LETTER OF CREDIT AND SECURITY AGREEMENT Supplement to Loan, Security and Bulk Purchase Agreement

 

THIS SUPPLEMENT (“Supplement”) made and executed this 30th day of April, 2008 by and between INFOSONICS CORPORATION (“Client”) and WELLS FARGO CENTURY, INC. (“WFC”).

 

1. Supplement to Agreement

 

1.1 Supplement. This Supplement shall constitute a supplement to the Loan, Security and Bulk Purchase Agreement, entered into between WFC 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 WFC and relating to indebtedness of Client to WFC, 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 WFC’s approval thereof, WFC will guarantee payment by Client (i) to vendors for purchases made by 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 WFC, 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 or on a standby basis (a “Letter of Credit”); provided, that, in any event, the aggregate of all Purchase Guaranties and Letters of Credit issued and outstanding at any time shall not exceed $10,000,000. In each such instance Client will execute a form of request for Purchase Guaranty on WFC’s form or application for credit on the form of such bank requesting WFC 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 shall be fully reserved against under the 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 WFC 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 WFC, in WFC’s sole discretion, may elect. Client shall, if WFC so elects in any Transaction, deposit with Client either cash or other collateral satisfactory to WFC, in such amounts as WFC, in WFC’s sole discretion, may require from time to time, prior to any Transaction.

 

 

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 WFC, in WFC’s sole and absolute discretion. Nothing herein contained shall be deemed or construed to grant to Client any right, power or authority to pledge WFC’s credit in any manner or to any extent whatever.

 

2.5 Issuance. All Letters of Credit guaranteed by WFC 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 WFC, forthwith upon demand and in full, any and all moneys which WFC may pay or be obligated to pay on, under, in connection with, or by reason of, any Transaction, including all attorney’s fees, if any.

 

3.2 Indemnities. Client shall indemnify WFC and any bank which may issue any Letter of Credit guaranteed by WFC 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 WFC and them harmless against any and all third party claims, losses, liabilities, expense, demands and causes of action ("Claims") which may be made, asserted, or brought against WFC, or any of them, arising on, under, in connection with, or by reason of, any Transaction, except for Claims arising from WFC's acts or omissions.

 

3.3 Additional Documents. Client shall, upon WFC’s request, execute and deliver to Client any trust receipts which WFC may reasonably require in connection with the release to Client of any merchandise or documents and any financing statements that WFC may, from time to time, reasonably require.

 

3.4 Insurance. Client shall cause all merchandise which may be the subject of any Transaction to be appropriately insured under an all risk United States dollar policy, at Client’s sole cost, but for WFC’s account and benefit as WFC’s interest may appear, in amounts and by insurance companies reasonably satisfactory to WFC; and shall deliver to WFC forthwith proof of full payment of all premiums thereon if requested by WFC. Upon Client’s failure or refusal, for any reason, to deliver any such prepaid policies to WFC, WFC 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 WFC, forthwith, the amount of such premiums so paid by WFC with interest thereon computed as provided in Section 8.2 hereof. Client’s liability to WFC 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 WFC, 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 WFC may at any time reasonably request that are necessary for WFC in connection with the performance of its services hereunder will be promptly furnished. In this connection, Client warrants and represents that, to its knowledge as of the date of shipment, 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 WFC naming Client as beneficiary shall, to Client's knowledge, 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 WFC for any purpose will, to Client's knowledge, be genuine, correct and complete.

 

4. Power of Attorney

 

4.1 Scope. In connection with all Transactions, Client hereby appoints each officer of WFC’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 WFC’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 material 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 WFC’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 WFC to obtain payment of any monies owed to WFC, or for which Client may thereafter become liable to WFC, in any Transaction or otherwise hereunder. The said power and authority is coupled with an interest and shall be irrevocable (except as to future Transactions) until all Transactions shall have been fully consummated and all monies owed to WFC 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 WFC, 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 WFC and grants to WFC 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 WFC, including, but not limited to, Client’s account with WFC 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 WFC’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 WFC or set apart for WFC by anyone for WFC, in any way, by Client or for Client’s account, or in which Client may have any interest, whether WFC 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 WFC, in WFC’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 WFC 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 WFC the purchase order, selling order, letter of credit in Client’s favor and all other instruments in connection with the Transaction which WFC may require; and all of the same shall be deemed to have been automatically assigned to WFC and shall become WFC’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 WFC’s sole property and in furtherance thereof, Client, upon the occurrence and during the continuation of an Event of Default, 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 WFC or upon WFC’s order. If any of the Title Documents shall come into Client’s possession, Client shall hold same in trust for WFC and shall forthwith deliver the same to WFC in their original form. Unless WFC instructs otherwise, upon the occurrence and during the continuation of an Event of Default, 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 WFC and apply in all respects to WFC 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 WFC’s approval thereof, which shall not be unreasonably withheld, delayed or conditioned, WFC will cause WFC’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 WFC’s banks for negotiation or acceptance in connection therewith and Client hereby agrees to indemnify WFC and hold WFC 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, WFC shall have the right prior to presentation, negotiation or acceptance of documents at WFC’s banks under the related Letters of Credit to charge to Client’s account the face amount of such outstanding airway releases, steamship guarantees or indemnities.

