EXHIBIT 10.29
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LOAN AND SECURITY AGREEMENT
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THIS LOAN AND SECURITY AGREEMENT, as amended, restated, extended or
otherwise modified by the parties hereto, their successors and assigns, from
time to time, including, without limitation, all schedules and attachments
hereto ("Agreement"), is made and entered into this 2nd day of December, 2004,
by and between POWER2SHIP, INC., a Corporation organized and existing under the
laws of State of Nevada with a principal place of business located at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and FREIGHT RATE, INC., a Corporation organized
and existing under the laws of State of Delaware with a principal place of
business located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, (collectively
"Borrower") and MERCANTILE CAPITAL, L.P., with offices located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Lender").
WITNESSETH:
BACKGROUND
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Borrower has requested Lender to establish on its books and records a
revolving credit facility ("Revolving Credit") pursuant to which Lender may make
revolving loans and advances to Borrower up to an aggregate amount at one time
outstanding equal to One Million Dollars ($1,000,000.00) ("Revolving Credit
Limit") secured by the Collateral, as such term is defined in Section 3 herein,
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and evidenced by a promissory note (the "Revolving Loan Note") of even date.
Lender is willing to do so upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the promises herein contained, and each
intending to be legally bound hereby, the parties agree as follows:
1. DEFINITIONS. All terms defined in Schedule 1 and all other
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capitalized terms defined in this Agreement, shall have the meanings ascribed to
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them herein when used in the Loan Documents, unless otherwise defined therein.
2. THE LOANS.
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2.1 The Revolving Credit. Subject to the terms and limitations hereof,
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Borrower may borrow, repay with-out penalty or premium and re-borrow hereunder
the amount equal to the Borrowing Base or any lesser amount (the "Revolving
Loans" and together with all other loans and advances made hereunder, the
"Loans"), each advance evidenced by Lender's books and Records, from time to
time until the earliest of: (a) one year from the execution of this Agreement,
subject to annual renewal at Lender's discretion; or (b) the occurrence of an
Event of Default (either such event, a "Revolving Credit Termination Date").
2.1.1 Each application by Borrower for a Loan hereunder shall be
accompanied by; (a) a fully completed Borrowing Base Certificate; (b) an
accounts receivable aging report based upon invoice dates; and (c) copies of:
(i) credit memos (which shall be issued promptly by Borrower and reflected in
Borrower's next Borrowing Base Certificate and/or accounts receivable
reconciliation); (ii) debit memos; (iii) sales journals; (iv) cash receipts
journals and (v) any other documents reasonably required by Lender (items (i)
through (v) hereinafter referred to as "Account Substantiation Documents").
2.1.2 If, at any time, the Revolving Loans exceed the most current
calculated Borrowing Base of Borrower in Lender's possession, Borrower shall,
within three (3) Business Days, repay to Lender, in cash, such amounts, plus
interest thereon, as may be necessary to eliminate such excess, and Lender may
charge any Deposit Account of any nature of Borrower for such amount.
2.1.3 For the purpose of determining the existence of a Borrowing
Base sufficient to support the Revolving Loans from time to time outstanding
hereunder, Borrower shall deliver to Lender weekly and at such other time or
times as Lender may specify on a commercially reasonable basis, a Borrowing Base
Certificate, an accounts receivable aging report based upon invoice dates and
copies of all Account Substantiation Documents.
2.2 Disbursement of the Loans. The Lender will credit the proceeds of
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the Loans to or for the benefit of Borrower via wire transfer or ACH to
Borrower's operating account as Borrower shall designate by written notice to
Lender, except for the payment of amounts due to or for the benefit of Lender
hereunder which shall be made directly to Lender. Prior to receiving the
Subordination Agreements as provided in, and required by, Section 7.1.36 of this
Agreement, the Borrower may borrow the lesser of the Borrowing Base or Two
Hundred and Fifty Thousand and 00/100 Dollars ($250,000.00). In the event the
Lender is not provided with acceptable Subordination Agreements in accordance
with Section 7.1.36 of this Agreement such failure shall constitute an Event of
Default under Section 8.1.15, which default shall relieve lender from any
obligation to make additional advances under this Agreement and shall entitle
the Lender to exercise any of its rights and remedies under this Agreement. In
the event Lender is provided with copies of acceptable Subordination Agreements
within sixty (60) days of closing which, when taken with the Subordination
Agreements previously executed in favor of Lender in form acceptable to Lender,
have the effect of subordinating 90% of the sum of the face value of all 14.25%
Secured Convertible Debentures issued plus the face value of all Series B 5%
Secured Convertible Debentures issued, the Borrower may borrow, repay with-out
penalty or premium and re-borrow hereunder the amount equal to the Borrowing
Base or any lesser amount.
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2.3 Interest Rates and Payments of Interest. Interest shall accrue and
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be paid as follows:
2.3.1 Interest will accrue at the rate set forth in Schedule 2
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and made part hereof and shall be calculated on the basis of a 360-day year,
counting the actual number of days elapsed, on the greater of $100,000.00 or the
principal balance of the Loans, from time to time outstanding, and shall be
payable on the first (1st) day of each month commencing on the first (1st) day
of the first month after the Closing Date and continuing on the same day of each
month thereafter until all Obligations are satisfied in full.
2.3.2 If the rate is related to the Base Rate, each time the Base
Rate shall change, the Interest Rate on the Loans shall change contemporaneously
with such change in the Base Rate. If, at any time, any rate shall be deemed by
any competent court of law, Governmental Authority or tribunal to exceed the
maximum rate of interest permitted by any applicable Laws, then, for such time
as such Rate would be deemed excessive, application thereof shall be suspended
and there shall be charged in lieu thereof the maximum rate of interest
permissible under such Laws.
2.3.3 The Lender agrees to give the Borrower next Business Day
availability on payments received and deposited into Lender's account at
Wilmington Trust Company of Pennsylvania (the "Concentration Account").
Provided, however; that (a) for the purpose of computing interest hereunder such
items shall be applied by Lender on account of the Revolving Loans the number of
days equal to the Float Factor described in Schedule 2 after same have been
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deposited into the Concentration Account, and (b) no such item received by
Lender shall constitute payment to Lender unless such item is actually collected
by the bank at which Lender maintains its Concentration Account, presently,
Wilmington Trust Company of Pennsylvania.
2.4 Fees. Borrower hereby agrees to pay the fees described on Schedule
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2 which shall constitute additional Obligations hereunder secured by the
Collateral. Any of such fees not paid when due shall bear interest from the date
due until paid at the interest rate specified in Paragraph 2.3.1:
2.4.1 Other Fees, Charges and Expenses. The Borrower shall
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promptly pay to or on behalf of Lender from time to time the reasonable fees and
expenses of the Lender's counsel, appraisers, and auditors incurred in
connection with this Agreement and the Obligations.
3. COLLATERAL SECURITY.
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3.1 Grant of Security Interests. As security for the timely
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satisfaction of all Obligations, Borrower hereby assigns, transfers and sets
over to Lender all of its right, title and interest in and to, and grant Lender
a continuing lien on and security interest in and to all of the Borrower's
Assets described in Schedule 3, wherever located, whether now owned or hereafter
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acquired, together with all replacements therefor and all cash and non-cash
Proceeds (including, but without limitation, insurance Proceeds and Proceeds of
Proceeds) thereof, collectively called the "Collateral" which, together with all
of Borrower's other property of any kind held by Lender, shall stand as one
general, continuing collateral security for all Obligations of the Borrower to
Lender and may be retained by Lender until all Obligations have been satisfied
in full
3.2 Priority of Liens. Except for the Liens set forth on Schedule 4,
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as approved by Lender ("Permitted Liens"), and except as provided in Section
7.2.2, Lender's Liens in and to the Collateral shall be first and prior Liens to
all Liens against the Assets of Borrower now existing or hereafter arising
("Lender's Prior Security Interest").
3.3 Financing Statements. Borrower hereby: (a) authorizes Lender to
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file any financing statements (including amendments thereto and continuation
statements thereof) in form satisfactory to Lender as Lender may specify; (b)
agrees to take such other steps as Lender may direct, including the noting of
Lender's lien on the Collateral and on any certificates or documents of title
therefor, all to perfect Lender's liens on and security interests in the
Collateral; and (c) agrees to pay or reimburse Lender for all costs and taxes of
filing or recording the same in such public offices as Lender may designate. In
addition to the foregoing, and not in limitation thereof, a carbon,
photographic, or other reproduction of this Agreement shall be sufficient as a
financing statement and may be filed in any appropriate office in lieu thereof.
Borrower hereby irrevocably appoints Lender as its attorney-in-fact (without
requiring Lender to act as such) to execute any financing statements, including
amendments thereto and continuation statements thereof in the name of Borrower,
and to perform all other acts and deeds that Lender deems appropriate to perfect
and continue its security interest in, and to protect and preserve, the
Collateral.
3.4 Lender's Special Rights
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3.4.1 In the event Lender, in its sole discretion, should
reasonably believe that an Event of Default as described in Paragraph 8 has
occurred, Lender (through any of its officers, employees, auditors or agents)
shall have the right, upon the giving of notice to Borrower, and after the
expiration of any cure period (if applicable) without said default being cured,
at any time or times hereafter to: (a) on not less than sixty (60) days' written
notice to Borrower, permanently reduce the Revolving Credit Limit; (b) confirm
orders, Account Debtor balances and invoices and verify the validity of
Accounts, Inventory and/or invoices or any other matter relating to any Account
or Inventory by mail, telephone, telegraph or otherwise, in the name of Borrower
or Lender or any other name Lender so chooses; (c) notify all Account Debtors
that the Accounts have been assigned to Lender and Lender has a security
interest therein; (d) direct all Account Debtors to make payment to Lender of
all Accounts; (e) enforce payment and collect, by legal proceedings or
otherwise, any Accounts in the name of Lender; and (f) during Borrower's usual
business hours, or during the usual business hours of any third party having
control over the Records of Borrower, (i) conduct such collateral examinations
and audits Lender deems appropriate of Borrower's books and Records, and (ii)
inspect and verify Borrower's books and Records in order to verify the amount or
condition of, or any other matter relating to, the Collateral and Borrower's
financial condition.
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3.4.2 Lender shall be entitled to conduct, from time to time
during the term of this Agreement, examinations of Borrower's business
operations, Inventory and Records and to check and test the same as to quality,
quantity, value and condition. Borrower will be obligated to pay or reimburse
Lender for the costs of such examinations.
3.5 Landlords' /Mortgagees' Waivers. Borrower will cause each landlord
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and mortgagee, of all premises leased or owned, wherein any of the Collateral
may be located, to execute and deliver to Lender instruments, in form and
substance satisfactory to Lender, by which such landlord or mortgagee waives or
subordinates its rights, if any, to the Collateral.
3.6 Insecurity Clause. Borrower agrees that if any of the Collateral
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shall at any time be insufficient or otherwise unsatisfactory to Lender in its
sole judgment, Borrower shall either (a) within five (5) days of notice of such
Collateral deficiency, reduce the amount of the outstanding Obligations to an
amount such that the value of the Collateral in relation to the outstanding
Obligations is satisfactory to Lender, or (b) after such five (5) day period, on
demand, forthwith pledge, assign, transfer or grant Lender a continuing lien on
and security interest in and to, or deposit with Lender as part of the
Collateral, additional property satisfactory to Lender.
4. OTHER PROVISIONS.
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4.1 Lock Box. Borrower will direct all of its Account Debtors to
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forward payments directly to the lockbox facility ("Lock Box") maintained with
Wilmington Trust ("Lock Box Bank"). The Lock Box address is Power2Ship,
W510154, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇. Lender shall apply such
payments to reduce the outstanding Obligations. In the event that Borrower
receives Remittances, Borrower agrees that such Remittances shall be held in
express trust for the benefit of Lender which shall be immediately notified of
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such receipt. Borrower shall immediately upon receipt, turn over all Remittances
to Lender in precisely the form received, except for the endorse-ment of
Borrower when necessary to permit the collection of the Remittances which
endorsement Borrower hereby agrees to make. Pending such deposit, Borrower will
not commingle any Remittances (including all pre-payments) with any of its other
funds or property, but will hold them separate and apart there-from expressly in
trust for Lender. Such statements, reports of collections and adjustments as
Lender may, from time to time, specify shall accompany all Remittances. All
funds received by Lender will be applied to reduce the Obligations, subject to
collection. Borrower shall have no right of access to or withdrawal from the
Lock Box. Lender shall have no duty to segregate Proceeds of Collateral
remitted to the Lock Box, or deposited in the Concentration Account pursuant to
Paragraph 4.2 below, from other funds or property remitted to the Lock Box or
deposited in the Concentration Account.
