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Letter of Credit and Security Agreement - Century Business Credit Corp. and BAM! Entertainment Inc.

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                     LETTER OF CREDIT AND SECURITY AGREEMENT

Supplement to Factoring Agreement/Security Agreement (Accounts Receivable-
Financing)

        THIS SUPPLEMENT ("Supplement") made and executed this 25th day of
February, 2002 by and between BAM! ENTERTAINMENT, INC. a Delaware corporation
("Client") and CENTURY BUSINESS CREDIT CORPORATION ("Factor").

1. SUPPLEMENT TO AGREEMENT

1.1. Supplement. This Supplement shall constitute a supplement to the Factoring
Agreement, Security Agreement (Accounts Receivable - Financing), or both,
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.

2. TRANSACTIONS

2.1. 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 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
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 an 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.

2.2. Scope. The term "Transaction", whenever used in this Supplement, shall mean
and include any such Letter of Credit which may be made or issued by Factor
hereunder, or any drafts 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 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.


<PAGE>

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. The aggregate amount of each Transaction shall be reserved against
advances which would otherwise be available under Section 3.2 of the Agreement
(the "Advance Reserve"). In the event insufficient advance availability exists
under Section 3.2 of the Agreement to institute the Advance Reserve, prior to
and for each Transaction, Client shall deposit with Factor sufficient cash
collateral so that the amount of such Transaction has been fully reserved for
through a combination of an Advance Reserve and cash collateral. For each
Transaction, Factor agrees to release 50% of the Advance Reserve and/or cash
collateral applicable to such Transaction, upon the presentment of a valid
purchase order for the purchase of the merchandise involved in such Transaction,
with such purchase order to be approved by Factor in its sole discretion. The
release of the Advance Reserve and/or cash collateral will be effectuated by
such means as determined by Factor in its sole and absolute discretion.

2.4. Limitations. 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 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.


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<PAGE>


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.

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.


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<PAGE>


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 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


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<PAGE>
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


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<PAGE>
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 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 in connection with or relating to any Transaction or
waivers of discrepancies issued hereunder and any drafts 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



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<PAGE>
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 Letters of Credit by Factor hereunder and for all services which
Factor may render hereunder, the following:

        a) As to Letters of Credit:

            (i) an issuance (opening) charge equal to 1/4 of 1% of the full face
amount of each Letter of Credit; plus

            (ii) 1/4 of 1% of the amount of each increase of any such Letter of
Credit; plus

            (iii) 1/4 of 1% 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 1/4 of 1% of the then outstanding face amount thereof for each 30 day
extension or part thereof in excess of such expiration date; plus

            (iv) a charge equal to not less than 1/4 of 1% on each negotiation
under each Letter of Credit.

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 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 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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<PAGE>


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

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<PAGE>

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 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. EACH OF CLIENT AND FACTOR HEREBY WAIVES TRIAL BY
JURY AND THE RIGHT THERETO IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING ON,
OUT OF, OR BY REASON OF, OR RELATING IN ANY WAY TO THIS SUPPLEMENT OR THE
INTERPRETATION OR ENFORCEMENT THEREOF, OR TO ANY TRANSACTIONS HEREUNDER .

        IN WITNESS WHEREOF, the parties hereto have executed this Supplement as
of the day and year first above written.

                                                CENTURY BUSINESS CREDIT
                                                CORPORATION

                                                By:  /s/ ILLEGIBLE
                                                    ---------------------------
                                                Title:  President
                                                       ------------------------

                                                BAM! ENTERTAINMENT, INC.,
                                                a Delaware corporation


                                                By:  /s/ RAYMOND MUSCI
                                                    ---------------------------
                                                Title:  C.E.O.
                                                       ------------------------



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<PAGE>

                            AUTHORIZED SIGNATURES OF

                            BAM! ENTERTAINMENT, INC.


February 25, 2002

Century Business Credit Corporation
333 South Grand Avenue, Suite 4150
Los Angeles, California 90017

Gentlemen:


The names of the persons authorized, to make, sign and deliver on behalf of this
Corporation, Letters of Credit and amendments to Letters of Credit, authorize
the waiver of discrepancies, and authorize the issuance of air releases and/or
steamship indemnities, relative to Factor's Factoring Contract or Security
Agreement - Accounts Receivable - Financing, and any Supplement thereto, with
Century Business Credit Corporation, are as follows:

NAME (PRINT)                                            SIGNATURE
------------                                            ---------

Raymond Musci                                 /s/ RAYMOND MUSCI
                                             -----------------------------------
Stephen Ambler                                /s/ SM AMBLER
                                             -----------------------------------
Lynnie Nojadera                               /s/ LYNNIE NOJADERA
                                             -----------------------------------

                                Very truly  yours,

                                BAM! ENTERTAINMENT, INC.,
                                a Delaware corporation

                                By:  /s/ RAYMOND MUSCI
                                    -------------------------------------------
                                Title:  C.E.O.
                                       ----------------------------------------





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                                   SCHEDULE 1
                        IMPORT LETTER OF CREDIT AGREEMENT
                                BANK FEE SCHEDULE
                             AS OF FEBRUARY __, 2002


Issuance (Opening)                                   $100 Flat

Cable Notification                                   $ 25 Per Page

Amendment Fee                                        $ 75 Flat (1-3)
                                                     $100 Flat (After 3)

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            1/4% Flat/$100 Minimum

Authorization to Pay/                                1/4% Flat/$100 Minimum
    Reinstatement of Expired 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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