EXHIBIT 4.2
Date: March 29, 2004
X. X. XXXXX CORPORATION
00000 Xxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxx 00000
Re: LETTER OF CREDIT AGREEMENT
Ladies and Gentlemen:
From time to time, in order to assist you in establishing or opening
Letters of Credit with a bank or trust company (herein the "Bank") to cover the
purchase of goods and inventory, you may request us to join in the applications
for such Letters of Credit, and/or guarantee payment or performance of such
Letters and any drafts or acceptances thereunder, thereby lending our credit to
you. These arrangements shall be handled by us subject to the terms and
conditions set forth below.
A. Our assistance in this matter shall at all times and in all respects be
in our sole discretion and as provided in the factoring agreement
entered into between us of even date (the "Agreement"). The amount and
extent of the Letters of Credit and the terms and conditions thereof
and of any drafts or acceptances thereunder, shall in all respects be
determined solely by us and shall be subject to change, modification
and revision by us, at any time and from time to time. All capitalized
terms not defined herein shall have the meaning given such terms in the
Agreement.
B. Any indebtedness, liability or obligation of any sort whatsoever,
however arising, whether present or future, fixed or contingent,
secured or unsecured, due or to become due, paid or incurred, arising
or incurred in connection with any Letters of Credit, guarantees,
drafts or acceptances thereunder or otherwise (herein the
"Obligations") shall be incurred solely as an accommodation to you and
for your account. Obligations shall include, without being limited to,
all amounts due or which may become due under said Letters of Credit,
guarantees or any drafts or acceptances thereunder, all amounts charged
or chargeable to you or to us by the Bank, other financial institution
or correspondent bank which opens, issues or is involved with such
Letter of Credit, any other bank charges; fees and commissions; duties
and taxes; costs of insurance; all such other charges and expenses
which may pertain either directly or indirectly to such Letters of
Credit, drafts, acceptances, guarantees or to the goods or documents
relating thereto, and our charges as herein provided. We shall have the
right, at any time and without notice to you, to charge your account on
our books with the amount of any and all such Obligations when due. Any
debit balance which may exist at any time or from time to time in your
account shall be repayable to us on demand and shall incur interest at
the rate provided in the Agreement. All Obligations are to be repaid to
us solely in United States currency.
C. As security for the prompt payment in full of all of your present and
future indebtedness or obligations whether under Agreement between us,
any other agreement between us or otherwise, as well as to secure the
payment in full of all Obligations referred to herein, you hereby
pledge and grant to us a continuing general lien upon and security
interest in the following "Collateral", whether now owned or hereafter
acquired by you, wherever located, whether in transit or not: all
presently owned and hereafter acquired: (a) warehouse receipts, bills
of lading, shipping documents, documents of title, chattel paper and
instruments, all whether negotiable or not; (b) merchandise, inventory
and goods which relate to any of the foregoing or which are purchased
from suppliers located outside of the United States or its territories
or which relate to letters of credit opened through or with our
assistance (whether for purchases from domestic or foreign suppliers),
and all additions thereto, substitutions therefor and replacements
thereof, in all stages of manufacture, process or production--from raw
materials through work-in-process to finished goods, together with all
goods and materials used or usable in manufacturing, processing,
packaging or shipping same, all wherever located and whether in transit
or not; and (c) cash and non-cash proceeds of any and all of the
foregoing, of whatever sort and however arising.
D. You warrant and represent that we have and shall have at all times a
valid and effective first and paramount lien on and security interest
in all said Collateral and that your title to said Collateral is
unencumbered by any other liens except for Permitted Liens. You also
warrant and represent that all sales of any goods or inventory covered
hereby shall be made by you in the ordinary course of business and the
accounts arising from such sales and proceeds thereof shall be
transferred and assigned to us pursuant to the Agreement; and you
confirm that our lien and security interest extends and attaches to
those accounts and proceeds. Further, you warrant and represent that
all Letters of Credit are being opened to cover actual purchases of
goods and inventory solely for your account, and said goods will not be
sold or transferred, other than as herein provided, without our
specific prior written consent. You agree to comply with the
requirements of any and all laws in order to grant to us and maintain
in our favor, a valid first lien upon and security interest in the
Collateral subject to Permitted Liens, and to do whatever we may
request from time to time in order to effect the purposes of this
Agreement, including, but without limitation, filing financing
statements, keeping records and making reports on the Collateral to us,
advising us of the location of all Collateral, marking, labeling and
segregating such Collateral and obtaining any necessary agreements or
waivers with regard to the Collateral. To the extent permitted by
applicable law, you irrevocably authorize us to file financing
statements and all amendments and continuations with respect thereto,
all in order to create, perfect or maintain our security interest in
the Collateral, and you hereby ratify and confirm any and all financing
statements, amendments and continuations with respect thereto
heretofore and hereafter filed by us pursuant to the foregoing
authorization.