 

7. WFC’s Responsibility

 

7.1 Limitation of Liability. WFC shall not be liable or responsible, in any manner or to any extent, for any damage caused by faithfully and dutifully 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 WFC 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 (except for Claims caused by the acts of omissions of WFC). Except as set forth in this Agreement, all Transactions hereunder shall be entirely without recourse against WFC in any event.

 

7.2 Reliance. WFC and any bank shall have the right to rely upon any oral (if from an officer of Client), 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. WFC retains WFC’s independent right to refuse any documents presented containing discrepancies despite the fact that WFC has contacted Client and Client has accepted such discrepancies.

 

7.3 Waiver of Discrepancies. WFC reserves the sole right, after consulting with Client, in WFC’s reasonable discretion, to waive any discrepancies, defects or mistakes in any of the documents presented to WFC or WFC’s banks for negotiation or acceptance.

 

 

8. Fees

 

8.1 Compensation. In addition to any commissions, discount, interest, charges, fees or expenses charged to WFC for Client’s account by any bank, or by WFC 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 absent manifest error), Client shall pay to WFC, as compensation for the issuance of Purchase Guaranties or Letters of Credit by WFC hereunder and for all services which WFC may render hereunder, the following:

 

(a) As to commercial Letters of Credit:

 

(i) an issuance (opening) charge equal to 0.125% of the full face amount of each commercial Letter of Credit; plus

 

(ii) 0.125% of the amount of each increase of any such commercial Letter of Credit; plus

 

(iii) a charge equal to not less than 0.125% on each negotiation under each commercial Letter of Credit.

 

(b) As to standby Letters of Credit, a 2.0% per annum fee on the full face amount of each standby Letter of Credit, payable on the issuance date and on each anniversary of the issuance date during the term thereof.

 

(c) As to Purchase Guaranties:

 

(i) an issuance (opening) charge equal to 0.125% of the full face amount of each Purchase Guaranty; plus

 

(ii) a charge equal to not less than 0.125% on each negotiation under each Purchase Guaranty.

 

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 WFC 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 WFC hereunder or any Transaction covered thereby.

 

8.3 Reserved.

 

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.

 

8.5 Costs. Client shall reimburse WFC for all reasonable and necessary out-of-pocket costs and expenses (including legal fees and disbursements) incurred by WFC in connection with the execution and delivery of this Supplement and perfection of WFC’s security interest in the Collateral, or to obtain or enforce payment of any of Client’s Obligations to WFC hereunder.

 

 

9. WFC’s Remedies

 

9.1 Remedies. In the event of any default by Client under the Agreement or hereunder, WFC shall have the right to sell, at public or private sale, all Collateral and documents relating thereto which WFC may hold as security and shall generally have all of the rights and remedies of a secured party under the Uniform Commercial Code and in accordance with Section 7.2 of the Agreement.

 

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. WFC’s failure to enforce any right or remedy hereunder or WFC’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 WFC’s respective successors and assigns

 

10.3 Recapture. To the extent WFC, or any beneficiary of a Transaction to whom WFC 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 WFC in whole or in part, then, to the extent of any sum not finally retained by WFC or such beneficiary (regardless of whether such sum is recovered from WFC 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 WFC 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 WFC, which payment shall be due on demand.

 

10.4 Entire Agreement. This Supplement contains WFC’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 WFC 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 and Reference. EACH OF CLIENT AND WFC 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.

 

	WELLS FARGO CENTURY, INC.
	By:	/S/ Joseph Ram
	Name:	Joseph Ram
	Title:	CEO
	INFOSONICS CORPORATION
	By:	/s/ Kevin Sullivan
	Name:	Kevin Sullivan
	Title:	Executive Vice President, Western Region

 

 

April 30, 2008

 

Wells Fargo Century, Inc.

333 South Grand Avenue, Suite 4150

Los Angeles, CA 90071

 

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 Loan, Security and Bulk Purchase Agreement, and any Supplement thereto, with Wells Fargo Century, Inc., are as follows:

 

NAME (PRINT)		SIGNATURE
Jeff Klausner	CFO	/s/  Jeff Klausner
		(Signature)
Joseph Ram	CEO	/s/  Joseph Ram
		(Signature)
Josh Haims	VP Finance	/s/ Josh Haims
		(Signature)

	Very truly yours,
	INFOSONICS CORPORATION
	By:	/s/ Joseph Ram
	Name:	Joseph Ram
	Title:	CEO