4.2 Concentration Account. All Proceeds of any Collateral shall be
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deposited into the Concentration Account through the Lock Box, direct deposit by
Borrower or Account Debtor or otherwise. Borrower hereby absolutely assigns to
Lender all amounts now or hereafter due the Borrower in connection with its
Accounts. Borrower shall, at the request of Lender, cause all invoices of
Borrower forwarded to Account Debtors to notify such Account Debtors to make all
payments in connection with such invoices directly to the Lender for deposit
into the Concentration Account. It is further understood that the Concentration
Account is the Lender's account and Borrower agrees that Borrower shall have no
right to withdraw monies from the Concentration Account.
4.3 Collections. Lender may at any time, in the exercise of its rights
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under Section 3.4, take control of the cash and non-cash Proceeds of any of
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Borrower's Accounts, and charge the collection costs and expenses to a deposit
account of Borrower, but, unless and until Lender does so or gives Borrower
other written instructions, the collection of the Accounts shall be in
accordance with the terms and conditions of this Agreement. The receipt of any
wire transfer of funds, check, or other item of payment by Lender shall be
applied to conditionally reduce the Obligations, but shall not be considered a
payment on account unless such wire transfer is of immediately available federal
funds and is made to the Concentration Account of Lender or unless and until
such check or other item of payment is honored when presented for payment.
4.3.1 The costs of all collection and enforcement proceedings
against any Account Debtor, including reasonable attorney's fees and
out-of-pocket expenses, shall be borne solely by Borrower whether incurred by
Lender or by Borrower.
4.4 Cash Collateral. Until such time as the amounts now or hereafter
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on deposit in any account are delivered to the Lender in accordance with the
provisions set forth in this Agreement, such amounts shall be deemed to be held
by the Borrower for the benefit of the Lender in express trust and such amounts
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together with all amounts now or hereafter on deposit in the Concentration
Account shall be deemed to be "Cash Collateral" under Section 363 of the
Bankruptcy Code. In the event that Borrower files a voluntary petition in
Bankruptcy or is made subject to any involuntary Bankruptcy proceeding, the
Borrower may not use such Cash Collateral without the consent of the Lender
and/or an order of any the Bankruptcy Court pursuant to 11 U.S.C. Sec.
363(b)(2). The Borrower hereby waives any right it may have to assert that the
Lender's liens on and security interests in and to such amounts and other like
Collateral does not constitute Cash Collateral.
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4.5 Power of Attorney. Borrower hereby irrevocably authorizes and
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empowers Lender, grants a power of attorney, coupled with an interest to, and
appoints Lender, or any officer, director or employee of Lender, as
attorney-in-fact for Borrower, with full authority for and on behalf of
Borrower, and in its name, place and stead, to take any action which Borrower or
any officer or director of Borrower could do if then present, as may, in the
opinion of Lender, be necessary or advisable, to; (a) cause any amounts on
deposit in any Deposit Account of Borrower with any bank or other depository
("Depository") to be transferred to Lender including, without limitation, the
power and authority to sign, seal, execute and deliver for and on behalf of
Borrower, and in its name, place and stead, any agreement, document or
instrument of any nature, including, without limitation, any Control Agreements,
deposit agreements, signature cards, corporate resolutions or as may otherwise
be required by any Depository at which Borrower maintains any account of any
nature, to cause such Depository to transfer to Lender, all amounts of Borrower
now or hereafter on deposit with such Depository; (b) cause such Depository to
provide to Lender all information in possession of such Depository with respect
to any accounts of Borrower, of any nature, on deposit with such Depository,
including, without limitation, account balances, account statements, checks,
drafts or other items drawn on such account, deposit and withdraw tickets; (c)
change the name of any such account from Borrower's name to the name of the
Lender; (d) give orders to any Depository with respect to any such accounts,
including, without limitation, orders to transfer the balances in any such
accounts to Lender; and (e) take such other action as may in the opinion of
Lender, be necessary to cause all accounts now or hereafter on deposit in any
such depository institution to be transferred to Lender. Lender covenants and
agrees that it shall not exercise its rights under this Paragraph unless Lender,
in its sole discretion, should reasonably believe that an Event of Default as
described in Paragraph 8 has occurred.
4.5.1 Borrower does hereby irrevocably designate, make,
constitute and appoint Lender (and any of Lender's officers, employees or agents
designated by Lender) as Borrower's true and lawful attorney in fact (without
requiring them to act as such) coupled with an interest, with full power of
substitution, hereby ratifying and confirming all acts and deeds in connection
herewith, with power, without notice to Borrower, and at such time or times
hereafter as Lender may in its sole election determine, in Borrower's name and
at Borrower's expense: (a) to endorse the name of Borrower upon any and all
remittances, checks, drafts, money orders and other instruments for the payment
of monies that are payable to Borrower and constitute collections on Borrower's
Accounts or Proceeds of any insurance; (b) to demand payment of Accounts; (c) to
execute in the name of Borrower any schedules, assignments, instruments,
documents, notices, and statements that Borrower are obligated to give Lender
here-under; (d) to enforce payment of Accounts by legal proceedings or
otherwise; (e) to exercise all of Borrower's rights and remedies with respect to
the collection of Accounts; (f) to settle, adjust, compromise, extend or renew
any Account; (g) to settle, adjust or compromise any legal proceedings brought
to collect an Account; (h) to sell or assign any Account upon such terms, for
such amounts and at such time or times as Lender deems advisable; (i) to
discharge and release any Account; (j) to take control in any manner of any item
of payment or proceeds of an Account and for this purpose to notify the postal
authorities to change the address for delivery of mail addressed to Borrower to
such address as Lender may designate and to receive, open and dispose of all
mail addressed to Borrower; (k) to prepare, file and sign Borrower's name on any
Proof of Claim in any proceeding filed under Title 11 of the United States Code
or similar document as to an Account Debtor; (l) to prepare, file and sign
Borrower's name on any Notice of Lien, Claim of Mechanic's Lien, Assignment or
Satisfaction of Lien or Mechanic's Lien, or similar document in connection with
an Account; (m) to endorse the name of Borrower upon any Chattel Paper,
Document, Instrument, Receivable, invoice, freight ▇▇▇▇, ▇▇▇▇ of Lading,
Warehouse Receipt or similar documents or agreement relating to any Inventory,
Account or Goods pertaining thereto; (n) to execute in the name of Borrower any
Account Debtor notification; and (o) to do all other acts necessary or
desirable to protect Borrower's interest in the Accounts and to enforce any
Account or other Collateral. Except for those rights provided for in
Subparagraph (a) and (c) herein, the exercise of which shall be at the sole
discretion of Lender, Lender covenants and agrees that it shall not exercise its
rights under any other Subparagraph contained in this Paragraph unless Lender,
in its sole discretion, should reasonably believe that an Event of Default as
described in Paragraph 8 has occurred.
4.5.2 Borrower releases Lender from any and all causes of action
or claims which Borrower may now or here-after have for any asserted loss or
damage to Borrower claimed to be caused by or arising from: (a) any failure of
Lender to protect, en-force or collect in whole or in part any Account; (b)
Lender's notification to any Account Debtors of Lender's security interests in
any of the Accounts; (c) Lender's directing any Account Debtors to pay any sums
owing to Borrower directly to Lender; and (d) any other act or omission to act
on the part of Lender and any of its officers, employees or agents designated by
Lender except for willful misconduct.
4.6 Additional Accounts. Except for accounts listed on Schedule 4,
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which are subject to a Control Agreement, Borrower shall not, without the prior
written consent of Lender, open or maintain any Deposit Accounts of any nature
with any Depository. Any Deposit Account shall, unless otherwise agreed to by
Lender, be subject to a Control Agreement and Borrower shall enter into with
Lender, and cause each Depository to enter into with Lender, a Control Agreement
with respect to any account of Borrower now or hereafter maintained at any
Depository.
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4.7 Payments. All payments of interest on and principal of the Loans,
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all fees and all other sums payable to the Lender hereunder shall be paid
directly to the Lender in immediately available funds, in such currency of the
United States of America as is, at the time of payment, legal tender for the
payment of public and private debts. Borrower shall make each payment hereunder
not later than 5:00 p.m., local time, on the day after each payment comes due,
at the office of the Lender at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Should any payment of principal or interest or fees become due and payable on a
Saturday, Sunday or legal holiday under the laws of the Commonwealth of
Pennsylvania, the payment date thereof shall be extended to the next succeeding
business day and such extension of time shall in such case be included in
computing such interest or fees, as the case may be. Any such payments or
prepayments made shall be applied, first to the payment of unpaid costs and
charges due including late fees, then to interest due and payable under the
Revolving Loan Note and then to the reduction of the outstanding principal
balance thereof. So long as a sufficient Borrowing Base exists, all payments of
principal, interest, costs, fees and expenses due to the Lender in connection
with this Agreement, the Loan Documents and the Loans shall be made as follows:
4.7.1 Borrower authorizes and directs the Lender, at the Lender's
option, to cause all interest and fees due and payable pursuant to this
Agreement in connection with the Revolving Loans to be paid on the due date
thereof by charging all such interest payments and fees as and when due, as an
advance against the Revolving Credit, and each such advance shall be deemed to
be a Revolving Loan and shall bear interest from the date due until paid at the
interest rate specified in Paragraph 2.3.1.
4.7.2 Borrower authorizes and directs the Lender, at the Lender's
option, to cure all reasonable or necessary costs, fees, taxes, charges and
expenses of any kind or description payable pursuant to this Agreement or paid
or incurred by Lender with respect to the Loans hereunder or any Collateral
therefor or the Collection of or realization upon same on the due date thereof
to be paid by charging such costs, fees or expenses as an advance against the
Revolving Credit, each such advance shall be deemed to be a Revolving Loan and
shall bear interest from the date due until paid at the interest rate specified
in Paragraph 2.3.1.
4.7.3 Principal payable on account of the Revolving Loans shall be
due and payable to the extent and on the date of any collections received with
respect to any Proceeds of the Collateral if not otherwise applied to interest
or other Obligations, and the outstanding balance thereof shall be paid in full
on the earlier of the Revolving Credit Termination Date or on the acceleration
of the Obligations under and pursuant to this Agreement.
4.7.4 The balance of the Obligations, if any, shall be payable as
and when provided in this Agreement or other Loan Documents or in any other
agreements relating to such Obligation and, if not specified, then on DEMAND.
Unless expressly specified otherwise herein or in other Loan Documents, any of
such Obligations not paid when due shall bear interest from the due date until
paid at the interest rate specified in Paragraph 2.3.1 hereof.
4.7.5 Anything herein to the contrary notwithstanding, Borrower
hereby authorizes Lender, without further order or authorization of Borrower, to
charge any Borrower's Deposit Account(s) monthly, on the due date therefor, for
all payments of principal and interest and all other amounts due hereunder and
under the Notes. Lender shall notify Borrower of any charge to Borrower's
account(s) promptly after such charge is made. Lender covenants and agrees that
it shall only exercise its rights under this Paragraph if a) the total
availability under the Borrowing Base is insufficient to fund any advances made
under this Agreement; b) the Lender, in its sole discretion, should reasonably
believe that the Borrower has breached any of the Affirmative or Negative
Covenants contained in Paragraph 7 of this Agreement; or c) the Lender, in its
sole discretion, should reasonably believe that an Event of Default as described
in Paragraph 8 has occurred.