E. You unconditionally indemnify us and hold us harmless from any and all
loss, claim or liability arising from any transactions or occurrences
relating to Letters of Credit established or opened for your account,
the Collateral relating thereto and any drafts or acceptances
thereunder (collectively "Losses") and all Obligations hereunder,
including any such losses due to any action taken by any Bank, other
than Losses arising from or relating to the gross negligence or willful
misconduct of such Bank or us. You further agree to hold us harmless
for any errors or omission, whether caused by us, by the Bank or
otherwise. Your unconditional obligation to us hereunder shall not be
modified or diminished for any reason or in any manner whatsoever. You
agree that any charges made to us for your account by the Bank shall be
conclusive on us and may be charged to your account.
F. We shall not be responsible for: The existence, character, quality,
quantity, condition, packing, value or delivery of the goods purporting
to be represented by any documents; any difference or variation in the
character, quality, quantity, condition, packing value or delivery of
the goods from that expressed in the documents; the validity,
sufficiency or genuineness of any documents or of any endorsements
thereon, even if such documents should in fact prove to be in any or
all respects invalid, insufficient, fraudulent or forged; the time,
place, manner or order in which shipment is made; partial or incomplete
shipment, or failure or omission to ship any or all of the goods
referred to in the Letters of Credit or
documents; any deviation from instructions; delay, default, or fraud by
the shipper and/or anyone else in connection with the Collateral or the
shipping thereof; or any breach of contract between the shipper or
vendors and yourselves. Furthermore, without being limited by the
foregoing, we shall not be responsible for any act or omission with
respect to or in connection with any Collateral.
G. You agree that any action taken by us, if taken in good faith, or any
action taken by any Bank, under or in connection with the Letters of
Credit, the guarantees, the drafts or acceptances, or the Collateral,
shall be binding on you and shall not put us in any resulting liability
to you. In furtherance thereof, we shall have the full right and
authority to clear and resolve any questions of non-compliance of
documents; to give any instructions as to acceptance or rejection of
any documents or goods; to execute any and all steamship or airway
guarantees (and applications therefor), indemnities or delivery orders;
to grant any extensions of the maturity of, time of payment for, or
time of presentation of, any drafts, acceptances, or documents; and to
agree to any amendments, renewals, extensions, modifications, changes
or cancellations of any of the terms or conditions of any of the
applications, Letters of Credit, drafts or acceptances; all in our sole
name, and the Bank shall be entitled to comply with and honor any and
all such documents or instruments executed by or received solely from
us, all without any notice to or any consent from you.
H. Without our express consent and endorsement in writing, you agree not
to clear and resolve any questions of non-compliance of documents; to
give any instructions as to acceptance or rejection of any documents or
goods; to execute any and all applications for steamship or airway
guarantees, indemnities or delivery orders; to grant any extensions of
the maturity of, time of payment for, or time of presentation of, any
drafts, acceptances or documents; or to agree to any amendments,
renewals, extensions, modifications, changes or cancellations of any of
the terms or conditions of any of the applications, Letters of Credit,
drafts or acceptances.
I. You agree that any necessary import, export or other licenses or
certificates for the import or handling of the Collateral will have
been promptly procured; all foreign and domestic governmental laws and
regulations in regard to the shipment and importation of the
Collateral, or the financing thereof will have been promptly and fully
complied with; and any certificates in that regard that we may at any
time request will be promptly furnished. In this connection, you
warrant and represent that all shipments made under any such Letters of
Credit are in accordance with the governmental laws and regulations of
the countries in which the shipments originate and terminate, and are
not prohibited by any such laws and regulations. You assume all risk,
liability and responsibility for, and agree to pay and discharge, all
present and future local, state, federal or foreign taxes, duties, or
levies. Any embargo, restrictions, laws, customs or regulations of any
country, state, city, or other political subdivision, where the
Collateral is or may be located, or wherein payments are to be made, or
wherein drafts may be drawn, negotiated, accepted, or paid, shall be
solely your risk, liability and responsibility.
