AMENDED AND RESTATED INVENTORY SECURITY AGREEMENT
Exhibit
10.2
June
22,
2007
Universal
Security Instruments, Inc.
0
Xxxxxx
Xxxx Xxxxx
Xxxxxx
Xxxxx , Xxxxxxxx 00000
AMENDED
AND RESTATED INVENTORY SECURITY AGREEMENT
Ladies
and Gentlemen:
This
Amended and Restated Inventory Security Agreement shall amend, replace and
supersede in its entirety the Inventory and Security Agreement Supplement to
Factoring Agreement executed by you in favor of us, dated February 28, 1995,
as
supplemented and amended. This
agreement is being executed by you to induce us to enter into or continue a
factoring or financing arrangement with you, and is executed in consideration
of
our doing or having done any of the foregoing.
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1.
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ADVANCES
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1.1
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We
are considering making advances to you in our sole discretion and
from
time to time of up to 50% of the value of your Eligible Inventory
(as
hereinafter defined) calculated on the basis of the lower of cost
or
market, with cost calculated on a first in-first out basis. Eligible
Inventory shall mean the gross amount of your Inventory (as hereinafter
defined) that is subject to a valid, exclusive, first priority and
fully
perfected security interest in our favor and which Inventory at all
times
continues to be acceptable to us in our reasonable business judgement
and
less any a) work-in-process, b) supplies, other than raw material,
c)
Inventory not present in the United States of America, d) Inventory
returned or rejected by your customers other than goods that are
undamaged
and resalable in the normal course of business, e) Inventory to be
returned to your suppliers, f) Inventory in transit to third parties
(other than your agents or warehouses), g) Inventory in possession
of a
warehouseman, bailee or other third party, unless such warehouseman,
bailee or third party has executed a notice of security interest
agreement
(in form and substance satisfactory to us) and we have taken all
other
action required to perfect our security interest in such Inventory,
and h)
less any reserves required by us in our reasonable discretion, including
for special order goods, discontinued, slow-moving and obsolete Inventory,
market value declines, xxxx and hold (deferred shipment), consignment
sales and shrinkage.
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1.2
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The
amount of the loans and advances made or to be made by us to you,
and the
period of time during which they are to remain outstanding shall
at all
times be in our sole discretion. The ratio of Eligible Inventory
to such
loans and advances and to the other Obligations (“as hereinafter defined”)
referred to herein must be satisfactory to us at all times, and the
valuation and acceptability of the Eligible Inventory is to be determined
exclusively by us. We are to be at liberty, from time to time, without
responsibility or liability to you, to revise any limit placed by
us on
loans and advances or other Obligations. Furthermore, all such advances
remain payable to us on demand.
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1.3
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Nothing
contained herein shall be construed as limiting or modifying, in
any way,
our right to: (a) hold any reserve we deem necessary as security
for
payment and performance of your Obligations, and/or (b) change the
aforementioned advance rate or entirely cease making
advances.
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2.
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GRANT
OF SECURITY INTEREST
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2.1
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As
security for the prompt payment in full of all Obligations (as hereinafter
defined) due by you from time to time to us, in conjunction with
the
factoring or accounts receivable financing agreement between us,
as
amended from time to time (herein the "Agreement"), you hereby pledge
and
grant to us a continuing general lien upon, and security interest
in
(herein "Security Interest"), the following described
"Inventory":
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All
present and hereafter acquired merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods and materials used or usable in manufacturing, processing,
packaging or shipping same; in all stages of production -- from raw materials
through work-in-process to finished goods -- and all proceeds of whatever
sort.
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2.2
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The
Security Interest in the Inventory shall extend and attach
to:
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(a)
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All
Inventory which is presently in existence and which is owned by you
or in
which you have any ownership interest, and all Inventory which you
may
purchase or in which you may acquire any ownership interest at any
time
and from time to time in the future, whether such Inventory is in
transit
or in your or our constructive, actual or exclusive possession, or
is held
by others for your account;
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(b)
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All
Inventory wherever located, including, without limitation, all Inventory
which may be located on your premises or upon the premises of any
carriers, forwarding agents, truckers, warehousemen, vendors, selling
agents, finishers, converters, processors, or other third persons
who may
have possession of the Inventory;
and
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(c)
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All
Inventory and any portion thereof which may be returned, rejected,
reclaimed or repossessed by either of us from your customers, as
well as
to all supplies, goods, incidentals, packaging materials, and any
other
items which contribute to the finished goods or products manufactured
or
processed by you, or to the sale, promotion or shipment
thereof.
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3.
