INVENTORY SECURITY AGREEMENT
New York, New York October 19, 1999
Rosenthal & Rosenthal, Inc.
1370 Broadway
New York, N. Y. 10018
Gentlemen:
We do hereby agree that the Factoring Agreement between us dated October 19,
1999, be and the same hereby is amended and supplemented by adding thereto the
following clauses:
We hereby pledge, assign, consign, transfer and set over to you, and you
shall at all times have a continuing general lien upon, and we hereby grant you
a continuing security interest in, all of our Inventory and the proceeds
thereof. "Inventory" shall include but not be limited to raw materials, work in
process, finished merchandise and all wrapping, packing and shipping materials,
wheresoever located, now owned or hereafter acquired, presently existing or
hereafter arising, and all additions and accessions thereto, the resulting
product or mass and any documents representing all or any part thereof. Upon
your request, we will at any time and from time to time, at our expense, deliver
such Inventory to you or such person as you may designate, cause the same to be
stored in your name at such place as you may designate, deliver to you documents
of title representing the same or otherwise evidence your security interest in
such manner as you may require.
The aforementioned pledge, assignment, consignment, transfer, lien and
security interest shall secure any and all of the Obligations.
We agree, at our expense, to keep all Inventory insured to the full value
thereof against such risks and by policies of insurance issued by such companies
as you may designate or approve, and the policies evidencing such insurance
shall be duly endorsed in your favor with a long form lender's loss payable
rider or such other document as you may designate and said policies shall be
delivered to you. Should we fail for any reason to furnish you with such
insurance, you shall have the right to effect the same and charge any costs in
connection therewith to us. You shall have no risk, liability or responsibility
in connection with payment or nonpayment of any loss, your sole obligation being
to credit our account with the net proceeds of any such insurance payments
received on account of any loss. Any and all assessments, taxes or other charges
that may be assessed upon or payable with respect to the Inventory or any part
thereof shall forthwith be paid by us, and we agree that you, in your
discretion, may effect such payment and charge the amount thereof to us. We
further agree that except for the pledge, assignment, consignment, transfer,
lien and security interest granted to you hereby and except for existing liens
to be released, we shall not permit said Inventory to otherwise become liened or
encumbered nor shall we grant any security interest therein to any other party.
We shall not, without your written consent first obtained, remove or dispose of
any of such Inventory except to bona fide purchasers thereof in the ordinary
course of our business on orders first approved in writing by you. All such
sales shall be reported to you promptly and the accounts or other proceeds
thereof shall be subject to the security interests in your favor. Following a
default in any of the Obligations as and when the same become due and during the
continuance thereof you shall have the right at all times to the immediate
possession of all Inventory and its products and proceeds. We shall make such
Inventory and all our records pertaining thereto available to you for inspection
at any reasonable business hours requested by you. You shall have the right, in
your discretion, to pay any liens or claims upon said Inventory, including, but
not limited to, warehouse charges, dyeing, finishing and processing charges,
landlords' claims, etc. and the amount of any such payment shall be charged to
our account and secured hereby. You shall not be liable for the safekeeping of
any of the Inventory or for any loss, damage or diminution in the value thereof
or for any act or default of any warehouseman, carrier or other person dealing
in and with said Inventory, whether as your agent or otherwise, or for the
collection of any proceeds thereof but the same shall at all times be at our
sole risk.
Prior to its sale to a bona fide purchaser in the ordinary course of
business, Inventory shall at all times remain at our address specified below or
at 111 Howard Blvd., Arlington, NJ 07856; and shall not be removed therefrom
without your prior written consent.
Upon our default in the payment, performance or discharge of any of the
Obligations as and when the same become due, or in the event of our insolvency,
or if a receiver or trustee is appointed for our assets or affairs, or if we
discontinue doing business, or if a petition in bankruptcy or for arrangement or
reorganization is filed by or against us, or if we make an assignment for the
benefit of our creditors, or suspend the operation of our business or commence
the liquidation thereof, or make any offer of settlement, extension or
composition with our creditors, or upon the appointment of a committee of our
creditors or a liquidating agent for us, or the issuance of any attachment or
execution against us, or the
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filing of a judgment or other lien against us, or upon our any default hereunder
or under any other agreement between us, you shall have the right, upon
reasonable notice to us, to sell all or any part of our Inventory, at public or
private sale, or make other disposition thereof, at which sale or disposition
you may be a purchaser. We agree that written notice sent to us by postpaid
mail, at least ten days before the date of any intended public sale or the date
after which any private sale or other intended disposition of the Inventory is
to be made, shall be deemed to be reasonable notice thereof. We do hereby waive
all notice of any such sale or other intended disposition if said Inventory is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market. Upon the occurrence of any of the events referred
to in the first sentence of this paragraph, you may require us to assemble all
or any part of the Inventory and make it available to you at a place to be
designated by you, which is reasonably convenient to both parties. In addition,
you may peaceably, by your own means or with judicial assistance, enter our or
any other premises and take possession of the Inventory and remove or dispose of
it on our premises and we agree that we will not resist or interfere with any
such action. We hereby expressly waive demand, notice of sale (except as herein
provided), advertisement of sale and redemption before sale. The net proceeds of
any such public or private sale or other disposition as far as needed shall be
applied toward the payment and discharge of any and all of the Obligations to
you, together with all interest thereon and all reasonable costs, charges,
expenses and disbursements in connection therewith, including the reasonable
fees of your attorneys, rendering any surplus remaining to us, we, of course, to
continue liable should there be any deficiency.
This agreement is deemed made in the State of New York and is to be
governed, interpreted and construed in accordance with the laws of the State of
New York. No modification, waiver or discharge of this agreement shall be
binding upon you unless in writing, signed and subscribed by you. If you should
at any time fail to exercise any right or privilege hereunder, the same shall
not constitute a waiver on your part of exercising any right or privilege at any
subsequent time. If any taxes are imposed or if you shall be required to
withhold or pay any tax because of any transactions between us, we agree to
indemnify you and hold you harmless in respect thereto. It is agreed between us
that trial by jury is hereby waived in any action, proceeding or counterclaim
brought by either of us against the other on any matters whatsoever arising out
of or in any way connected with this agreement or our relationship created
hereby and we hereby consent to the jurisdiction of the Supreme Court of the
State of New York for a determination of any dispute as to any such matters and
authorize the service of process on us by registered mail sent to us at our
address hereinbelow set forth.
This agreement shall constitute a security agreement pursuant to the
Uniform Commercial Code and, in addition to any and all of your other rights
hereunder, you shall have all of the rights of a secured party pursuant to the
provisions of the Uniform Commercial Code. We agree to execute a financing
statement and any and all other instruments and documents that may now or
hereafter be provided for by the Uniform Commercial Code or other law applicable
thereto, reflecting the security interests granted to you hereunder. We do
hereby authorize you to file a financing statement without our signature, signed
only by you as secured party, to reflect the security interests granted to you
hereunder.
Very Truly Yours,
BRIGHT STAR FOOTWEAR, INC.
By: /s/ NEIL COLE
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2975 Westchester Avenue, Purchase, NY 10577
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