4.8 Statements of Amount Due. At least once each month, Lender shall
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render to Borrower a statement of Borrower's Indebtedness to Lender hereunder
plus interest accrued thereon, which statements shall be considered correct and
accepted by Borrower and conclusively binding upon Borrower unless Borrower
notifies Lender to the contrary within ten (10) days from the date such
statement is delivered setting forth any error claimed by Borrower.
4.9 Joint and Several Obligations. Each of the undersigned Borrowers,
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if more than one, hereby irrevocably designate the other Borrower its
attorney-in-fact to borrow, sign and endorse the Revolving Loan Note, and
execute and deliver all instruments, documents, writings and further assurances,
required hereunder on its behalf. Each Borrower authorizes Lender to pay over
or credit all Loan Proceeds to any Borrower for distribution among such
Borrowers, as their needs require. Each of the Borrowers affirms and agrees
that all Loans, advances, obligations and liabilities hereunder and under the
Revolving Loan Note issued pursuant hereto shall be the joint and several
obligation of each Borrower, and that each Borrower shall make payment upon the
Revolving Loan Note issued pursuant hereto in accordance with its terms, or upon
its earlier maturity by acceleration, call or otherwise and that such Borrowers
shall in no way be affected by any extensions, renewals or forbearances granted
by Lender to them or any of them, failure of Lender to give them or any of them
notice of borrowing or other notice, any failure of Lender to pursue or preserve
its rights against them or any of them, the release by Lender of any Collateral
now or hereafter acquired or any guarantees or obligations, failure of Lender's
best efforts in obtaining "commercially reasonable" prices for any Collateral
disposed of, and that such agreement by each of such Borrowers to pay upon the
Revolving Loan Note issued pursuant hereto is unconditional and does not require
prior recourse by Lender to any Collateral .
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5. CONDITIONS PRECEDENT.
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Any obligation of Lender to make any of the Loans hereunder is subject to the
following conditions precedent:
5.1 Payments. On or before the Closing Date, Borrower shall have paid:
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(a) the Origination Fee and Collateral Management Fee described in Schedule 2;
(b) all charges, taxes and fees for recording, insurance, title insurance,
appraisals, environmental assessments and other items required under this
Agreement; and (c) all costs and expenses of Lender in establishing the Loans
and perfecting its interest in the Collateral, including, without limitation,
the fees and disbursements of Lender's counsel.
5.2 Documents Required for the Closing. On or before the Closing Date,
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Borrower shall have duly delivered to Lender duly executed original counterparts
of the following, all in form and content acceptable to Lender:
5.2.1 This Agreement;
5.2.2 The Revolving Loan Note;
5.2.3 A fully completed and executed Perfection Certificate;
5.2.4 A Validity Indemnification from each Indemnitor, if any;
5.2.5 The UCC-1 financing statements as required by Lender;
5.2.6 UCC-3 Termination Statements with respect to any security
interest of record in any of the Collateral prior to the date hereof in favor of
any Person other than Lender;
5.2.7 Landlord waivers and mortgagee waivers with respect to any
leased or mortgaged premises of Borrower in which any Collateral is located, and
as otherwise required in this Agreement;
5.2.8 Control Agreement(s) with consent of Depository;
5.2.9 A certified copy of the Borrower's fire, all risk, public
liability, flood and casualty insurance policy or policies evidencing coverage
satisfactory to the Lender, with mortgagee and lender loss payable and
additional insured endorsements in form and substance satisfactory to the Lender
naming the Lender as mortgagee and loss payee and additional insured, as its
interest may appear, together with one or more certificates of insurance
broker(s) satisfactory to the Lender (Accord 27), setting forth the insurance
obtained in accordance with Paragraph 7.1.4 and stating that such insurance is
in full force and effect, all premiums then due thereon have been paid and the
insurance policies relating thereto comply with Paragraph 7.1.4, and such
insurance is adequate and providing not less than 30 days notice to Lender of
any change or cancellation of such coverages;
5.2.10 The initial Borrowing Base Certificate duly completed and
executed by Borrower;
5.2.11 Current Aging of Borrower's Accounts based upon invoice
date containing information satisfactory to Lender;
5.2.12 Copies of all Account Substantiation Documents in effect
as of the Closing Date, if required by Lender;
5.2.13 A tax clearance certificate from each state for which
Borrower, each Subsidiary or other entity constituent of Borrower, if any, is
required to pay any sales and use taxes, evidencing payment of all sales and use
taxes owed by any of them as of the Closing Date:
5.2.14 A certified (as of the date of the Closing) copy of
resolutions of Borrower's and each Subsidiary or other entity constituent of
Borrower, if any, boards of directors or other governing agency authorizing the
execution, delivery and performance of this Agreement, the Revolving Loan Note,
the Collateral and Loan Documents and each other document to be delivered
pursuant hereto;
5.2.15 A certified (as of the date of the Closing) copy of
Borrower's and each Subsidiary or other entity constituent of Borrower, if any,
by-laws, operating agreement, partnership agreement or other governing documents
and all amendments to the foregoing;
5.2.16 A certificate (dated the date of the Closing) of
Borrower's and each Subsidiary or other entity constituent of Borrower, if any,
as applicable, corporate secretary or other authorized officer, member or
partner as to the incumbency and signatures of the officers, members, partners,
Authorized Financial Officer(s) or authorized persons of Borrower, and each
Subsidiary or other entity constituent of Borrower, if any, signing this
Agreement, the Notes, the Collateral and Loan Documents and each other document
to be delivered pursuant hereto;
6
5.2.17 A copy, certified as of the most recent date practicable by
the Secretary of the State of each entity's state of formation, of Borrower's,
each Subsidiary's or other entity constituent of Borrower, if any, certificate
of incorporation, partnership or formation, together with a certificate (dated
the date of the Closing) of Borrower's and each Subsidiary's or other entity
constituent of Borrower, if any, as applicable corporate secretaries or other
authorized Person to the effect that such certificate of incorporation,
partnership or formation has not been amended since the date of the aforesaid
certification;
5.2.18 Certificates, as of the most recent dates practicable, of
the aforesaid Secretary of State and the Secretary of State of each state in
which Power2Ship, each Subsidiary or other entity constituent of Power2Ship, if
any, is qualified as a foreign corporation, partnership, limited liability
company or other entity and the department of revenue or taxation of each of the
foregoing states, as to the good standing of Power2Ship, each Subsidiary or
other entity constituent of Power2Ship, if any;
5.2.19 A written opinion of Borrower's counsel, satisfactory to
Lender, dated the date of the Closing and addressed to the Lender.
5.2.20 Mortgage and Lien satisfactions as may be necessary to
provide Lender a first Lien on and security interest in the Collateral subject
to Lender's Priority Security Interest;
5.2.21 Copies of all documents evidencing the terms and conditions
of any Debt specified as Subordinated Indebtedness or any collateral therefor;
5.2.22 Master address list of Borrower's Account Debtors;
5.2.23 A certified copy of fictitious name registration of
Borrower filed with the State of Florida; and
5.2.24 Such other agreements, documents or instruments required by
Lender, or its counsel, to evidence the transactions described in this Agreement
and perfect the Liens and security interests of Lender in the Collateral.
5.3 Miscellaneous Conditions
------------------------
5.3.1 The audit of Borrower's Collateral shall have been performed
by Lender, the results of which shall be satisfactory to Lender, in its sole
discretion.
5.3.2 Lender shall have received UCC, Lien, tax, judgment and
other searches required by Lender.
5.3.3 All accounts payable of Borrower, which are now or will be
as of the Closing Date, outstanding more than 60 days from the date of invoice
shall be paid in full
5.3.4 Lender shall have received copies of all filing receipts and
acknowledgments issued by any governmental authority to evidence any recordation
or filing necessary to perfect the Lien of the Lender on the Collateral and
evidence in a form acceptable to the Lender that such Lien constitutes the
Lender's Prior Security Interest and is a valid and perfected lien subject only
to Permitted Liens as set forth on Schedule 4.
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5.4 Legal Matters. At the time of Closing and each subsequent
-------------
disbursement, all legal matters incidental thereto shall be reasonably
satisfactory to Lender and its counsel.
6. REPRESENTATIONS AND WARRANTIES.
------------------------------
6.1 Corporate Existence, etc. To induce Lender to enter into this
------------------------
Agreement, Borrower represents and warrants to Lender as follows:
6.1.1 Power2Ship, Inc. is duly organized and validly existing,
and in good standing under the laws of the State of Nevada, has the lawful power
to own, lease, encumber and operate its Assets and properties and to engage in
the business it conducts, and is duly qualified and in good standing as a
foreign corporation in the jurisdictions wherein the nature of the business
transacted by it or property owned by it makes such qualification necessary.
Freight Rate, Inc. is duly organized and validly existing, and in good standing
under the laws of the State of Delaware, has the lawful power to own, lease,
encumber and operate its Assets and properties and to engage in the business it
conducts, and is duly qualified and in good standing as a foreign corporation in
the jurisdictions wherein the nature of the business transacted by it or
property owned by it makes such qualification necessary. The addresses of all
places of business of Borrower are as set forth in the Perfection Certificate.
Borrower has no Subsidiaries or other entities constituent of Borrower, or
Affiliates except as described in the Perfection Certificate. Borrower, except
as disclosed to Lender, has not changed its name, been the surviving entity in a
merger, acquired any business, or changed its principal executive offices within
five (5) years and one (1) month prior to the date hereof;
6.1.2 Borrower has the requisite power and authority, corporate,
partnership, limited liability company or otherwise, to enter into and perform
this Agreement, the Revolving Loan Note and the Loan Documents to which it is a
party and to incur the Obligations herein and therein pro-vided for and has
taken all proper and necessary action to authorize the execution, delivery and
performance of this Agreement, the Revolving Loan Note and the Loan Documents
which are duly and validly executed and constitute legal, valid, and binding
obligations of Borrower enforceable in accordance with their respective terms;
7
6.1.3 Borrower is not in default with respect to any of its
existing Indebtedness or under any agreement, commitment, lease, contract, deed
of trust, mortgage, note or other Instrument, and the making and performance of
this Agreement, the Revolving Loan Note and the Loan Documents will not
immediately, with the passage of time, with the giving of notice or both: (a)
violate the charter, by-laws, partnership agreement, operating agreement, or
other organizational documents of Borrower or, in any material respect, violate
any Laws, rule, regulation, order, writ, judgment, injunction, decree,
determination or award applicable to Borrower; or (b) result in a default under
any con-tract, agreement, indenture, note, loan or credit agreement, license,
lease or instrument to which Borrower is a party or by which it or its property
is bound; or result in the creation or imposition of any security interest in or
Lien or encumbrance upon any of the Assets of Borrower except such as are in
favor of Lender;
6.1.4 No holder of any Indebtedness of Borrower has given notice
of any asserted default thereunder. No liquidation or dissolution of Borrower
and no receivership, insolvency, bankruptcy, reorganization or other similar
proceeding relative to Borrower or their properties is pending or, to the
knowledge of Borrower, threatened against them;
6.1.5 Except as described in Schedule 4, there are no pending
----------
orders, notices, litigation, actions, claims, suits, proceedings or
investigations pending, or, to the knowledge of Borrower, threatened or
reasonably anticipated against or affecting Borrower at law or in equity or
before or by any governmental instrumentality or agency (domestic or foreign),
commission, board, bureau, arbitrator or arbitration panel which may be expected
to result in any Material Adverse Change in the business, operations, prospects,
properties or Assets (including, without limitation, the Collateral), or
condition (financial or otherwise) of Borrower . There is no judgment, liability
or award, which may be expected to result in any Material Adverse Change in the
business, operations, prospects, properties or Assets (including, without
limitation, the Collateral), or condition (financial or otherwise) of Borrower.