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OBLIGATIONS
SECURED
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The
Security Interest granted hereunder and any lien or security interest that
we
now or hereafter have in any of your other assets, collateral or property,
secure the payment and performance of all of your now existing and future
indebtedness and obligations to us, whether absolute or contingent, whether
arising under the Agreement, this agreement or any other agreement or
arrangement between us, by operation of law or otherwise including ledger debt
(which is indebtedness for goods and services purchased by you from any party
whose accounts receivable are factored or financed by us), and indebtedness
arising under any guaranty, credit enhancement or other credit support granted
by us in your favor, including any accommodation extended with respect to
applications for letters of credit, our acceptance of drafts or our endorsement
of notes or other instruments for your account and benefit (herein the
“Obligations”). Obligations shall also include, without limitation, all
interest, commissions, financing and service charges, and expenses and fees
chargeable to and due from you under this agreement, the Agreement or any other
agreement or arrangement which may be now or hereafter entered into between
us.
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4.
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REPRESENTATIONS,
WARRANTIES AND COVENANTS
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4.1
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You
agree to safeguard, protect and hold all Inventory for our account
and
make no disposition thereof except in the regular course of your
business
as herein provided. You represent and warrant that Inventory will
be sold
and shipped by you to your customers only in the ordinary course
of your
business and then only on open account and on terms not exceeding
the
terms currently being extended by you to your customers, provided
that all
proceeds of all sales (including cash, accounts receivable, checks,
notes,
instruments for the payment of money and similar proceeds) are forthwith
transferred, assigned, endorsed, and turned over and delivered to
us.
Invoices covering sales of Inventory are to be assigned to us in
accordance with the provisions of the Agreement, and the proceeds
thereof
(if collected by you) are to be turned over to us in accordance with
the
provisions of the Agreement. Cash sales of Inventory, or sales in
which a
lien upon or security interest in the Inventory is retained by you
shall
only be made by you with our written approval, and all proceeds of
such
sales shall not be commingled with your other property, but shall
be
segregated, held by you in trust for us as our exclusive property,
and
shall be delivered immediately by you to us in the identical form
received
by you. Upon the sale, exchange, or other disposition of the Inventory,
as
herein provided, the Security Interest provided for herein shall,
without
break in continuity and without further formality or act, continue
in, and
attach to, all proceeds, including any instruments for the payment
of
money, accounts receivable, contract rights, documents of title,
shipping
documents, chattel paper and all other cash and non-cash proceeds
of such
sale, exchange or disposition. As to any such sale, exchange or other
disposition, we shall have all of the rights of an unpaid seller,
including stopping in transit, replevin, rescission and
reclamation.
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2
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4.2
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You
hereby warrant and represent that you are solvent; that this Security
Interest constitutes and shall at all times constitute a first and
only
lien on the Inventory; that you are, or will be at the time additional
Inventory is acquired by you, the absolute owner of the Inventory
with
full right to pledge, sell, consign, transfer and create a Security
Interest therein, free and clear of any and all claims or liens in
favor
of others; that you will at your expense forever warrant and, at
our
request, defend the same from any and all claims and demands of any
other
person; and that you will not grant, create or permit to exist, any
lien
upon or security interest in the Inventory, or any proceeds, in favor
of
any other person.
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4.3
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You
agree to comply with the requirements of all state and federal laws
in
order to grant to us a valid and perfected first Security Interest
in the
Inventory. We are hereby authorized by you to file any financing
statements or amendments covering the Inventory whether or not your
signature appears thereon. To the extent permitted by applicable
law, you
authorize us to sign your name, or to file financing statements or
continuations or amendments without your signature, all in order
to
create, perfect or maintain our security interest in the Inventory.
You
agree to do whatever we may request, from time to time, by way of;
leasing
warehouses; filing notices of lien, financing statements, amendments,
renewals and continuations thereof; cooperating with our agents and
employees; keeping Inventory records; obtaining waivers from landlords
and
mortgagees; and performing such further acts as we may require in
order to
effect the purposes of this
agreement.
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4.4
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You
agree to maintain insurance on the Inventory under such policies
of
insurance, with such insurance companies, in such amounts and covering
such risks as are at all times satisfactory to us. All policies covering
the Inventory are to be made payable to us, in case of loss, under
a
standard non-contributory "mortgagee", "lender" or "secured party"
clause
and are to contain such other provisions as we may require to fully
protect our interest in the Inventory and to any payments to be made
under
such policies. All original policies or true copies thereof are to
be
delivered to us, premium prepaid, with the loss payable endorsement
in our
favor, and shall provide for not less than thirty (30) days prior
written
notice to us of the exercise of any right of cancellation. At your
request, or if you fail to maintain such insurance, we shall arrange
for
such insurance, but at your expense and without any responsibility
on our
part for: obtaining the insurance, the solvency of the insurance
companies, the adequacy of the coverage, or the collection of claims.
