EXHIBIT 10.20
September 1, 2006
Versatile Entertainment, Inc.
150 West Jefferson
Los Angeles, CA 90007
Attn: Edward C. Houston
Re: Inventory Loan Facility
Dear Edward:
Reference is made to (i) the Factoring Agreement between FTC Commercial
Corp.
("FTC") and Versatile Entertainment, Inc. (the "Company") dated
October 14, 2004
(as supplemented
or amended from time
to time, the "Factoring Agreement") and
(ii) the Continuing
Security Agreement
between FTC and the Company of the date
herewith (as
supplemented
or amended from time to time, the "Security
Agreement"). The Factoring Agreement, the Security Agreement, and
all agreements
now or hereafter
entered into between FTC and the Company shall be referred to
herein collectively as the "Company Agreements."
Except as otherwise
provided in this letter agreement (this "Agreement"), any
capitalized terms used
herein but not defined in this Agreement shall have the
meanings assigned to such terms in the Factoring Agreement.
For purposes of this Agreement:
"Inventory" as used
herein shall have the meaning set forth in the
Security Agreement.
"Inventory Base" means
up to fifty percent
(50.0%) of the value
(the
lesser of cost or market) of the Company's raw material and finished
goods Inventory which
FTC determines, in its
sole discretion,
to be
eligible for inclusion
in the Inventory
Base. Without limiting the
generality of the
foregoing,
the following Inventory shall not be
eligible for inclusion in the Inventory Base if (i) such Inventory is
over one hundred
eighty (180) days old; (ii) such Inventory is
defective or
damaged; (iii) such Inventory is not located at the
Company's premises at 150 W. Jefferson, Los Angeles, California 90007;
(iv) such Inventory
is located at any real property leased by the
Company or at any contract warehouse, unless such Inventory is
subject
to a collateral access agreement acceptable to FTC and executed by
the
lessor or
warehouseman, as the
case may be, and unless such Inventory
is separately
identifiable from the goods of others, if any, stored on
the premises; (v) the Company does not have good, valid, and
marketable
title to such Inventory; (vi) such Inventory is not subject
to a valid
and perfected first priority security interest in favor of FTC;
(vii)
such Inventory
consists of bill and hold goods or goods
acquired on
consignment or (viii) such Inventory consists of work in
process.
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"Obligations" means
the any and all
obligations of the
Company under
this Agreement and the Company Agreements.
This Agreement
shall confirm our mutual understanding and agreement that,
subject to the terms and conditions of the Company Agreements, and
provided that
no default
or Event of
Default under any of the Company Agreements and no
termination of the
Factoring Agreement
has occurred, FTC may,
in its sole and
absolute discretion,
extend an inventory loan facility to the Company in an
aggregate principal
amount outstanding at
any time not to exceed the lesser of
(a) the Inventory
Base or (b) up to
$1,000,000 MINUS the
aggregate amount
of
then outstanding
inventory loans made to (i) Bella Rose, LLC d/b/a William Rast
("BRL") under the
Inventory Loan Facility between BRL and FTC of even date
herewith (as amended from time to time, the "BRL Facility
Agreement")
and (ii)
any subsidiaries of BRL (the "BRL Subsidiaries") which enter into factoring and
inventory loan arrangements with FTC (the " BRL Subsidiaries
Agreements")
The interest rate charged on outstanding inventory loans under this Agreement
will be the same rate charged in Section 23 of the Factoring
Agreement and will
be calculated, computed and payable in accordance with the
provisions of Section
23.
This Agreement shall terminate, at FTC's discretion, on the date which is the
earlier to occur of: (a) the date on which a default or Event of
Default occurs
under this Agreement,
the Company
Agreements, the
Factoring Agreement between
FTC and BRL dated October 12, 2005 (as amended, the "BRL Factoring
Agreement"),
the BRL Facility Agreement, any of the other
