EXHIBIT 10.2
LETTER OF CREDIT AND
SECURITY AGREEMENT
SUPPLEMENT TO FACTORING AGREEMENT
THIS SUPPLEMENT ("Supplement") made and executed this 15th day of
September, 2006 by and between IRONCLAD PERFORMANCE WEAR CORPORATION ("Client")
and XXXXX FARGO CENTURY, INC. ("Factor").
1. SUPPLEMENT TO AGREEMENT
1.1 SUPPLEMENT. This Supplement shall constitute a supplement to
the Factoring Agreement, entered into between Factor and Client and any other
agreements documents amendments or supplements executed in connection therewith
(collectively, the "Agreement".) All of the terms and conditions of the
Agreement which are not inconsistent with the terms and conditions of this
Supplement shall apply with full force and effect to all Transactions covered by
this Supplement. This Supplement shall be deemed to be guaranteed by all
guaranties and secured by all pledge and security agreements in favor of Factor
and relating to indebtedness of Client to Factor, notwithstanding anything to
the contrary in any such document or agreement.
2. TRANSACTIONS
2.1 PURCHASE GUARANTY; LETTER OF CREDIT. From time to time, upon
Client's request but subject, in each instance, to Factor's approval thereof,
Factor will guarantee payment by Client (i) to vendors for purchases made by
Client of which Client may require for Client in the regular course of Client's
business (a "Purchase Guaranty"); or (ii) to banks under letters of credit to be
opened by Client in a bank designated by Factor, in Client's name and for
Client's account, and any drafts or acceptances thereunder, for the purchase of
merchandise required by Client in the regular course of Client's business (a
"Letter of Credit"). In each such instance Client will execute a form of request
for Purchase Guaranty on Factor's form or application for credit on the form of
such bank requesting Factor to deliver same to the bank and to cause it to issue
an irrevocable Letter of Credit in conformity with the application. Each Letter
of Credit and Purchase Guaranty shall, at Factor's Option, be fully reserved
against under the Factoring Agreement.
2.2 SCOPE. The term "Transaction", whenever used in this
Supplement, shall mean and include any such Letter of Credit or Purchase
Guaranty which may be made or issued by Factor hereunder, or any drafts and
acceptances thereunder, any air release, steamship guaranty or other indemnity
issued in connection with any Letter of Credit, all merchandise which may be the
subject of any such Purchase Guaranty or Letter of Credit so guaranteed and all
documents and instruments of every kind relating thereto, including, without
limitation, all documents of title, transport, indebtedness and payment, or
evidencing any thereof.
2.3 TERMS. Each Transaction hereunder shall be in such form and
shall contain such terms, conditions and provisions as Factor, in Factor's sole
discretion, may elect. Client shall, if Factor so elects in any Transaction,
deposit with Client either cash or other collateral satisfactory to Factor, in
such amounts as Factor, in Factor's sole discretion, may require from time to
time, whether prior to any Transaction or at any time or times thereafter.
2.4 LIMITATIONS. Notwithstanding anything to the contrary herein,
the total amount of Transactions hereunder which may be outstanding at any time
may be limited by Factor, in Factor's sole and absolute discretion. Nothing
herein contained shall be deemed or construed to grant to Client any right,
power or authority to pledge Factor's credit in any manner or to any extent
whatever.
2.5 ISSUANCE. All Letters of Credit guaranteed by Factor hereunder
shall be issued in Client's name.
3. CLIENT'S OBLIGATIONS; REPRESENTATIONS AND WARRANTIES
3.1 PAYMENT. Client shall promptly pay, satisfy and discharge, in
full, as and when due, all debts, liabilities and obligations of any kind
incurred by Client in connection with each and every Transaction, including,
without limitation, all fees and charges of any bank; and Client shall pay to
Factor, forthwith upon demand and in full, any and all moneys which Factor may
pay or be obligated to pay on, under, in connection with, or by reason of, any
Transaction, including all communication expenses and attorney's fees.
3.2 INDEMNITIES. Client shall indemnify Factor and any bank which
may issue any Letter of Credit guaranteed by Factor hereunder or any air
release, steamship guarantee or other indemnity and any correspondent of any
such bank which may have any connection with any Transaction or any drafts or
acceptances thereunder or any air release, steamship guarantee or other
indemnity, and hold Factor and them harmless against any and all claims, losses,
liabilities, expense, demands and causes of action which may be made, asserted,
or brought against Factor, or any of them, arising on, under, in connection
with, or by reason of, any Transaction.