The
insurance we purchase may not pay any claims made by you or against
you in
connection with your Inventory. You are responsible for the costs
of this
insurance, including interest and any other charges we may impose
in
connection with the purchase of this insurance. The costs of this
insurance may be more than insurance you can buy on your own. You
may
still obtain insurance of your own choosing, subject to the terms
and
conditions of this paragraph 0, on the Inventory. If you provide
us with
proof that you have obtained adequate insurance on your Inventory,
we will
cancel the insurance that we purchased and refund or credit any unearned
premiums to you. In the event that we purchase such insurance, we
will
notify you of said purchase within thirty (30) days after the date
of such
purchase. If, within thirty (30) days after the date notice was sent
to
you, you provide us with proof that you had adequate insurance on
your
Inventory as of the date we also purchased insurance and that you
continue
to have the insurance that you purchased yourself, we will cancel
the
insurance that we purchased without charging you any costs, interest,
or
other charges in connection with the insurance that we purchased.
Unless
we shall otherwise agree with you in writing, we shall have the sole
right, in our name or yours, to file claims under any insurance policies,
to receive, receipt and give acquittance for any payments that may
be
payable thereunder, and to execute any and all endorsements, receipts,
releases, assignments, reassignments or other documents that may
be
necessary to effect the collection, compromise or settlement of any
claims
under any such insurance policies.
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4.5
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You
agree to pay, when due, all taxes, assessments, claims and other
charges
(herein "taxes") lawfully levied or assessed upon the Inventory unless
such taxes are being diligently contested in good faith by you by
appropriate proceedings and adequate reserves are established in
accordance with GAAP. Notwithstanding the foregoing, if such taxes
remain
unpaid after the date fixed for the payment thereof, and a lien therefor
shall be claimed which in our opinion might create a valid obligation
having priority over the rights granted to us herein, we may then,
without
notice to you, on your behalf, pay such taxes, and the amount thereof
shall be an Obligation secured hereby and due to us on demand. “GAAP”
shall mean generally accepted accounting principles in the United
States
of America as in effect from time to time and for the period as to
which
such accounting principles are to
apply.
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3
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4.6
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Any
and all fees, costs and expenses, of whatever kind and nature, (including
any taxes, attorneys' fees or costs for insurance of any kind), which
we
may incur in filing public notices; in preparing or filing documents,
making title examinations; in protecting, maintaining, or preserving
the
Inventory; in enforcing or foreclosing the Security Interest hereunder,
whether through judicial procedures or otherwise; or in defending
or
prosecuting any actions or proceedings arising out of or related
to our
transactions with you under this arrangement, shall be borne and
paid by
you. If same are not promptly paid by you, we may pay same on your
behalf,
and the amount thereof shall be an Obligation secured hereby and
due to us
on demand.
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4.7
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You
agree to comply with all acts, rules, regulations, and orders of
any
legislative, administrative or judicial body or official, applicable
to
the Inventory or any part thereof, or to the operation of your business;
provided that you may contest any acts, rules, regulations, orders
and
directions of such bodies or officials in any reasonable manner which
will
not, in our opinion, adversely affect our rights or priority in the
Inventory hereunder.
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5.
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BOOKS
AND RECORDS AND
EXAMINATIONS
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5.1
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You
agree to maintain Books and Records pertaining to the Inventory in
such
detail, form and scope as we shall reasonably require. “Books and Records”
means your accounting and financial records (whether paper, computer
or
electronic), data, tapes, discs, or other media, and all programs,
files,
records and procedure manuals relating thereto, wherever
located.
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5.2
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You
agree that we or our agents may enter upon your premises at any time
during normal business hours, and from time to time, for the purpose
of
inspecting the Inventory and any and all Books and Records pertaining
thereto. You agree to notify us promptly of any change in your name,
mailing address, principal place of business or the location of the
Inventory. You are also to advise us promptly, in sufficient detail,
of
any substantial change relating to the type, quantity or quality
of the
Inventory, or any event which would have a material effect on the
value of
the Inventory or on the Security Interest granted to us
herein.
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5.3
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You
agree to: execute and deliver to us, from time to time, solely for
our
convenience in maintaining a record of the Inventory, such consignments
or
written statements as we may reasonably require, designating, identifying
or describing the Inventory pledged to us hereunder. Your failure,
however, to promptly give us such consignments, or other statements
shall
not affect, diminish, modify or otherwise limit our Security Interest
in
the Inventory.
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6.
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EVENTS
OF DEFAULT AND REMEDIES UPON
DEFAULT
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6.1
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It
is an “Event of Default” under this agreement if an Event of Default
occurs under the Agreement.
