EXHIBIT 10.2
_______________, 1998
Stage II Apparel Corp.
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
INVENTORY SECURITY AGREEMENT
Gentlemen:
1. As security for the prompt payment in full of all loans and advances made and
to be made to you from time to time by us, in conjunction with the factoring
or accounts receivable financing agreement between us, as amended from time
to time (herein the "Agreement"), as well as to secure the payment in full of
the other Obligations (hereinafter defined), you hereby pledge and grant to
us a continuing general lien upon and security interest in (herein "Security
Interest") the following described "Collateral":
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.
2. This agreement is being executed by you to induce us to make loans or
advances to you or otherwise to extend credit or financial accommodations to
you, or 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. You agree that any of the foregoing shall be done
or extended by us in our sole discretion, and shall be deemed to have been
done or extended by us in consideration of and in reliance upon the execution
of this agreement, but that nothing herein shall obligate us to do any of the
foregoing.
3. 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 Collateral to such loans and
advances and to the other Obligations referred to herein must be satisfactory
to us at all times, and the valuation of the Collateral 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.
4. In addition to the loans and advances made or to be made by us to you or to
others for your account, "Obligations" shall include any and all indebtedness
which may at any time be owing by you to us howsoever arising. Obligations
shall include, without limitation, all indebtedness whether now in existence
or incurred by you from time to time hereafter; whether secured by pledge,
lien upon or security interest in any of your assets or property other than
the Collateral herein described, or by pledge, lien upon or security interest
in the assets or property of any other person, firm, entity or corporation
(herein "person"); whether such indebtedness is absolute or contingent, joint
or several, matured or unmatured, direct or indirect and whether you are
liable to us for such indebtedness as principal, surety, endorser, guarantor
or otherwise. Obligations shall also include, without limitation, your
liability to us for any balances owing in any account maintained on our books
under the Agreement or under any other agreement or arrangement now or
hereafter entered into between us; indebtedness for goods or services
purchased by you from any concern whose accounts receivable are factored or
financed by us; your liability to us as maker or endorser on any promissory
note or other instrument for the payment of money; your liability to us under
any instrument of guaranty or indemnity, or arising under any guaranty,
endorsement or undertaking which we may make or issue to others for your
account, 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. 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.
5. The Security Interest in the Collateral, unless expressly limited by the
provisions of paragraph 1 above, shall extend and attach to:
(a) The entire Collateral which is presently in existence and which is owned
by you or in which you have any interest, and all Collateral which you may
purchase or in which you may acquire any interest at any time and from time
to time in the future, whether such Collateral is in transit or in your or
our constructive, actual or exclusive occupancy or possession or otherwise,
or is held by you or others for your account; and
(b) The entire Collateral wherever located, including without limitation, all
Collateral 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 Collateral; and
(c) The entire Collateral 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.
6. You agree to safeguard, protect and hold all Collateral for our account and
make no disposition thereof except in the regular course of your business as
herein provided. Until we have given you notice to the contrary, any
Collateral which we may from time to time
permit to remain in your or another person's possession or control, may be
sold and shipped by you to your customers in the ordinary course of your
business, 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 in accordance with
the provisions of the Agreement. We shall have the right to withdraw this
permission at any time, in which event no further disposition shall be made
of the Collateral without our prior written approval. Invoices covering
sales of Collateral 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 the Collateral, or sales in which a lien upon or
security interest in the Collateral 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 Collateral, 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.
7. 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 Collateral; that you are, or will be at the time additional Collateral
is acquired by you, the absolute owner of the Collateral 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
Collateral, or any proceeds, in favor of any other person.
8. You agree to maintain books and records pertaining to the Collateral in such
detail, form and scope as we shall require. You agree that we or our agents
may enter upon your premises at any time, and from time to time for the
purpose of inspecting the Collateral and any and all 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 Collateral. You
are also to advise us promptly, in sufficient detail, of any substantial
change relating to the type, quantity or quality of the Collateral, or any
event which would have a material effect on the value of the Collateral or on
the Security Interest granted to us herein.