Borrower is not in default with respect to any judgment, order, writ,
injunction, decree, rule, award or regulation of any court, governmental
instrumentality or agency, commission, board, bureau, or arbitrator or
arbitration panel;
6.1.6 Borrower does not know of, or anticipate any Material
Adverse Change in its Assets, Liabilities, properties, business, or condition
(financial or otherwise);
6.1.7 Borrower has good and marketable title to all of its
properties and Assets, subject to no security interest, encumbrance or Lien, or
the claim of any third person, except for Permitted Liens;
6.1.8 The Financial Statements presented and to be presented to
Lender, including any related schedules and notes appended thereto, have been
and will be prepared in accordance with GAAP and fully and fairly present in all
material respects the financial condition of Borrower at the dates thereof and
the results of operations for the periods covered thereby. There have been no
Material Adverse Changes in the financial condition or business of Borrower from
the date such Financial Statements were presented to Lender to the date hereof;
6.1.9 As of the date hereof, Borrower does not have any direct
or contingent liability or material Indebtedness of any nature, including,
without limitation, liabilities for taxes and any interest or penalties relating
thereto, except to the extent reflected (in a footnote or otherwise) and
reserved against in the Financial Statements of Borrower delivered to Lender
prior to the date hereof or as disclosed in Schedule 4. Borrower does not know
----------
and has no reasonable grounds to know of any basis for the assertion against
Borrower of any material Indebtedness of any nature not fully reflected and
reserved against in its Financial Statements;
6.1.10 Borrower has filed or caused to be filed all federal,
state and local tax returns and other reports it is required by Law to file
prior to the date hereof and which are material to the conduct of its business,
or has timely filed requests for extensions to file the same as permitted by
Law, and has paid or caused to be paid all taxes, assessments and other
governmental charges due and payable prior to the date hereof, and has made
adequate provision for the payment of such taxes, assessments or other charges
accruing but not yet payable. Borrower does not have any knowledge of any
deficiency or additional assessment in a material amount in connection with any
taxes, assessments or charges not provided for on its books and Records;
6.1.11 Borrower has complied in all material respects with all
applicable Laws with respect to: (a) any restrictions, specifications or other
requirements pertaining to products that Borrower imports, manufactures or sells
or to the services it performs; (b) the con-duct of its business and (c) the
use, maintenance and operation of the real and personal properties owned or
leased by it in the operation of its business;
6.1.12 No representation, warranty or statement by Borrower
contained herein or in any certificate or other document furnished pursuant
hereto contains any untrue statement of material fact or omits to state a
material fact necessary to make such representation or warranty not misleading
in light of the circumstances under which it was made;
6.1.13 No recording, filing, registration, notice or other similar
action is required in order to insure the legality, validity, binding effect or
enforceability of this Agreement or the Revolving Loan Note or the other
documents and instruments executed hereunder as against all persons, other than
such filings as may be required under the UCC and mortgages to perfect Lender's
interest in all real property owned by Borrower;
8
6.1.14 Except as described on Schedule 4, there are no Liens or
----------
security interests in any of the Borrower's Assets and Borrower does not know of
any circumstances which might lead to the imposition of any Lien;
6.1.15 Except as described on Schedule 4, or as disclosed in the
----------
Financial Statements of Borrower provided to Lender, Borrower does not has any
material leases, contracts or commitments of any kind (such as employment
agreements; collective bargaining agreements; powers of attorney; distribution
arrangements; patent, trademark or copyright license agreements; contracts for
future purchase or delivery of goods or rendering of services; bonus, pension
and retirement Plans; or accrued vacation pay, insurance and welfare
agreements); all parties (including Borrower) to all such material leases,
contracts and other commitments to which Borrower are parties have complied with
the provisions of such leases, contracts and other commitments; no party is in
default under any thereof and no event has occurred which, but for the giving of
notice or the passage of time or both, could constitute a default;
6.1.16 Borrower is in compliance in all material respects with all
applicable provisions of ERISA;
6.1.17 Borrower does not have any Defined Benefit Pension Plan, as
that term is defined in ERISA;
6.1.18 Except as disclosed in the Financial Statements or on
Schedule 4, or in the ordinary course of Borrower's business, no officer of
----------
Borrower, and no other Affiliate of Borrower is currently a party to any
transaction with Borrower, including, without limitation, any contract,
agreement or other arrangement providing for the employment of, furnishing of
advisory or other services by, rental of real or personal property from, or
otherwise requiring payments to, any such officer or Affiliate;
6.1.19 No Event of Default has occurred and is continuing or is
about to occur;
6.1.20 The Obligations and Indebtedness of Borrower under this
Agreement, the Revolving Loan Note and any other Loan Document are not
subordinated in right of payment or otherwise to any other obligation of
Borrower or to the rights of others;
6.1.21 There are no strikes, work stoppages, material grievance
proceedings or other material controversies pending or, to the best of
Borrower's knowledge, threatened between Borrower and any employees engaged in
the business of Borrower or any union or other collective bargaining unit
representing such employees. Borrower has complied and is in compliance with
all Laws relating to the employment of labor, including, without limitation,
provisions relating to wages, hours, collective bargaining, occupational safety
and health, equal employment opportunities and the withholding of income taxes
and social security contributions, the non-compliance of which might have a
Material Adverse Effect on its business, operations, prospects, Assets,
properties or condition (financial or otherwise);
6.1.22 Except as disclosed to Lender in Schedule 4, Borrower shall
----------
not pay any commission or finder's fee payable in connection with the Loans;
6.1.23 Each Account is: (a) genuine and authentic, (b) in all
respects, what it purports to be, and (c) represents the bona fide sale of
Goods or performance of services in the ordinary course of the Borrower's
business to the Account Debtor named in each such Account. The amount set forth
on the invoice or other billing statement for such Account is true and correct.
Each Account used as a base for borrowing hereunder is an Eligible Account;
6.1.24 Borrower is not party to or bound by any agreement or
instrument or subject to any corporate or other restriction the performance or
observance of which now has or, as far as Borrower can reasonably foresee, may
have a Material Adverse Effect, financial or otherwise, upon the Assets or
business of Borrower.
6.1.25 Borrower is not now and will not be engaged principally or,
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying or trading in any margin stocks or margin
securities (within the meaning of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System) or other securities, and no part of the
proceeds of the Loans hereunder has been or will be applied for the purpose of
purchasing or carrying or trading in any such stock or securities or of
refinancing any credit previously extended, or of extending credit to others,
for the purpose of purchasing or carrying any such margin stock, margin
securities or other securities in contravention of such Regulations.
6.1.26 Borrower does not operate or do business under any assumed,
trade or fictitious names except as described in the Perfection Certificate.
6.1.27 To the actual knowledge of Borrower, no director, employee,
principal shareholder or Control Person of Borrower is a director, employee,
principal shareholder or Control Person of Lender and no employee, partner or
Control Person of Lender is in Control of Borrower.
6.1.28 Borrower does not know of any activity at any real property
or facility owned or operated by Borrower (each a "Property") which has been
conducted, or is being conducted, except in compliance with all Environmental
Laws, statutes, ordinances, regulations, orders, and requirements of common law
concerning (a) those activities, (b) repairs or construction of any
improvements, (c) handling or storing of any materials, (d) discharges to the
air, soil, surface water or ground water, and (e) storage, treatment or disposal
of any waste at or connected with any activity at any Property.
9
6.1.29 Borrower does not know of the presence of any contamination
on the Property. As used in this Agreement, the term "contamination" shall mean
the uncontained presence of hazardous substances at the Property, or arising
from the Property, which may require remediation under any applicable law; and
the term "hazardous substances" shall mean "hazardous substances" or
"contaminants" or "regulated substances" as defined pursuant to any applicable
Environmental Laws, if such presence would require removal or remediation
thereof under such Environmental Law.
6.1.30 Borrower does not know of any chemical, material or
substance, exposure to which is prohibited, limited or regulated by a federal,
state or local government agency, authority or body, or which, even if not so
regulated, to the best of Borrower's knowledge after due investigation, may or
could pose a hazard to health and safety of the occupants of the Property or the
owners or occupants of property adjacent to or in the vicinity of the Property.
6.1.31 Borrower does not know of any investigation of any Property
for the presence of radon or radon gas or the presence of the radioactive decay
products or radon.
6.1.32 No tanks presently or formerly used for the storage of any
liquid or gas above or below ground are present on any Property.
6.2 Solvency. Borrower has sufficient capital to carry on all
---------
businesses and transactions in which it now engages or is about to engage, is
solvent and will continue to be solvent after incurring the Loans and creating
security interests of Lender in the Collateral.
6.3 Investment Company. Borrower is not an "investment company," or a
-------------------
company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
6.4 Survival. All of the representations and warranties set forth in
--------
Paragraph 6.1 shall survive until all Obligations are satisfied in full.
6.5 Names and addresses of Borrower.
-------------------------------
6.5.1 The addresses of all places of business of Borrower and each
trade name and trade style utilized by Borrower and the address related to each
such name are as set forth in the Perfection Certificate.
6.5.2 The addresses where Borrower keeps the Collateral and its
books and Records concerning the Collateral are as set forth in the Perfection
Certificate.
6.5.3 The addresses at which Inventory and Assets are located are
as set forth in the Perfection Certificate.
7. BORROWERS' COVENANTS.
--------------------
7.1 Affirmative Covenants. Borrower does hereby covenant and agree
---------------------
with Lender that, so long as any of the Obligations remain unsatisfied, it will:
7.1.1 Furnish Lender: (a) within twenty (20) days after the close
of each monthly accounting period in each fiscal year of Borrower, its monthly
trial balances and month-end reports all in reasonable detail and subject to
year-end adjustments, together with such other financial statements prepared by
Borrower for management during such monthly period; (b) within forty-five (45)
days after the close of each quarterly accounting period in each fiscal year of
Borrower, Consolidated and consolidating income statements and balance sheets
and statements of changes in financial position of Borrower and its Affiliates,
if any, all as of the end of such quarterly period, prepared by the Authorized
Financial Officer of Borrower, all in reasonable detail, and prepared in
accordance with GAAP; (c) within ninety (90) days after the close of each fiscal
year of Borrower: (i) Consolidated and consolidating income statements and
balance sheets of Borrower, and its Affiliates, if any, all as of the end of
such fiscal year; and (ii) Consolidated and consolidating statement of
stockholders' equity and a statement of changes in financial position; all in
reasonable detail, including supporting schedules and comments, such annual
statements, to be reviewed by, an independent certified public accountant
selected by Borrower, and acceptable to Lender, to have been prepared in
accordance with GAAP. Lender shall have the right, from time to time, to
discuss Borrower's financial affairs directly with Borrower's independent
certified accountants; (d) contemporaneously with each (i) monthly and quarterly
report required by the foregoing paragraphs, a certificate of the Authorized
Financial Officer of Borrower, and (ii) year end financial reports required by
the foregoing paragraphs, a certificate by Borrower's independent certified
public accountant, in each case stating that the signer of such certificate has
individually reviewed the provisions of this Agreement and that a review of the
activities of Borrower during such monthly, quarterly or yearly period, as the
case may be, has been made by or under the supervision of the signer of such
certificate with a view to determining whether Borrower has kept, observed,
performed and fulfilled all their obligations under this Agreement, and that, to
the best of his/her knowledge, Borrower has observed and performed each and
every undertaking contained in this Agreement and is not at the time in default
in the observance or performance of any of the terms and conditions hereof or,
if Borrower shall be so in default, specifying all such defaults and events of
which he/she may have knowledge and the proposed cure of such defaults; (e) at
Lender's request, copies of all receipts, if available or other evidence of the
payment, of United States withholding, FICA and other applicable state and
local payroll taxes, as such payments are made, and copies of each quarterly, or
as otherwise required by the Internal Revenue Service, FICA and FUTA income tax
withholding forms filed by Borrower, Borrower, acknowledges that Borrower is
responsible for the timely payment, when due, of all such taxes; (f) within five
(5) days after the close of each calendar month, a Borrowing Base Certificate,
an accounts receivable and accounts payable aging and listing all as of the end
of the immediately preceding month in form satisfactory to Lender. All agings
submitted hereunder shall reflect an allocation to the corresponding invoice(s)
of any and all payments or credits (or any part thereof) received or given by
Borrower; (g) within five (5) days after the close of each calendar month, and
at Lender's reasonable request, in form satisfactory to Lender, an Accounts
reconciliation which sets forth, together with such other information requested
by Lender, a listing of all miscellaneous debits and credits to Borrower's
Accounts, sufficient in detail to enable Lender to reconcile the differences, if
any, between the balance of Borrower's Accounts as shown on Lender's books and
Records, and the balance of such Accounts shown on Borrower's books and Records.
Upon receipt of such reconciliation, the value of Borrower's Accounts on
Lender's Records shall be adjusted as appropriate and shall be reflected by
Borrower in the next Borrowing Base submitted by Borrower to Lender hereunder;
(h) within five (5) days after the close of each calendar month, and at Lender's
reasonable request, an update and list of all changes to the master address list
of Borrower's Account Debtors; (i) at Lender's request, all Shipping Documents
evidencing the shipment of Goods which gave rise to the Accounts, completion
certificates or other proof of the satisfactory performance of services that
gave rise to an Account, and Borrower's copy of any written order or contract
that gave rise to the Account; (j) weekly, on or before Tuesday of each week for
the calendar week ending on the Friday of the immediately preceding week, a
Borrowing Base Certificate of Borrower; (k) at Lender's request, Borrower shall
submit copies of the invoices for each Account of Borrower or Borrower's sales
journal or such other Records acceptable to Lender in substitution thereof; (l)
within five (5) days of the close of each calendar month and at other times as
Lender may request, an Inventory Certificate; (m) within ten (10) days after
filing, copies of the federal income tax returns filed (together with all
schedules) or extensions requested by Borrower ; and (n) such additional
financial information regarding Borrower and its operations and financial
condition as Lender may, from time to time, reasonably require;
10
7.1.2 Cause Indemnitor, if any, to furnish to Lender: (a) not
later than ninety (90) days after the close of each calendar year, financial
statements of Indemnitor, in form and content acceptable to Lender; (b) within
10 days of filing, copies of Indemnitor's federal tax returns (together with all
schedules) or extensions requested by Indemnitor; and (c) such other financial
information regarding Indemnitor as Lender may, from time to time, require;
7.1.3 Maintain the Collateral and its other properties in good
condition and repair (normal wear and tear excepted) and will pay and discharge
or cause to be paid and discharged when due the costs of repairs to or
maintenance of the same and will pay or cause to be paid, all rental or mortgage
payments due on the real estate owned or leased by Borrower. Borrower hereby
agrees that in the event Borrower fails to pay or causes to be paid any such
payment, Lender may do so and be immediately reimbursed by Borrower therefor;
7.1.4 Maintain or cause to be maintained, take out, pay for and
keep in effect or cause to be taken out, paid for, and kept in effect, so long
as the Obligations remain unsatisfied, such insurance against risks, including
without limitation, commercial general liability and property damage, fire and
extended coverage with respect to the Collateral owned by any Borrower (to the
extent of its full insurable replacement value), vandalism and malicious
mischief and sprinkler leakage coverage and coverage against such other hazards,
as are customarily insured against by companies in the same or similar business,
and such other hazards as Lender may, from time to time reasonably require,
including flood hazard to the extent any Property is located in an area
designated or identified as an area having specified flood hazards, all in
amounts and with such insurance carriers as may be satisfactory to Lender, and
will deliver to Lender, upon their issuance, insurance policies for all
insurance then in force. All renewal and substitute policies of insurance shall
be delivered to Lender, premium paid, at least fifteen (15) days prior to the
termination of the policies previously delivered to Lender. All such insurance
policies will name Lender as loss payee and/or additional insured, as required
by Lender, and contain a provision whereby they may not be canceled or amended
except upon thirty (30) days written notice to Lender and shall be endorsed with
a standard mortgagee or loss payee clause, as applicable, in favor of Lender and
not subject to contribution. Borrower shall cause all hazard insurance policies
and any policies insuring the Collateral covered by this Agreement to provide,
and the insurers issuing such policies to certify to Lender, that (a) the
interest of Lender shall be insured regardless of any warranties, declarations
and conditions contained in such policies; (b) if such insurance be proposed to
be canceled or materially changed for any reason whatsoever, such insurer will
promptly notify Lender and such cancellation or change shall not be effective as
to Lender for thirty (30) days after receipt by Lender of such notice, unless
the effect of such change is to extend or increase coverage under the policy;
(c) Lender will have the right at its election to remedy any default in the
payment of premiums within thirty (30) days of notice from the insurer of such
default; and (d) loss payments in each instance will be payable to Lender as
mortgagee or secured party, or otherwise as its interest may appear. Without
limitation of the foregoing, such Proceeds may be applied at Lender's option in
whole or in part toward (a) the repair or replacement of any Collateral of
Borrower that has been damaged or destroyed and in respect of which the
insurance Proceeds were payable or (b) the payment or prepayment of the
outstanding principal of any of the Obligations and interest accrued thereon.
From and after the occurrence, and during the continuation of an Event of
Default, Borrower hereby irrevocably appoints Lender as its agent to sign and
endorse any and all checks, drafts or other instruments payable to Borrower
representing insurance Proceeds, and to satisfy any and all claims in connection
therewith;
11
7.1.5 Pay or cause to be paid when due, all taxes, assessments and
charges or levies imposed upon them or on any of their property or which they
are required to withhold and pay over, except where contested in good faith by
appropriate proceedings with adequate reserves therefor having been set aside on
their books; but Borrower shall pay or cause to be paid all such taxes,
assessments, charges or levies forthwith whenever foreclosure on any lien that
attaches (or security therefor) appears imminent;
7.1.6 Collect its Accounts only in the ordinary course of
business;
7.1.7 Keep accurate and complete in all material respects, books
and Records relating to Accounts, Inventory, receivables, other Collateral, and
business affairs consistent with sound accounting practices; keep complete and
accurate Records (including all books of original and final entry, computer
programs, soft-▇▇▇▇, stored material and data banks associated with or arising
out of their business, operations and/or record keeping) and make all necessary
entries therein to reflect the transactions and facts giving rise to Accounts,
Chattel Paper, Inventory, receivables and other Collateral, and all payments,
debits, credits and adjustments applicable thereto;
7.1.8 Within ten (10) days of the commencement of the same, give
notice to Lender of: (a) any litigation in which Borrower is a party to the
extent the liability of Borrower in respect of such litigation is reasonably
expected to exceed $10,000, and (b) the institution of any other suit or any
administrative proceeding against Borrower that might materially and adversely
affect its individual operations, financial condition, property or business;
7.1.9 Maintain financial records in accordance with GAAP and, upon
reasonable notice by Lender, permit any authorized representative designated by
Lender to visit at reasonable times and inspect any of the Properties of
Borrower (including, without limitation, their books of account, Records,
correspondence and other papers and to make extracts therefrom) and to discuss
its affairs, finances and accounts with its officers and its independent
certified public accountants or other parties preparing statements for or on
behalf of Borrower;
7.1.10 Maintain its corporate, partnership, limited liability
company or other entity existence in good standing; make no material change in
the nature or character of its business and not engage in any business which is
materially different from the business in which it is currently engaged;
maintain and keep in full force and effect all licenses and permits necessary to
the proper conduct of its business; and operate its business strictly in
accordance with applicable federal, state and local law;
7.1.11 Execute such other and further documents, including,
without limitation, indemnity agreements, deeds of trust, security agreements,
Pledge Agreements, Control Agreements, assignments, financing statements,
continuation statements and the like as may, from time to time, in the
reasonable opinion of Lender or Lender's counsel, be necessary to perfect,
confirm, establish, reestablish, continue or complete Lender's security interest
in the Collateral and the purposes and intentions of this Agreement, it being
the intention of Borrower to provide hereby a full and absolute warranty of
further assurance to Lender. If Borrower fails to execute any such documents
within five (5) days of being reasonably requested to do so by Lender, Borrower
hereby appoints Lender or any officer of Lender as Borrower's attorney-in-fact
for purposes of executing such documents in Borrower's name, place and stead,
which power of attorney shall be considered to be coupled with an interest and
irrevocable;
7.1.12 Notify Lender immediately of the occurrence of any Event of
Default hereunder, under the agreements, documents or instruments, evidencing
Loans by Lender to Borrower or of any fact, condition or event that only with
the giving of notice and/or passage of time, or both would become an Event of
Default, or of the failure of Borrower to observe any of its undertakings
hereunder;
7.1.13 Notify Lender ninety (90) days in advance of any change in
the location of any of its places of business or of the establishment of any new
or the discontinuance of any existing place of business and furnish to Lender
any new or replacement UCC-1 financing statements, duly signed by Borrower
necessary to keep perfected Lender's security interest in the Collateral;
7.1.14 Pay when due (or within applicable grace periods) all
Indebtedness due third Persons, except when the amount thereof is being
contested in good faith, by appropriate proceedings and with adequate reserves
therefor being set aside on the books of Borrower. If default be made by
Borrower in the payment of any principal (or installment thereof) of, or
interest on, any such Indebtedness, the Lender shall have the right, in its
discretion, to pay such interest or principal for the account of Borrower and be
reimbursed by Borrower therefor;
7.1.15 If Lender should reasonably believe that the Borrower has
breached any of the Affirmative or Negative Covenants contained in Paragraph 7
of this Agreement or that an Event of Default as described in Paragraph 8 has
occurred, Permit Lender, its officers, employees, designees and agents to,
without prior notice to Borrower, have access to inspect and audit the
Collateral without hindrance or delay, such Collateral audits to be performed at
the times determined by Lender in its sole discretion;
12
7.1.16 Permit Lender, its officers, employees, designees and
agents, at any time and from time to time, upon the giving of three (3) Business
Days notice, during regular business hours, to have access, to inspect and
audit, the Collateral without hindrance or delay, such Collateral audits to be
performed at the times determined by Lender in its sole discretion;
7.1.17 Permit Lender, its officers, employees, designees and
agents, without hindrance or delay, at such times as Lender deems reasonably
appropriate, upon the giving of three (3) Business Days notice, to have access
to, audit, inspect, and make copies of or extracts from all of Borrower's books
and Records including, without limitation, all journals, orders, receipts and
correspondence and any other books and Records pertaining to Borrower's business
which Lender may request, wherever located;
7.1.18 Cause all persons, including computer service bureaus,
bookkeeping services, accountants, auditors and the like, within three (3)
Business Days of the Lender's demand for access to the same, to make all such
books and Records in their possession available to Lender, its officers,
employees, designees and agents. If deemed necessary by Lender, and in Lender's
sole discretion there has occurred an Event of Default under Paragraph 8 of this
Agreement or a breach of the Affirmative or Negative Covenants contained in
Paragraph 7, Lender may immediately remove said books and Records from any
Borrower's place of business or any other place where the same may be found for
the purposes of examining, auditing or reproducing the same. Any books or
Records so removed by Lender shall be returned by Lender as soon as Lender shall
have completed its inspection, audit or reproduction thereof;
7.1.19 Take all necessary steps to preserve its corporate,
partnership, limited liability company or other entity existence and franchises
and comply with all present and future Laws applicable to it in the operation of
its business, and all material agreements to which it is subject except those
with respect to which the failure to do so would not have a Material Adverse
Effect on Borrower;
7.1.20 Do all acts and make all such filings as may be necessary
to ensure that Borrower is duly qualified to do business in all jurisdictions in
which the conduct of its business or the ownership of its properties makes such
qualification necessary;
7.1.21 If any Account is or becomes Chattel Paper and/or evidenced
by a Promissory Note, trade acceptance or any other Instrument for the payment
of money, promptly deliver such Chattel Paper and/or Instrument to Lender
appropriately endorsed to Lender's order. Regardless of the form of such
endorsement, Borrower hereby waive presentment, demand, dishonor, notice of
dishonor, protest and notice of protest, and all other notices with respect
thereto;
7.1.22 Immediately notify Lender if any Account arises out of a
contract with the United States or any department, agency, or instrumentality
thereof, and execute any documents or instruments and take any steps required by
Lender so that all monies due and to become due under such Accounts or Contracts
shall be assigned to Lender and notice thereof given to the government under the
Federal Assignment of Claims Act;
7.1.23 Within five (5) days of the creation of the same, promptly
notify Lender in writing of any agreement (express or implied) under which any
terms of sale (written or oral) materially differ from original terms or normal
operating procedures that may have been or will be granted;
7.1.24 When requested by Lender from time to time, give Lender
specific assignments and schedules of Accounts after they come into existence,
the form and content of such assignments and schedules to be satisfactory to
Lender;
7.1.25 Upon Lender's reasonable request, instruct Borrower's
outside computer service company and accountants that Lender is irrevocably
empowered to have full access to and to have printouts and all information
respecting Borrower's financial records maintained by Borrower's outside
computer service company and/or accountants respecting any and all financial
Records now or hereafter maintained by the same on account of Borrower at
Borrower's expense and Lender will notify Borrower of any such contact;
7.1.26 Promptly notify Lender within five (5) days of the
occurrence or discovery of any event which would cause or has caused all or any
part of a previously Eligible Account to become ineligible;
7.1.27 Execute and deliver to Lender any instrument, document,
assignment or other writing which Lender deems necessary or desirable to carry
out the terms of this Agreement or to enable Lender to perfect or enforce its
Liens and security interests in the Collateral;
7.1.28 Pay Lender on demand the cost of collection or enforcement,
including reasonable attorney's fees, of all Accounts or other Collateral, if
Lender undertakes such collection or enforcement together with all taxes,
charges and expenses of any nature paid or incurred by Lender under or with
respect to Loans hereunder or any of the Collateral therefor, or Lender may
charge any bank account of Borrower of any nature for such amounts;
13
7.1.29 Enter into Subordination Agreements with Lender and those
certain creditors described in Schedule 4, Section 5.3.4, where the creditors
described therein subordinate their security interest in certain items of
collateral, as described in Schedule 4, Section 5.3.4, on such terms and
conditions acceptable to Lender, to the security interest granted to the Lender
in this Agreement and other Loan Documents between Borrower and Lender;
7.1.30 Enter into a Subordination Agreement with Lender and such
other Person(s), as applicable, who have made loans to Borrower, to provide that
the loan payable to any such Person and any collateral security therefor will be
subordinated to Lender on such terms and conditions acceptable to Lender;
7.1.31 Indemnify and agree to protect, defend and hold harmless
Lender, any entity which "controls" Lender, within the meaning of Section 15 of
the Securities Act of 1933, as amended, or is under common control with Lender
and any member, partner, officer, director, official, agent, employee or
attorney of Lender, and their respective heirs, administrators, executors,
successors and assigns (collectively, the "Indemnified Parties"), from and
against any and all losses, damages, expenses or liabilities of any kind or
nature and from any suits, claims or demands, including reasonable attorneys'
fees incurred in defending such claim, suffered by any of them and caused by,
relating to, arising out of, resulting from, or in any way connected with this
Agreement, the Loan Documents or the transactions contemplated herein and
therein (unless determined by a final judgment of a court of competent
jurisdiction to have been caused by the gross negligence or willful misconduct
of the Indemnified Parties), including, without limitation, (a) losses, damages
(including consequential damages payable to third parties), expenses or
liabilities sustained by Lender in connection with any environmental inspection,
monitoring, sampling or cleanup of any real estate or other Collateral owned or
operated by Borrower, required or mandated by any applicable environmental law;
(b) any untrue statement of a material fact contained in information submitted
to Lender by Borrower or the omission of any material fact necessary to be
stated therein in order to make such statement not misleading or incomplete; (c)
the failure of Borrower to perform any undertakings or obligations herein
required to be performed by Borrower ; and (d) the ownership, occupancy,
operation, use or maintenance of any Property or Collateral; (e) any breach of
any covenant, warranty, representation or other provision of this Agreement or
the Loan Documents; (f) any sale, lease, encumbrance or other disposition of any
of the Collateral, as that term is defined herein; (g) any alleged violation of
any Law, regulation or ordinance by Borrower in connection with this Agreement
or any other agreement or instrument with Borrower; (h) any personal injury or
property damage alleged to have been suffered in connection with the ownership,
use, possession, sale, lease or other disposition of any Collateral; or (i) any
claim by any person arising out of Borrower's breach of warranty or failure to
perform any of Borrower's obligations under any contract regarding the use,
sale, lease or other disposition of any Collateral. Borrower further agrees to
reimburse Lender for all reasonable counsel fees and costs expended or incurred
by Lender in connection with the foregoing. This indemnification shall survive,
for the period of the applicable statute of limitations, the termination of this
Agreement.
7.1.32 In case any action shall be brought against Lender or any
other Indemnified Party in respect to which indemnity may be sought against
Borrower, Lender or such other Indemnified Party shall promptly notify Borrower
and Borrower shall assume the defense thereof, including the employment of
counsel selected by Borrower and satisfactory to Lender, the payment of all
reasonable costs and expenses and the right to negotiate and consent to
settlement. The failure of Lender to so notify Borrower shall not relieve
Borrower of any liability they may have under the foregoing indemnification
provisions from any liability which Borrower may otherwise have to Lender, or
any of the other Indemnified Parties, except to the extent materially prejudiced
by such delay or failure of notice. In the event that Borrower shall not be
proceeding diligently to defend such claim, Lender shall have the right, at its
sole option, to employ separate counsel in any such action and to participate in
the defense thereof, all at Borrower's sole cost and expense. Borrower shall not
be liable for any settlement of any such action effected without the applicable
Person's consent (unless Borrower fails to defend such claim), but if settled
with Borrower's consent, or if there be a final judgment for the claimant in any
such action, Borrower agrees to indemnify and save harmless Lender from and
against any loss or liability by reason of such settlement or judgment;
7.1.33 Immediately notify Lender should any circumstances arise
that might lead to imposition of a Lien pursuant to any Environmental Law, as
such statutes may be amended from time to time and take such actions as may be
necessary to prevent such Lien from attaching to any of the Collateral;
7.1.34 Obtain all Permits required to be obtained from any
Governmental Authority under any law, rule or regulation, including any
Environmental Law, shall maintain all Permits required to be maintained under
any such laws, rules or regulations, and shall immediately notify Lender of
Borrower's failure to obtain or maintain any Permit required to be obtained or
maintained under any such laws, rules or regulations;
7.1.35 Within ninety (90) days from the Closing Date, furnish
Lender with copies of Certificates of Good Standing from the Secretary of State
of Delaware and the Secretary of State of each state in which Freight Rate,
Inc., each Subsidiary or other entity constituent of Freight Rate, Inc., if any,
is qualified as a foreign corporation, partnership, limited liability company or
other entity and the department of revenue or taxation of each of the foregoing
states, as to the good standing of Freight Rate, Inc. and each of their
Subsidiaries in said State(s), in addition to certificates evidencing their
authority to do business in said states; and
7.1.36 Within sixty (60) days from the Closing Date, furnish
Lender with copies of Subordination Agreements acceptable to Lender in its sole
discretion, which are to be executed by and enforceable against the Holders of
14.25% Secured Convertible Debentures c/o Newbridge Securities Corporation, ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇. The total
value of the subordinated obligations to be provided within sixty (60) days of
the Closing Date under this paragraph, when taken with all Subordination
Agreements previously executed in favor of Lender in form acceptable to Lender,
must equal or exceed 90% of the sum of the face value of all 14.25% Secured
Convertible Debentures issued plus the face value of all Series B 5% Secured
Convertible Debentures issued.
14
7.2 Negative Covenants. Without the prior written consent of Lender,
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which consent shall not be unreasonably withheld, Borrower shall not:
7.2.1 Change its name, its place of business, or, if more than
one, chief executive office or its mailing address, organizational
identification number, if it has one; change its type of organization,
jurisdiction of organization or other legal structure or enter into any merger,
consolidation, reorganization or recapitalization;
7.2.2 Create, incur or assume or permit to exist any liability for
borrowed money or lease except for unsecured subordinated debt, borrowings from
Lender, the existing Indebtedness set forth on Schedule 4 or purchase money
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loans or leases incurred to purchase or lease Equipment used in the ordinary
course of Borrower's business provided that; (a) any Liens created to secure
such Debt shall be created within 6 months of the acquisition or lease of the
related asset; (b) such Liens do not at any time encumber any property other
than the property financed by such Debt (c) the amount of Debt secured thereby
is not increased; and (d) the principal amount of Debt secured by any such Lien
shall at no time exceed one hundred percent (100%) of the original purchase
price or lease payment amount of such property at the time it was acquired;
7.2.3 Wind up, liquidate or dissolve its affairs, enter into any
merger, consolidation, reorganization or recapitalization, reclassify its
capital stock or make any change to its formation documents;
7.2.4 Sell, transfer, assign, lease or otherwise dispose of all or
(except in the ordinary course of business) any material part of its Assets, nor
permit the transfer of any Collateral or Property or any interest of Borrower
therein;
7.2.5 Factor any of its Accounts, nor grant, create, incur or
permit to exist any mortgage, pledge, a security interest in or Lien upon, or
for any other purpose assign or transfer, either absolutely or as collateral
security, any of the Collateral except in favor of Lender;
7.2.6 Notify any Account Debtor to make payment except to the Lock
Box, or request an Account Debtor to withhold or stop any payment otherwise
directed by Lender;
7.2.7 Become liable, directly or indirectly, as guarantor, surety,
endorser or otherwise for any obligation of any other person, firm, or
corporation except for endorsement of commercial paper for deposit or collection
in the ordinary course of business;
7.2.8 Declare or pay any dividends (other than a 10% dividend
equaling $99,000 payable annually in arrears commencing on June 30, 2004, at its
sole discretion and provided no Event of Default has occurred under the Loan
Documents, in cash or shares of its common stock, to the current owners of its
Series B Preferred Stock), return any capital to any of its stockholders,
partners, members or other principals, authorize or make any distribution,
payment or delivery of property or cash to its stockholders, partners, members
or other principals, or make any other payment or distribution on account of its
stock or other ownership interest in cash or in equity except with regards to
any preferred stock which was issued prior to the execution of this Agreement,
and except to the extent necessary to pay the income taxes payable by the
shareholders, partners or members of Borrower, if Borrower is a Subchapter S
Corporation, partnership or limited liability company;
7.2.9 Make any loan or advance to any officer, shareholder,
member, partner, director or employee of Borrower, or any of their Affiliates,
except for temporary advances in the ordinary course of business;
7.2.10 Purchase or otherwise invest in or hold securities,
non-operating real estate or other non-operating Assets, except: (a) direct
obligations of the United States of America; (b) the present investment in any
such Assets; (c) operating Assets that hereafter become non-operating Assets;
and (d) investment in bank certificates of deposit at banks subject to a Control
Agreement;
7.2.11 Enter into any new agreement to rent or lease any real or
personal property or enter into any arrangement with any bank, insurance company
or other lender or investor providing for the leasing of any real or personal
property or equipment (a) which has been or is sold or transferred by Borrower
to such lender or investor or (b) which has been or is being acquired from
another Person by such lender or investor or (c) on which one or more buildings
have been or are to be constructed by such lender or investor, for the purpose
of leasing such property to Borrower ;
7.2.12 Make or furnish Lender any financial statement,
representation, warranty, certificate or other document, statement or
information that will contain any untrue, incorrect or incomplete statement of
material fact or that will omit to state a material fact necessary to make it
not misleading in light of the circumstances under which it was furnished;
15
7.2.13 Directly or indirectly apply any part of the proceeds of
the Loan to the purchasing or carrying of any "margin stock" within the meaning
of Regulation G, T, X or U of the Board of Governors of the Federal Reserve
System, or any regulations, interpretations or rulings thereunder;
7.2.14 Prepay any Subordinated Indebtedness, Indebtedness for
borrowed money, or Indebtedness secured by any of its Assets (except the
Obligations) or enter into or modify any agreement as a result of which the
terms of payment of any of the foregoing Indebtedness are waived or modified;
7.2.15 Enter into a sale-leaseback or synthetic lease transaction;
7.2.16 Acquire any stock of, membership or partnership interest
in, or all or substantially all of the Assets of, any Person;
7.2.17 Change its fiscal year;
7.2.18 Assign or attempt to assign this Agreement or any other
Loan Document or any of its rights, duties or obligations hereunder or
thereunder; or.
7.2.19 Store, locate, move or relocate all or any portion of the
Collateral or the Records related thereto in or to any other location except
upon thirty (30) days prior written notice to Lender.
8. DEFAULT.
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8.1 Events of Default. The occurrence of any one or more of the
-----------------
following events shall constitute an "Event of Default" hereunder:
8.1.1 Any Obligor shall fail to pay any installment of principal,
interest, fee or Obligation within three (3) Business Days of when the same is
due;
8.1.2 Any Obligor shall fail to observe or perform any other
obligation or covenant required to be observed or performed by it hereunder,
under any of the Loan Documents, or under any other agreement between any
Obligor and Lender or the occurrence of an Event of Default under any other
agreement between any Obligor and Lender and the expiration of any applicable
cure period without said default being cured;
8.1.3 Any Obligor shall (a) fail to pay any secured Indebtedness
due any third Person and such failure shall continue beyond any applicable grace
periods; (b) fail to pay any Indebtedness due any third Person and such failure
is not cured prior to any acceleration of such Indebtedness by the applicable
creditors, whichever is earlier, or the exercise of any remedies permitted under
any of the documents evidencing such Indebtedness; or (c) any Obligor shall
suffer to exist any other event of default under any agreement binding upon any
Obligor, which default (if subject to a cure period) has not been cured prior
to the expiration of any applicable cure period, provided that the failure of
any Individual Surety to pay any non-material consumer debt shall not constitute
an Event of Default hereunder, provided further that Obligor shall be entitled
to fail to pay Indebtedness which is the subject of a bona fide dispute between
such Obligor and the creditor thereof which is being prosecuted diligently by
such Obligor;
8.1.4 Any Obligor shall make or furnish to Lender any
representation, warranty, statement or certificate in connection with this
Agreement, the Loan Documents or the Obligations which is not true and correct
when made or furnished, or shall be false, incorrect or incomplete when made;
8.1.5 Any Obligor shall admit its inability to pay its debts as
they mature, or shall make an assignment for the benefit of its creditors;
8.1.6 Proceedings in bankruptcy, or for reorganization of any
Obligor, or for the readjustment of any of its debts under Bankruptcy Code, as
amended, or any part thereof, or under any other laws, whether state or federal,
for the relief of debtors, now or hereafter existing, shall be commenced by or
against any Obligor and, if commenced against any Obligor, shall not be
discharged within thirty (30) days of their commencement;
8.1.7 A receiver or trustee shall be appointed for any Obligor or
for any substantial part of its Assets, or any proceedings shall be instituted
for the dissolution or the full or partial liquidation of any Obligor, and such
receiver or trustee shall not be discharged within thirty (30) days of its
appointment, or any Obligor shall discontinue business or materially change the
nature of its business;
8.1.8 The entry of any judgment against any Obligor which, if
adversely decided, would have a Material Adverse Effect, which remains
unsatisfied for thirty (30) days unless being contested by Obligor in good faith
with appropriate proceedings and with execution stayed; or a judgment creditor
of any Obligor shall obtain possession of any of the Collateral by any means,
including, but without limitation, levy, distraint, replevin or self-help;
16
8.1.9 Any Governmental Authority or instrumentality seizes,
appropriates, condemns or occupies all or a substantial part of the Properties
of any Obligor or interferes in any substantial manner with the operation of the
business of any Obligor;
8.1.10 Any Plan is terminated within the meaning of Title IV of
ERISA, or a trustee is appointed by the appropriate United States District Court
to administer any Plan, or the Pension Benefit Guaranty Corporation, or any
successor thereto, institutes proceedings to terminate any Plan or to appoint a
trustee to administer any Plan, or any Reportable Event or COBRA Violation
occurs which Lender determines in good faith indicates a substantial likelihood
that an event described above will occur;
8.1.11 If, in Lender's judgment, the value of the Collateral so
substantially deteriorates or diminishes that Lender reasonably deems the
Obligations to be inadequately secured, and Obligor, within five (5) Business
Days of Lender's demand, neither reduces the amount of the Obligations, nor
provides additional Collateral;
8.1.12 The validity or enforceability of this Agreement, the
Revolving Loan Note or any of the Loan Documents, shall be contested by any
Obligor or any Obligor shall deny that it has any or further liability or
obligation hereunder or therewith;
8.1.13 The occurrence of any Material Adverse Change in the
financial condition of any Obligor;
8.1.14 The failure to supply evidence of the good standing and
authority of Freight Rate, Inc. and each Subsidiary or other entity constituent
of Freight Rate, Inc. in accordance with paragraph 7.1.35 hereinabove; or
8.1.15 The failure to provide acceptable Subordination Agreements
in accordance with paragraph 7.1.36 hereinabove.
8.2 Acceleration. Immediately and without notice upon the occurrence
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and during the continuation of any Event of Default, all Obligations, whether
hereunder or otherwise, shall immediately become due and payable without
further action of any kind; and, notwithstanding any outstanding commitment of
Lender to Borrower to make additional and further Loans to Borrower, upon the
occurrence of any Event of Default, any such commitment shall immediately become
null and void and of no force and effect whatsoever.
8.3 Remedies.
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8.3.1 After any acceleration due to an Event of Default,
interest on the principal balance of the Obligations outstanding from time to
time shall accrue and is payable at the interest rate set forth in Schedule 2
----------
attached hereto plus Five Percent (5%) per annum from the date of such
acceleration until all such Obligations are satisfied in full and whether or not
any judgment is entered hereon (the sum of both rates, the "Default Rate"). In
addition to the rights and remedies given it by this Agreement and the Loan
Documents, Lender shall have all those allowed by all applicable laws,
including, but without limitation, the Uniform Commercial Code as enacted in any
jurisdiction in which any Collateral may be located and Lender may enforce such
rights and pursue such remedies without demand of performance and without other
notice. Without limiting the generality of the foregoing, Lender may
immediately, without demand of performance and without other notice (except as
specifically required by this Agreement or the Loan Documents) or demand
whatsoever to any Obligor, all of which are hereby expressly waived, and without
advertisement, take possession of the Collateral, exercise the Warrant of
Attorney contained in Section 9.17 herein, retain all of Borrower's Records,
sell at public or private sale or otherwise realize upon in Pennsylvania, or
elsewhere, the whole or, from time to time, any part of the Collateral or any
interest which any Obligor may have therein. After deducting from the Proceeds
of sale or other disposition of the Collateral all expenses (including all
expenses for legal services), Lender shall apply such Proceeds toward the
satisfaction of the Obligations. Any remainder of the Proceeds after
satisfaction in full of the Obligations shall be distributed as required by
applicable Laws. Notice of any sale or other disposition shall be given to
Borrower at least ten (10) days before the time of any intended public sale or
of the time after which any in-tended private sale or other disposition of the
Collateral is to be made, which Borrower hereby agrees shall be reasonable
notice of such sale or other disposition. Borrower agrees to assemble, or to
cause to be assembled at its expense, the Collateral at such place or places, as
Lender shall designate. At any such sale or other disposition, Lender may, to
the ex-tent permissible under applicable laws, purchase the whole or any part of
the Collateral, free from any right of redemption on the part of any Obligor,
which right is hereby waived and released. Without limiting the generality of
any of the rights and remedies conferred upon Lender under this paragraph,
Lender may, to the full extent permitted by applicable Laws: (a) enter upon the
premises of Borrower, exclude therefrom Borrower or any Affiliate thereof, and
take immediate possession of the Collateral, either personally or by means of a
receiver appointed by a court of competent jurisdiction, using all necessary
force to do so; (b) at Lender's option, use, operate, manage and control the
Collateral in any lawful manner; (c) collect and receive all rents, income,
rev-enue, earnings, issues and profits therefrom; and (d) maintain, repair,
renovate, alter or remove the Collateral as Lender may determine in its
discretion.
17
8.3.2 To the extent that applicable law imposes duties on Lender
to exercise remedies in a commercially reasonable manner, Borrower acknowledges
and agrees that it is not commercially unreasonable for Lender (a) to fail to
incur expenses reasonably deemed significant by Lender to prepare Collateral for
disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (b) to fail to obtain
third party consents for access to Collateral to be disposed of, or to obtain
or, if not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or
disposed of, (c) to fail to exercise collection remedies against Account Debtors
or other Persons obligated on Collateral or to remove Liens on or any adverse
claims against Collateral, (d) to exercise collection remedies against Account
Debtors and other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (f) to contact other
Persons, whether or not in the same business as Borrower, for expressions of
interest in acquiring all or any portion of the Collateral, (g) to hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature, (h) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (i) to dispose of assets
in wholesale rather than retail markets, (j) to disclaim disposition warranties,
(k) to purchase insurance or credit enhancements to insure Lender against risks
of loss, collection or disposition of Collateral or to provide to Lender a
guaranteed return from the collection or disposition of Collateral, or to the
extent deemed appropriate by Lender, to obtain the services of other brokers,
investment bankers, consultants and other professionals to assist Lender in the
collection or disposition of any of the Collateral. Borrower acknowledges that
the purpose of this Paragraph 8.3.2 is to provide non-exhaustive indications of
what actions or omissions by Lender would not be commercially unreasonable in
Lender's exercise of remedies against the Collateral and that other actions or
omissions by Lender shall not be deemed commercially unreasonable solely on
account of not being indicated in this Paragraph 8.3.2. Without limitation upon
the foregoing, nothing contained in this Paragraph 8.3.2 shall be construed to
grant any rights to Borrower or to impose any duties on Lender that would not
have been granted or imposed by this Agreement or by applicable law in the
absence of this Paragraph 8.3.2.
9. MISCELLANEOUS.
-------------
9.1 Construction. The provisions of this Agreement shall be in
------------
addition to those of any guaranty, surety, hypothecation, pledge or security
agreement, note, or other evidence of liability held by Lender, and any other
agreement between Borrower and any entity constituent of Borrower as guarantor
or otherwise, and Lender, all of which shall be construed as complementary to
each other. Nothing herein contained shall prevent Lender from enforcing any or
all other notes, guaranty, surety, hypothecation, pledge or security agreements
in accordance with their respective terms. The parties acknowledge that any and
all Accounts assigned or transferred to Lender or in which Lender is granted a
security interest hereunder have been assigned, and transferred to Lender, and
Lender was granted a security interest therein, as security for Lender's Loan
and advances hereunder, and Borrower's Obligations, and are not and have not
been, in fact, sold to Lender regardless of whether any assignment thereof,
which is or may be separate from this Agreement, is absolute.
9.2 Term of Agreement. This Agreement shall terminate after payment in
-----------------
full of the Revolving Loan Note and the discharge of all obligations and
undertakings of Borrower to Lender, whether arising hereunder or otherwise.
Lender's agreement hereunder to make the Loans shall terminate on the earliest
of: (a) the occurrence of an Event of Default or (b) the Revolving Credit
Termination Date; provided that certain agreements of Borrower and Lender
hereunder shall continue in full force and effect beyond the Revolving Credit
Termination Date or other termination hereof. In addition, the renewal of the
Revolving Credit shall be subject to annual review by Lender.
9.2.1 On the Revolving Credit Termination Date, all of the
obligations shall be immediately due and payable. The termination of this
Agreement shall not affect the rights, liabilities and obligations of the
parties with respect to the Obligations as of the date of termination, or the
Collateral which secures and is to secure the Obligations, which Collateral
shall remain subject to the liens and security interests granted hereunder until
all of the Obligations are satisfied in full. The failure of Lender to enforce
any of the terms and provisions hereof or failure to declare default hereunder
shall apply only in a particular instance, and shall not operate as a continuing
waiver.
9.3 Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed in accordance with GAAP, except as otherwise stated
herein.
9.4 Stamp or Excise Tax. Should any stamp or excise tax be payable in
-------------------
respect of this Agreement, the Revolving Loan Note and other documents to be
delivered hereunder, or any modification hereof or thereof, Borrower shall pay
the same and shall hold Lender harmless from any and all liabilities with
respect to or resulting from any delay in paying or any failure to pay such
taxes.