3.3 ADDITIONAL DOCUMENTS. Client shall, upon Factor's request,
execute and deliver to Client any trust receipts which Factor may require in
connection with the release to Client of any merchandise or documents and any
financing statements that Factor may, from time to time, require.
3.4 INSURANCE. Client shall cause all merchandise which may be the
subject of any Transaction to be fully insured under an all risk United States
dollar policy, at Client's sole cost, but for Factor's account and benefit as
Factor's interest may appear, in amounts and by insurance companies satisfactory
to Factor; and shall deliver to Factor forthwith proof of full payment of all
premiums thereon. Upon Client's failure or refusal, for any reason, to deliver
any such prepaid policies to Factor, Factor shall have the right, but not the
obligation, to procure such policies and to pay the premiums thereon for
Client's account; and Client shall pay to Factor, forthwith, the amount of such
premiums so paid by Factor with interest thereon computed as provided in Section
8.2 hereof. Client's liability to Factor hereunder shall not be affected,
impaired, released, or discharged, in whole or in part, by reason of any loss,
theft, or destruction of, or depreciation or damage to, any merchandise which is
not fully covered by the proceeds of insurance thereon actually received by
Factor, regardless of the cause of any such loss, theft, destruction,
depreciation or damage, or absence or nonreceipt of insurance proceeds and
whether such nonreceipt of insurance proceeds is caused by the failure of the
insurer to pay claims or otherwise.
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3.5 IMPORTATION. Client agrees that any necessary import, export
or other licenses or certificates for the import or handling of the Collateral
(as defined in Section 5.1 hereof) 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 Factor may at
any time request will be promptly furnished. In this connection, Client warrants
and represents 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.
3.6 TAXES AND DUTIES. Client assumes all risk, liability and
responsibility for, and agrees to pay and discharge, all present and future
local, state, federal or foreign taxes, duties, or levies. Any embargo,
restriction, law, custom or regulation 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 Client's risk, liability and responsibility.
3.7 SOLVENCY. Client is and will continue to be solvent.
3.8 GENUINENESS. Each Letter of Credit Client presents to Factor
naming Client as beneficiary shall be genuine, correct and complete and will not
have been drawn against except to the extent stated to Client in writing at the
time of such presentation; and all invoices, receipts and other documents and
instruments of every kind which Client presents, displays, or delivers to Factor
for any purpose will be genuine, correct and complete.
4. POWER OF ATTORNEY
4.1 SCOPE. In connection with all Transactions, Client hereby
appoints each officer of Factor's corporation as Client's attorney-in-fact, with
full power and authority in each of them (i) to sign and endorse Client's name
upon all Title Documents; (ii) in Client's name or Factor's, to complete any
Transaction, to obtain, execute and deliver all necessary or proper documents in
connection therewith and to collect the proceeds thereof; (iii) upon any default
under the Agreement, or this Supplement, or in any Transaction, to cancel,
rescind, terminate, modify, amend, or adjust in any other way, in whole or in
part, any pending Transaction; and (iv) upon Client's refusal to do so following
Factor's request, in Client's name and for Client's account, to do any and all
other acts and things which may be necessary or proper in connection with this
Supplement or any Transaction, or both, or to enable Factor to obtain payment of
any monies owed to Factor, or for which Client may thereafter become liable to
Factor, in any Transaction or otherwise hereunder. The said power and authority
is coupled with an interest and shall be irrevocable until all Transactions
shall have been fully consummated and all monies owed to Factor have been paid
in full.
5. SECURITY
5.1 COLLATERAL. As collateral security for the full payment,
performance and discharge of any and all of Client's debts, obligations and
liabilities to Factor, whether arising under the Agreement, or hereunder, or
otherwise, whether direct or indirect, liquidated or not, absolute or
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contingent, due or not due, now existing or hereafter arising, Client hereby
pledges to Factor and grants to Factor a general lien upon and continuing
security interest in and a right to set-off against, all now existing and
hereafter arising Documents of Title, and goods and inventory, together with all
credit balances, equities other property, tangible or intangible, now or
hereafter existing in any of Client's accounts with Factor, including, but not
limited to, Client's account with Factor hereunder and under the Agreement and
all property and securities of every kind and nature which have been or at any
time hereafter may be delivered to or otherwise come into Factor's possession,
custody or control, as collateral security, or for safekeeping, or for any other
or different purpose of any kind or which shall be in transit to Factor or set
apart for Factor by anyone for Factor, in any way, by Client or for Client's
account, or in which Client may have any interest, whether Factor shall accept
the same for the purpose for which delivered or not, and any and all proceeds of
said property and securities and every part thereof ("Collateral"); with the
right to Factor, in Factor's discretion, to resort first to any part of said
security and to apply any proceeds thereof to Client's Obligations in such order
and amounts as Factor may elect. Recourse to security shall not be required.
5.2 ADDITIONAL SECURITY. As further security for the payment of
all of Client's debts, obligations and liabilities hereunder, Client shall, in
connection with each Transaction, assign to Factor the purchase order, selling
order, letter of credit in Client's favor and all other instruments which Factor
may require; and all of the same shall be deemed to have been automatically
assigned to Factor and shall become Factor's property immediately upon the
occurrence of each Transaction and without any formal assignment thereof. All
invoices, cash, checks, drafts, notes, documents, bills of lading, warehouse,
shipping and dock receipts, and other title, payment, or other instruments
pertaining to each Transaction (collectively, "Title Documents") and the
merchandise relating thereto shall be deemed to be Factor's sole property and in
furtherance thereof, Client shall instruct all suppliers, shippers, carriers,
forwarders, warehouses, banks and other persons holding or receiving any of such
Title Documents or merchandise to deliver the same to Factor or upon Factor's
order. If any of the Title Documents shall come into Client's possession, Client
shall hold same in trust for Factor and shall forthwith deliver the same to
Factor in their original form. Unless Factor instructs otherwise, Client may
dispose of merchandise imported by Client in connection with Transactions in the
ordinary course of Client's business
5.3 ADDITIONAL RIGHTS. Any rights, remedies, duties or obligations
granted or undertaken by Client 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 Factor and apply in all respects to
Factor and shall be in addition to any rights, remedies, duties or obligations
contained herein
6. STEAMSHIP GUARANTIES AND AIRWAY RELEASES
6.1 GUARANTIES AND RELEASES. From time to time, merchandise
purchased by Client under Letters of Credit may arrive at a designated location
before receipt and availability of the Documents of Title that would permit
Client to obtain possession of the merchandise. Upon Client's request but
subject, in each instance, to Factor's approval thereof, Factor will cause
Factor's banks to issue air releases, steamship guarantees or other such
indemnities on Client's behalf in respect of Letters of Credit opened through
such banks to induce carriers to release to
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Client shipments of merchandise without presentation of the original bills of
lading or other evidence of shipment properly endorsed. Upon issuance of such
air way releases, steamship guarantees or other indemnities, Client irrevocably
and unconditionally waives any and all discrepancies, mistakes, defects or
omissions in any of the documents presented or to be presented to Factor's banks
for negotiation or acceptance in connection therewith and Client hereby agrees
to indemnify Factor and hold Factor harmless from and against any and all
consequences which may result from the issuance of such air releases, steamship
guaranties or other indemnities. Upon issuance of an airway release, steamship
guarantee or other indemnity, Factor shall have the right prior to presentation,
negotiation or acceptance of documents at Factor's banks under the relative
Letters of Credit to charge to Client's account the face amount of such
outstanding airway releases, steamship guarantees or indemnities.
7. FACTOR'S RESPONSIBILITY
7.1 LIMITATION OF LIABILITY. Factor shall not be liable or
responsible, in any manner or to any extent, for any error, act or omission by
Factor, or by any bank or any other party, in following Client's instructions or
those contained in any Letter of Credit or Purchase Guaranty in connection with
or relating to any Transaction or waivers of discrepancies issued hereunder and
any drafts or acceptances under any such Transaction, or any Documents of Title,
transport, payment, or indebtedness or any other instruments or documents,
whether or not transferred to Factor hereunder, or the completion of execution
of any Transaction; or for any loss or depreciation of, or damage to, any
merchandise, Documents of Title, transport, payment, or indebtedness of any
other documents or instruments, regardless of the cause of any thereof. All
Transactions hereunder shall be entirely without recourse against Factor in any
event.
7.2 RELIANCE. Factor and any bank shall have the right to rely
upon any oral, telecopy or other facsimile instruction or communication received
from Client in connection with any proposed modifications, deviations,
extensions or other actions affecting a Transaction, including, without
limitation, waivers of discrepancies. Factor retains Factor's independent right
to refuse any documents presented containing discrepancies despite the fact that
Factor has contacted Client and Client has accepted such discrepancies.
7.3 WAIVER OF DISCREPANCIES. Factor reserves the sole right, in
Factor's sole discretion, to waive any discrepancies, defects or mistakes in any
of the documents presented to Factor or Factor's banks for negotiation or
acceptance
8. FEES
8.1 COMPENSATION. In addition to any commissions, discount,
interest, charges, fees or expenses charged to Factor for Client's account by
any bank, or by Factor under Schedule 1 hereto, in connection with any
Transaction (all of which will be charged to Client's account and when made by
the bank shall be conclusive on Client), Client shall pay to Factor, as
compensation for the issuance of Purchase Guaranties or Letters of Credit by
Factor hereunder and for all services which Factor may render hereunder, the
following:
(a) As to Letters of Credit:
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(i) an issuance (opening) charge equal to 0.25%
of the full face amount of each Letter of Credit; plus
(ii) 0.25% of the amount of each increase of any
such Letter of Credit; plus
(iii) 0.25% of the full face amount of each Letter
of Credit for each 30 day period or part thereof from such date of issuance to
the expiration date and 0.25% of the then outstanding face amount thereof for
each 30 day extension or part thereof in excess of such expiration date,
(iv) a charge equal to not less than 0.25% on
each negotiation under each Letter of Credit; plus
(v) an acceptance commission with respect to
each draft guaranteed by Factor in an amount equal to 0.50% each thirty (30)
days on the face amount of such acceptance for the period from the date of the
acceptance to the date of its maturity. The acceptance commission and bank
charges in respect of each acceptance shall be payable in full on the date of
the creation of such acceptance.
(b) As to Purchase Guaranties:
(i) an issuance (opening) charge equal to 0.25%
of the full face amount of each Purchase Guaranty;
(ii) 0.25% of the full-face amount of each
Purchase Guaranty for each 30 day period or part thereof thereafter that such
Purchase Guaranty remains open;
(iii) a charge equal to not less than 0.25% on
each negotiation under each Purchase Guaranty; plus.
8.2 INTEREST. In addition to the foregoing, interest, shall be
computed at a rate to be fixed as provided in the Agreement, on all funds
actually paid by Factor to any bank, supplier, or other party on, under, by
reason of, or in connection with any Letter of Credit or Purchase Guaranty
issued by Factor hereunder or any Transaction covered thereby.
8.3 COMMISSION. Notwithstanding the termination of the Agreement
or this Supplement, Client shall pay a fee to Factor equal to the factoring
commission under the Agreement on any sales that would have been created arising
from inventory purchased by Client directly or indirectly with the proceeds of
Letters of Credit or Purchase Guarantees opened by Factor.
8.4 STANDARD CHARGES. Attached hereto as Schedule 1 are the
standard commissions, charges, fees and expenses of our banks (including our
standard processing charge per item) as of the date hereof, which Schedule may
be amended from time to time upon written notice to you.
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8.5 COSTS. Client shall reimburse Factor for all reasonable
out-of-pocket costs and expenses (including legal fees and disbursements)
incurred by Factor in connection with the execution and delivery of this
Supplement and perfection of Factor's security interest in the Collateral, or to
obtain or enforce payment of any of Client's Obligations to Factor hereunder.
9. FACTOR'S REMEDIES
9.1 REMEDIES. In the event of any default by Client under the
Agreement or hereunder, Factor shall have the right to sell, at public or
private sale, all Collateral and documents relating thereto which Factor may
hold as security and shall generally have all of the rights and remedies of a
secured party under the Uniform Commercial Code. Factor may become the purchaser
at any public sale, free of any claim or equity of redemption. Factor shall give
Client reasonable notice of the time and place of any public sale thereof or of
the time after which any private sale thereof is to be made. The requirement of
reasonable notice shall be met if such notice is mailed, postage prepaid, to
Client at Client's last known address at least five days before the time of any
such sale. Net proceeds of any such sale or sales, after deduction of all
expenses of every kind relating thereto (including reasonable attorneys fees),
shall be applied to payment of all of Client's Obligations to Client, whether
arising out of this Supplement or otherwise, in such order of application as
Factor may elect. Any surplus which may result shall be paid to Client or as
otherwise required by law and Client shall continue liable for any deficit.
10. MISCELLANEOUS
10.1 TERM. The term of this Supplement shall commence on the date
hereof and shall continue until the term of the Agreement ends under the
provisions thereof.
10.2 WAIVER. Client waives presentment, demand, protest, notice of
nonpayment and notice of protest as to all instruments, as well as any and all
other notices to which Client might otherwise be entitled. Factor's failure to
enforce any right or remedy hereunder or Factor's waiver of any default
hereunder shall not constitute a waiver of any such right of remedy or of any
subsequent default. This Supplement shall be binding upon and inure to the
benefit of Client's and Factor's respective successors and assigns
10.3 RECAPTURE. To the extent Factor, or any beneficiary of a
Transaction to whom Factor may owe an obligation receives payment on account of
the Obligations herein described, which payment is thereafter set aside or
required to be repaid by Factor in whole or in part, then, to the extent of any
sum not finally retained by Factor or such beneficiary (regardless of whether
such sum is recovered from Factor by Client, Client's estate or trustee or any
party acting for, on behalf of or through Client or as Client's representative),
Client's obligations to Factor shall be reinstated and the security interests
created hereby shall remain in full force and effect (or be reinstated) until
Client shall have made payment to Factor, which payment shall be due on demand.
10.4 ENTIRE AGREEMENT. This Supplement contains Factor's sole and
entire understanding and agreement with respect to its entire subject matter,
and all prior negotiations, disclaimers, commitments, agreements and
understandings heretofore had between Factor and
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Client with respect thereto are hereby merged herein. This Supplement cannot be
changed or terminated orally.
10.5 GOVERNING LAW. This Supplement is executed and delivered in
the State of California and shall be governed, construed and interpreted, as to
validity, enforcement and in all other respects, in accordance with the law of
the State of California. Termination of this Agreement shall not affect
Obligations on Transactions having their inception prior thereto.
10.6 WAIVER OF JURY TRIAL AND REFERENCE. EACH OF CLIENT AND FACTOR
HEREBY AGREE THAT THIS SUPPLEMENT SHALL BE SUBJECT TO THE TERMS OF SECTIONS 9.7
AND 9.8 OF THE AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Supplement as
of the day and year first above written.
XXXXX FARGO CENTURY, INC.
By: /s/ Xxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxx
------------------------------------
Title: SVP
------------------------------------
IRONCLAD PERFORMANCE WEAR CORPORATION
By: /s/ Xxxxxx Xxxxx
------------------------------------
Name: Xxxxxx Xxxxx
------------------------------------
Title: EVP & CFO
------------------------------------
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AUTHORIZED SIGNATURES OF
IRONCLAD PERFORMANCE WEAR CORPORATION
August 31, 2006
Xxxxx Fargo Century, Inc.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Gentlemen:
The names of the persons authorized, to make, sign and deliver on behalf of this
Corporation, Letters of Credit, Purchase Guaranties, amendments to Letters of
Credit and amendments to Purchase Guarantees, authorize the waiver of
discrepancies, and authorize the issuance of air releases and/or steamship
indemnities, relative to this Corporation's Factoring Agreement, and any
Supplement thereto, with Xxxxx Fargo Century, Inc., are as follows:
NAME (PRINT) SIGNATURE
PRESIDENT: Xxxxxx Xxxxxx /s/ Xxxxxx Xxxxxx
--------------------------------------------
(SIGNATURE)
EXECUTIVE
VICE PRESIDENT/
CHIEF FINANCIAL
OFFICCER: Xxxxxx Xxxxx /s/ Xxxxxx Xxxxx
--------------------------------------------
(SIGNATURE)
SECRETARY: Xxxxxx Xxxxx /s/ Xxxxxx Xxxxx
--------------------------------------------
(SIGNATURE)
Very truly yours,
IRONCLAD PERFORMANCE WEAR CORPORATION
By: /s/ Xxxxxx Xxxxx
-------------------------------------
Name: Xxxxxx Xxxxx
-------------------------------------
Title: EVP & CFO
-------------------------------------
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SCHEDULE 1
IMPORT LETTER OF CREDIT AGREEMENT
BANK FEE SCHEDULE
AS OF AUGUST 31, 2006
Issuance (Opening) $100 Flat
Cable Notification $ 25 Per Page
Amendment Fee $ 75 Flat (1-3)
$100 Flat (After 3)
Acceptance Commission 1-1/2% p.a.
Minimum $125
Negotiation Commission Refer to L/C Supplement Agreement/
$100 Minimum
Processing Fee $100 Per Invoice Negotiated
Discrepancy Fee $150 Per Discrepancy
Document Against Payment 1/2% Flat
$100 Minimum
Expiration Commission 1/2% Flat/
$100 Minimum
Authorization to Pay/ 1/2% Flat/
Reinstatement of Expired $100 Minimum
Letter of Credit
Letter of Indemnity $100 Flat to Issue and
(Steamship Guarantee) $ 50 Flat for Each 30 Days
Outstanding
Air Release $100 Flat
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