9. You agree to: execute and deliver to us, from time to time, solely for our
convenience in maintaining a record of the Collateral, such consignments or
separate written statements as we may require, designating, identifying or
describing the Collateral 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 Collateral.
10. 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
Collateral. We are hereby authorized by you to file any financing statements
covering the Collateral whether or not your signature appears thereon. 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 custodians; keeping
stock records; transferring Collateral to our possession; obtaining waivers
from landlords and mortgagees; and performing such further acts as we may
require in order to effect the purposes of this agreement.
11. You agree to maintain insurance on the Collateral 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
Collateral 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 Collateral and to any payments to be made under such
policies. All original policies are to be delivered to us, premium prepaid,
with the loss payable endorsement in our favor, and shall provide for not
less than ten 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. 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.
12. You agree to pay, when due, all taxes, assessments, claims and other charges
(herein "taxes") lawfully levied or assessed upon the Collateral and if such
taxes remain unpaid after the date fixed for the payment thereof, or if any
lien shall be claimed thereunder which in our opinion might create a valid
obligation having priority over the rights granted to us herein, we may,
without notice to you, but on your behalf, pay such taxes, and the amount
thereof shall be an Obligation secured hereby and due to us on demand. 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 or rendering opinions; in protecting, maintaining, or
preserving the Collateral; 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.
13. You agree to comply with all acts, rules, regulations, and orders of any
legislative, administrative or judicial body or official, applicable to the
Collateral 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
Collateral hereunder.
14. On a breach by you of any of the terms or provisions of this agreement, the
Agreement or any other agreement or arrangement now or hereafter entered
into between us; or on the effective date of a termination of the
Agreement; or on the nonpayment when due of any Obligation owing to
us, whether or not the Agreement shall continue; or upon your
committing an act of bankruptcy, making a general assignment for
the benefit of creditors; or there is filed by or against you a
petition in bankruptcy or for the appointment of a receiver; or there
is commenced under any bankruptcy or insolvency law, any proceeding for
your relief or for the composition, extension, arrangement or adjustment
of any of your obligations; or your business is discontinued as a going
concern; then 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 Collateral without judicial
process, and to enter any premises where the Collateral may be located for
the purpose of taking possession of or removing the Collateral. We shall
have the right without notice or advertisement, to sell, lease, or
otherwise dispose of all or any part of the Collateral, 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 Collateral is required by law, five (5)
days notice shall constitute reasonable notification. If any Collateral
shall require maintenance, preparation, or is in process or other
unfinished state, we shall have the right, at our option, to do such
preparation, processing or completion of manufacturing, for the purpose of
putting the Collateral in such saleable form as we shall deem appropriate.
You agree, at our request, to assemble the Collateral 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 Collateral in saleable form. The proceeds of any such sale,
lease or other disposition of the Collateral shall be applied first,
to the expenses of retaking, 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.
15. The rights and Security Interest granted to us hereunder are to continue in
full force and effect, notwithstanding the termination of the Agreement or
the fact that the principal
account maintained in your name on our books may from time to time be
temporarily in a credit position, until the final payment to us in full of
all Obligations due to us by you. Our delay, or omission to exercise any
right hereunder, shall not be deemed a waiver thereof, or be deemed a
waiver of any other right, unless such waiver be in writing and signed by
us. 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.
16. To the extent that your Obligations are now or hereafter secured by any
assets or property other than the Collateral, 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.
17. This agreement, which is subject to modification only in writing signed by
us, is supplementary to and is to be considered as part of the Agreement.
No course of dealing between us shall change or modify this agreement. The
validity, interpretation and enforcement of this agreement shall be
governed by the laws of the State of New York.
18. 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 in New York State, after which, we
shall forward a copy to you with signatures completed for your files.
Very truly yours,
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By____________________________
Name:
Title:
Read and Agreed to:
STAGE II APPAREL CORP.
By____________________________
Name:
Title:
Accepted at New York, New York
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By____________________________
Name:
Title:
