accordance with the provisions of Section
23.
This Agreement shall terminate, at FTC's discretion, on the date which is the
earlier to occur of: (a) the date on which a default or Event of Default occurs
under this Agreement, the Company Agreements, the Factoring Agreement between
FTC and Versatile dated October 14, 2004 (as amended, the "Versatile Factoring
Agreement"), the Versatile Facility Agreement, any of the other agreements
between Versatile and FTC (the Versatile Factoring Agreement, the Versatile
Facility Agreement and all such other agreements between Versatile and FTC are
collectively the "Versatile Agreements"), or the Company Subsidiaries
Agreements; or (b) the date on which the Factoring Agreement or the Versatile
Factoring Agreement or any factoring agreement between FTC and any of the
Company Subsidiaries is terminated in accordance with the notice provisions
thereof.
In order to induce FTC to extend the foregoing inventory loan facility to the
Company, the Company agrees that, so long as the Factoring Agreement remains in
effect and any of the Obligations have not been paid and performed in full:
i. The Company shall, no later than ten (10) days after
the end of each month, provide to FTC: (a) an
Inventory Certification or designation in the form
attached hereto as "Attachment A" or in such other
form as is acceptable to FTC; (b) an aging of all
Inventory as of the end of such month, in form and
substance acceptable to FTC; and (c) a report
detailing the piece goods, the work-in-process, the
finished goods Inventory available for sale, and the
finished goods Inventory sold as of the end of such
month, in form and substance acceptable to FTC.
ii. The Company shall not, without FTC's prior written
consent which shall not be unreasonably withheld,
sell, lease, transfer, assign, abandon or otherwise
dispose of any of the Company's assets in which FTC
has been granted a first priority security interest
under any
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of the Company Agreements, excluding: (a) assignments
of the Company's accounts to FTC under the Factoring
Agreement, (b) sales of Inventory to the Company's
customers in the ordinary course of the Company's
business and operations, (c) licenses of the
Company's tradenames, (d) sales or transfers of the
Company's tradenames to Versatile or the Company
Subsidiaries or any other affiliates of the Company
which enter into a factoring agreement with FTC, and
(e) the sale, lease, transfer, assignment,
abandonment or other disposition of Inventory that is
not be eligible for inclusion in the Inventory Base
and/or Equipment (as defined in the Security
Agreement) which is not essential for the business
and operations provided that the aggregate fair
market value of such Inventory and/or Equipment does
not exceed $100,000 during any of the Company's
fiscal years.
iii. The Company shall not, without FTC's prior written
consent which shall not be unreasonably withheld,
become a guarantor, a surety, or otherwise liable for
the debts or other obligations of any other person or
firm including, without limitation, Versatile, the
Company Subsidiaries or any other affiliates of the
Company, in excess of an aggregate amount $100,000
outstanding at any time, excluding debts or other
obligations of Versatile, the Company Subsidiaries or
any other affiliates of the Company to FTC.
iv. The Company shall, at the time the Company
Subsidiaries or any other affiliates of the Company
are formed under the laws of the state in which the
Company Subsidiaries or any other affiliates of the
Company are organized, give FTC written notice of any
such formation.
The inventory loan facility outlined in this Agreement shall be subject to the
satisfaction of each of the following conditions precedent in a manner
satisfactory to FTC:
i. The representations and warranties contained herein
and in each of the other Company Agreements shall be
true and correct as of the date of any inventory
loans made under this Agreement.
ii. No default or Event of Default under this Agreement,
the Company Agreements, the Versatile Agreements or
the Company Subsidiaries Agreements shall have
occurred or would occur as a result of any extension
of credit under the facility described herein.
iii. FTC shall have received originals of this Agreement
and the Security Agreement, both of the foregoing to
be dated as of the date hereof and to be duly
executed by the Company, and originals of Guaranties
of the Obligations, in the forms provided to the
Company by FTC, both of the foregoing to be dated as
of the date hereof and to be duly executed by
Versatile and People's Liberation, Inc., as
applicable.
Nothing herein shall be construed as limiting or modifying in any way any of
FTC's rights
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under the Company Agreements, including without limitation, FTC's rights, to be
exercised in its sole and absolute discretion, to hold any reserve FTC deems
necessary as security for payment and performance of the Obligations, change any
advance rates, cease making advances or other financial accommodations to the
Company and determine standards of eligibility. The Obligations shall be secured
by a first lien on and security interest in all of the assets of the Company in
which the Company has granted FTC a security interest under the Company
Agreements. The failure to perform any of the terms and conditions of this
Agreement or the breach of any of the representations or warranties contained in
this Agreement shall constitute a default or an Event of Default under the
Company Agreements, the Versatile Agreement and the Company Subsidiaries
Agreements and the failure to perform any of the terms and conditions of, or the
breach of any of the representations or warranties contained in, the Company
Agreements, the Versatile Agreements or the Company Subsidiaries Agreements
shall constitute a default under this Agreement.
The foregoing is based upon the financial condition of the Company as set forth
in its financial statements for the three months ended June 30, 2006, as filed
with the Securities and Exchange Commission in its Form 10-QSB. In addition, by
its signature below, the Company further represents and warrants that there has
been no material adverse change in the Company's financial condition since such
statement was prepared.
Please sign below to acknowledge that the Company is in agreement with all of
the foregoing.
Very truly yours, ACKNOWLEDGED AND AGREED TO:
FTC COMMERCIAL CORP. XXXXX XXXX, LLC d/b/a XXXXXXX XXXX
By: /s/ Xxx Xxxxxxx By: /s/ Xxxxx Xxxx
----------------------------- --------------------------------
Name: Xxx Xxxxxxx Name: Xxxxx Xxxx
Title: President Title: Manager and Chief Executive
Officer
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