Exhibit 10.3
________________, 1998
Stage II Apparel Corp.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Re: Letter of Credit Agreement
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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. 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.
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
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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. 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 factoring or
financing agreement between us, as amended (herein 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 the factoring or financing
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. 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 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
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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.
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, and all
Obligations hereunder, including any such loss or claim due to any action
taken by any Bank. 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
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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.
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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 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. On 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 nonpayment when due of any Obligations or other
indebtedness owing to us by you, whether or not the Agreement shall continue,
or upon your general failure to pay your debts when due, or upon your making
a general assignment for the benefit of creditors or upon there being 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
proceedings 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, 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
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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]
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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
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Name:
Title:
Read and Agreed to:
STAGE II APPAREL CORP.
By
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Name:
Title:
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SCHEDULE A
IMPORT LETTER OF CREDIT FEE SCHEDULE
Transaction Fee Minimum
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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
Plus: Processing Fee
First four amendments $75.00
After fourth $95.00
Guarantees $40.00
Plus: Processing Fee $40.00
Discrepancies $40.00
Cancellations $40.00
Unutilized L/C Fee $50.00
Monthly Commissions 1/4% Per Month on
Average Balance $100.00
Payments
Sight $20.00 plus 1/8% of draft amount $55.00
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