J. Any rights, remedies, duties or obligations granted or undertaken by
you to any Bank in any application for Letters of Credit, or any
standing agreement relating to Letters of Credit or otherwise, shall be
deemed to have been granted to us and apply in all respects to us and
shall be in addition to any rights, remedies, duties or obligations
contained herein.
K. You hereby agree that prior to your repayment of all indebtedness and
Obligations to us, we may be deemed to be the absolute owner of, with
unqualified rights to possession and disposition of, all Collateral,
all of which may be held by us as security as herein provided. Should
possession of any such Collateral be transferred to you, it shall
continue to serve,
as security as herein provided, and any goods or inventory covered
hereby may be sold, transferred or disposed of only as herein above
provided.
L. 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 reasonably satisfactory to us,
but at your expense. All policies covering the Collateral are to be
made payable to us in case of loss, under a standard non-contributory
"mortgagee", "lender's" or "secured party" clause and are to contain
such other provisions as we may require to fully protect our interests
in the Collateral and to any payments to be made under such policies,
and all proceeds of such policies are hereby assigned to us. All
policies are to be delivered to us, premium prepaid; and shall provide
for not less than ten days prior written notice to us of the exercise
of any right of cancellation. We shall have the sole right, in our own
name or your name, to file claims under any such insurance policies and
to deal with and handle such claims and any payments thereunder in all
respects.
M. Upon the occurrence and continuance of an Event of default, if any
representation or warranty made by you hereunder is incorrect in any
material respect or if any covenant made by you hereunder is breached,
we shall have the right, with or without notice to you, to foreclose
the lien and 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 to sell, lease, or otherwise dispose of all or any
part of the Collateral, whether the goods have arrived or are to
arrive, 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. 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 all of 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 and preparing for sale,
selling, and the like, and then to the satisfaction of your Obligations
or other indebtedness to us, application as to particular Obligations
or as to principal or interest to be in our absolute and 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 any surplus
resulting therefrom. We shall have all rights of a secured party under
the Uniform Commercial Code. 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.
N. Any charges, fees, commissions, costs and expenses charged to us for
your account by any Bank in connection with or arising out of Letters
of Credit issued pursuant hereto or out of transactions relating
thereto will be charged to your account in full as received by us and
when made by any such Bank shall be conclusive on us. In addition to
the amounts charged to your account pursuant to the preceding sentence,
for our services hereunder we shall be entitled to our service fees
which shall be computed and charged to your account as follows:
[SEE LETTER OF CREDIT FEE SCHEDULE]
This agreement, which is subject to modification only in writing, is
supplementary to and is to be considered as a part of, the Agreement. If the
foregoing is in accordance with your understanding, please so indicate by
signing and returning the enclosed copy of this letter.
Very truly yours,
THE CIT GROUP/COMMERCIAL SERVICES, INC.
By /s/ Xxxxxxx Xxxxx
-----------------------------------------
Name: Xxxxxxx Xxxxx
Title: Sr. Vice President
Read and Agreed to:
X. X. XXXXX CORPORATION
By /s/ Xxxxxx X. Xxx Xxxxxx
---------------------------------
Name: Xxxxxx X. Xxx Xxxxxx
Title: President and CEO
SCHEDULE A
IMPORT LETTER OF CREDIT FEE SCHEDULE
TRANSACTION FEE MINIMUM
-------------------------------- ----------------------------- ---------
ISSUANCE 1/4% of face amount $ 70.00
Plus: Processing Fee $70.00
Cable Fee $35.00
AMENDMENTS
L/C Amount Increase 1/4% of the increased amount $ 70.00
Plus: Processing Fee
First four amendments $ 95.00
After fourth $125.00
GUARANTEES $ 50.00
Plus: Processing Fee $ 50.00
DISCREPANCIES $ 50.00
CANCELLATIONS $ 50.00
UNUTILIZED L/C FEE $100.00
MONTHLY COMMISSIONS 3% per annum
charged monthly $ 100.00
PAYMENTS
Sight 1/4% of draft amount $ 55.00
Time 1 1/2% per annum
on draft amount for term $ 85.00
STANDBY L/C'S
ISSUANCE 3% per annum of the face
Amount of the standby L/C $1,000.00
Payment fee $1,000.00
Amendment fee $1,000.00