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6.2
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After
the occurrence of an Event of Default which is not waived by us,
we shall
have the right, with or without notice to you, to foreclose the Security
Interest created herein by any available judicial procedure, or to
take
possession of the Inventory without judicial process, and to enter
any
premises where the Inventory may be located for the purpose of taking
possession of or removing the Inventory. We shall have the right,
without
notice or advertisement, to sell, lease, or otherwise dispose of
all or
any part of the Inventory, whether in its then condition or after
further
preparation or processing, in your name or in ours, or in the name
of such
party as we may designate, either at public or private sale or at
any
broker's board, in lots or in bulk, for cash or for credit, with
or
without warranties or representations, and upon such other terms
and
conditions as we in our sole discretion may deem advisable, and we
shall
have the right to purchase at any such sale. If notice of intended
disposition of any said Inventory is required by law, five (5) days
notice
shall constitute reasonable notification. If any Inventory shall
require
maintenance, preparation, or is in process or other unfinished state,
we
shall have the right, at our option, to do such maintenance, preparation,
processing or completion of manufacturing, for the purpose of putting
the
Inventory in such saleable form as we shall deem appropriate. You
agree,
at our request, to assemble the Inventory and to make it available
to us
at places which we shall select, whether at your premises or elsewhere,
and to make available to us your premises and facilities for the
purpose
of our taking possession of, removing or putting the Inventory in
saleable
form. The proceeds of any such sale, lease or other disposition of
the
Inventory shall be applied first, to the expenses of taking, holding,
storing, processing, preparing for sale, selling, and the like, and
then
to the satisfaction of your Obligations to us, application as to
particular Obligations or as to principal or interest to be in our
sole
discretion. You shall be liable to us for, and shall pay to us on
demand,
any deficiency which may remain after such sale, lease or other
disposition, and we in turn agree to remit to you, or your successors
or
assigns, any surplus resulting therefrom. The enumeration of the
foregoing
rights is not intended to be exhaustive and the exercise of any right
shall not preclude the exercise of any other rights, all of which
shall be
cumulative.
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4
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6.3
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To
the extent that your Obligations are now or hereafter secured by
any
assets or property other than the Inventory, or by the guarantee,
endorsement, assets or property of any other person, then we shall
have
the right in our sole discretion to determine which rights, security,
liens, security interests or remedies we shall at any time pursue,
foreclose upon, relinquish, subordinate, modify or take any other
action
with respect to, without in any way modifying or affecting any of
them, or
of any of our rights hereunder.
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7.
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TERMINATION
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The
rights and Security Interest granted to us hereunder are to continue in full
force and effect, notwithstanding the fact that the account maintained in your
name on our books may from time to time be temporarily in a credit position,
until termination of the Agreement and the final payment in full of all
Obligations due us by you.
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8.
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MISCELLANEOUS
PROVISIONS
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8.1
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This
agreement and all attendant documentation, as the same may be amended
from
time to time, constitutes the entire agreement between us with regard
to
the subject matter hereof and supersedes any prior agreements or
understandings. This agreement can be changed only by a writing signed
by
both of us and our failure or delay in exercising any of our rights
hereunder will not constitute a waiver thereof, unless such waiver
is in
writing and signed by us, or bar us from exercising any of our rights
at
any time. No course of dealing between us shall change or modify
this
agreement. A waiver on any one occasion shall not be construed as
a bar to
or waiver of any right or remedy on any future occasion. The validity,
interpretation and enforcement of this agreement shall be governed
by the
laws of the State of New York.
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8.2
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This
agreement binds and benefits each of us and our respective successors
and
assigns, provided, however, that you may not assign this agreement
or your
rights hereunder without our prior written
consent.
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8.3
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If
any provision of this agreement is contrary to, prohibited by, or
deemed
invalid under, applicable laws or regulations, such provision will
be
inapplicable and deemed omitted to such extent, but the remainder
will not
be invalidated thereby and will be given effect so far as
possible.
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JURY
TRIAL WAIVER
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To
the extent permitted by applicable law, we each hereby waive any right to a
trial by jury in any action or proceeding arising directly or indirectly out
of
this agreement, or any other agreement or transaction between us or to which
we
are parties.
If
the
foregoing is in accordance with your understanding, please so indicate by
signing and returning to us the original and one copy of this agreement. The
agreement shall take effect as of the date set forth above, after being accepted
below by one of our officers after which we shall forward a fully executed
copy
to you for your files.
Sincerely,
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THE
CIT GROUP/COMMERCIAL SERVICES, INC.
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By:
/s/
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Name:
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Title:
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Read
and
Agreed to:
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THE
CIT GROUP/COMMERCIAL SERVICES, INC.
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By:
/s/
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Name:
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Title:
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