9.5 Further Assurance. From time to time, Borrower will execute and
-----------------
deliver to Lender such additional documents and will provide such additional
information as Lender may reasonably require to carry out the terms of this
Agreement and be informed of Borrower's status and affairs.
9.6 Enforcement and Waiver by Lender. Lender shall have the right at
--------------------------------
all times to enforce the provisions of this Agreement and the Loan Documents in
strict accordance with the terms hereof and thereof, notwithstanding any conduct
or custom on the part of Lender in refraining from so doing at any time or
times. The failure of Lender at any time or times to en-force its rights under
such provisions strictly in accordance with the same shall not be construed as
having created a custom in any way or manner contrary to specific provisions of
this Agreement or as having in any way or manner modified or waived the same.
All rights and remedies of Lender are cumulative and the occurrence and the
exercise of one right or remedy shall not be deemed a waiver or release of any
other right or remedy.
18
9.7 Expenses of Lender. Borrower will pay all reasonable or necessary
------------------
expenses including the fees and expenses of legal counsel for Lender, incurred
in connection with the administration, amendment, modification or enforcement
of this Agreement and the Loan Documents and the collection or attempted
collection of the Obligations, the Revolving Loan Note and the Collateral.
9.8 Notice. Any notices or consents required or permitted by this
------
Agreement shall be in writing and shall be delivered in person or sent by first
class or certified mail, return receipt requested, postage prepaid, by reputable
overnight carrier, or by fax, as follows, unless such address is changed by
written notice hereunder:
If to Borrower:
Power2Ship, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Chief Executive Officer
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Freight Rate, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, President
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to Lender:
Mercantile Capital, L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇, Senior Vice President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
9.8.1 Notices shall be deemed to have been received if hand
delivered, when delivered, if sent by certified mail or first class mail, three
(3) calendar days after the date deposited in the United States Mail, if by
overnight courier, on the date scheduled for delivery, and if by fax, when
transmitted. Any party may change the name and address of the person to whom
notices hereunder are to be sent by giving notice to such other party as
specified hereunder.
9.9 Waiver and Release by Borrower. To the maxi-mum extent permitted
------------------------------
by applicable Laws, Borrower waives protest of all commercial paper at any time
held by Lender on which Borrower is in any way liable and notice after
acceleration in the manner herein provided before exercise by Lender of the
remedies of self-help, set-off, or of other summary procedures permitted by any
applicable laws, or by any agreement with Borrower, and, except where required
hereby or by any applicable laws, notice of any other action taken by Lender;
and release Lender and its officers, attorneys, agents and employees from any
and all claims for loss or damages caused by any act or omission on the part of
any of them except willful misconduct.
9.10 Applicable Law. The internal laws of the Commonwealth of
--------------
Pennsylvania shall govern the construction of this Agreement, the Loan Documents
and the rights and remedies of the parties hereto, without regard to its
conflict of laws principles.
9.11 Consent to Jurisdiction, Service and Venue. For the purpose of
------------------------------------------
any suit, action or proceeding arising out of or relating to this Agreement, the
Revolving Loan Note or the Loan Documents, Borrower hereby irrevocably consents
and submits to the jurisdiction and venue of any of the Courts of the
Commonwealth of Pennsylvania or any Federal court located in the Eastern
District of Pennsylvania including, without limitation, the Court of Common
Pleas of ▇▇▇▇▇▇▇▇▇▇ County and the United States District Court for the Eastern
District of Pennsylvania, regardless of the convenience of such forum, and
Borrower further agrees and consents to accept and acknowledge all service of
process carried out by means of registered mail, return receipt requested in
connection with any such matter. The provisions of this Section shall not limit
or otherwise affect the right of Lender to institute and conduct action in any
other appropriate manner, jurisdiction or court.
9.12 Binding Effect, Assignment and Entire Agreement. This Agreement
-----------------------------------------------
shall inure to the benefit of and shall be binding upon the respective
successors and permitted assigns of the parties hereto. Borrower does not have
any right to assign any of its rights or obligations hereunder without the prior
written consent of Lender; provided, however, that Lender shall be permitted to
-------- -------
assign all of its rights, privileges and obligations hereunder at any time.
This Agreement and the Loan Documents executed and delivered pursuant hereto,
constitute the entire agreement between the parties and may be amended only by a
writing signed on behalf of each party.
19
9.13 Severability. If any provision of this Agreement shall be held
------------
invalid under any applicable Laws, such invalidity shall not affect any other
provision of this Agreement that can be given effect without the invalid
provision, and to this end, the provisions hereof are severable.
9.14 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
9.15 Seal. This Agreement is intended to take effect as an instrument
----
under seal.
9.16 Time of the Essence. Time is of the essence in this Agreement.
-------------------
9.17 WARRANT OF ATTORNEY.
-------------------
THE FOLLOWING PARAGRAPH SETS FORTH A WARRANT OF AUTHORITY FOR ANY ATTORNEY TO
CONFESS JUDGMENT AGAINST BORROWER. IN GRANTING THIS WARRANT OF ATTORNEY TO
CONFESS JUDGMENT AGAINST BORROWER, BORROWER, FOLLOWING CONSULTATION WITH
SEPARATE COUNSEL FOR BORROWER AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF,
HEREBY KNOWINGLY, INTENTIONALLY, VOLUNTARILY AND UNCONDITIONALLY WAIVES ANY AND
ALL RIGHTS BORROWER HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR
HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES OF
AMERICA, THE COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE. IT IS SPECIFICALLY
ACKNOWLEDGED BY THE UNDERSIGNED THAT LENDER HAS RELIED ON THIS WARRANT OF
ATTORNEY IN ENTERING INTO THIS AGREEMENT AND AS AN INDUCEMENT TO GRANT FINANCIAL
ACCOMMODATIONS TO BORROWER.
BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR ANY CLERK OF
ANY COURT OF RECORD, TO APPEAR FOR AND CONFESS JUDGMENT AGAINST BORROWER, (A)
FOR SUCH SUMS AS ARE DUE AND/OR MAY BECOME DUE ON THE OBLIGATIONS EVIDENCED BY
THIS AGREEMENT, AND/OR (B) IN ANY ACTION OF REPLEVIN INSTITUTED BY LENDER TO
OBTAIN POSSESSION OF ANY COLLATERAL SECURING THE NOTE OR SECURING ANY OF THE
OBLIGATIONS, IN EITHER CASE WITH OR WITHOUT DECLARATION, WITH COSTS OF SUIT,
WITHOUT STAY OF EXECUTION AND WITH AN AMOUNT, FOR LIEN PRIORITY PURPOSES, EQUAL
TO THE AMOUNT OF SUCH JUDGMENT, PLUS ATTORNEYS' COLLECTION FEES. TO THE EXTENT
PERMITTED BY LAW, OBLIGORS: (1) WAIVE THE RIGHT OF INQUISITION ON ANY REAL
ESTATE LEVIED ON, VOLUNTARILY CONDEMN THE SAME, AUTHORIZE THE PROTHONOTARY OR
CLERK TO ENTER UPON THE WRIT OF EXECUTION; (2) WAIVE AND RELEASE ALL RELIEF FROM
ALL REDEMPTION, APPRAISEMENT, STAY, EXEMPTION, OR APPEAL LAWS OF ANY STATE NOW
IN FORCE OR HEREAFTER ENACTED; AND (3) RELEASE ALL ERRORS IN SUCH PROCEEDINGS.
IF A COPY OF THIS AGREEMENT, VERIFIED BY AFFIDAVIT BY OR ON BEHALF OF LENDER
SHALL HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE
ORIGINAL OF THIS AGREEMENT AS A WARRANT OF ATTORNEY. THE AUTHORITY AND POWER TO
APPEAR FOR AND ENTER JUDGMENT AGAINST BORROWER SHALL NOT BE EXHAUSTED BY THE
INITIAL EXERCISE THEREOF, AND THE SAME MAY BE EXERCISED, FROM TIME TO TIME, AS
OFTEN AS LENDER MAY DEEM NECESSARY AND DESIRABLE, AND THIS AGREEMENT SHALL BE A
SUFFICIENT WARRANT THEREFOR. LENDER MAY ENTER ONE OR MORE JUDGMENTS IN THE SAME
OR DIFFERENT JURISDICTIONS FOR ALL OR PART OF BORROWER'S OBLIGATIONS, WITHOUT
REGARD TO WHETHER JUDGMENT HAS THERETOFORE BEEN ENTERED ON MORE THAN ONE
OCCASION FOR THE SAME OBLIGATIONS. IN THE EVENT ANY JUDGMENT ENTERED AGAINST
BORROWER HEREUNDER IS STRICKEN OR OPENED UPON APPLICATION BY OR ON BORROWER'S
BEHALF FOR ANY REASON WHATSOEVER, LENDER IS HEREBY AUTHORIZED AND EMPOWERED TO
AGAIN APPEAR FOR AND CONFESS JUDGMENT AGAINST BORROWER FOR ANY PART OR ALL OF
THE OBLIGATIONS; INCLUDING, WITHOUT LIMITATION, A SUBSEQUENT ENTRY OR ENTRIES OF
JUDGMENT BY LENDER TO CURE ANY ERROR OR DEFECTS IN SUCH PRIOR PROCEEDINGS.
9.18 Usury. If the applicable interest rate from time to time shall
------
exceed the maximum rate of interest permitted by applicable law, then the
applicable interest rate during such time shall be reduced so as to equal the
maximum rate of interest permitted by applicable law, and, in the event a
payment is made by Borrower or received by Lender in excess of the applicable
legal limits, the amount of such excess payment shall be credited to the account
of Borrower as a payment of principal.
9.19 Gender, Etc. Whenever used herein, the singular shall include the
------------
plural, the plural shall include the singular, and the use of the masculine,
feminine or neuter gender shall include all genders, as the context may require.
20
9.20 Headings. The Section and subsection headings of this Agreement
---------
are for convenience of reference only, and shall not limit or otherwise affect
any of the terms hereof.
9.21 Signatures by Facsimile. Any facsimile signature of any party
-----------------------
hereto shall constitute a legal, valid and binding execution hereby by such
party.
9.22 WAIVER OF JURY TRIAL. BORROWER ACKNOWLEDGES AND AGREES THAT: (A)
--------------------
ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR
INSTITUTED BY THE LENDER, BORROWER OR ANY OTHER PARTY HERETO OR ANY SUCCESSOR OR
ASSIGN OF LENDER, BORROWER OR ANY OTHER PARTY HERETO, ON OR WITH RESPECT TO THIS
AGREEMENT OR ANY OF THE LOAN DOCUMENTS OR THE OTHER DOCUMENTS REQUIRED HEREUNDER
OR THE DEALINGS OF THE PARTIES WITH RESPECT HERETO, OR THERETO, SHALL BE TRIED
ONLY BY A COURT AND NOT BY A JURY AND BORROWER WAIVES THE RIGHT TO TRIAL BY
JURY; (B) BORROWER WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER, IN ANY SUCH
SUIT, ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; AND (C)
THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND THE LENDER
WOULD NOT EXTEND CREDIT TO THE BORROWER IF THE WAIVERS SET FORTH IN THIS SECTION
WERE NOT A PART OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
ATTEST: POWER2SHIP, INC.
By: By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ (SEAL)
-------------------------- ----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, Chief Executive Officer
Its:
--------------------
FREIGHT RATE, INC.
By: By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ (SEAL)
-------------------------- ----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, President
Its:
--------------------
MERCANTILE CAPITAL, L.P.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇ (SEAL)
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Senior Vice President
INDEMNITOR'S ACKNOWLEDGEMENT:
▇▇▇▇▇▇▇ ▇▇▇▇▇, Indemnitor under a Validity Indemnification in favor of Lender
dated the 2nd day of December, 2004 hereby acknowledges receipt of this
Agreement and consents to its terms and conditions.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇, individually
21
SCHEDULE 1
----------
1) "Accounts", "Chattel Paper", "Contracts", "Contract Rights", "Documents",
-------- ------------- --------- --------------- ---------
"Equipment", "Fixtures" "General Intangibles", "Goods", "Inventory", "Investment
--------- -------- ------------------- ----- --------- ----------
Property", "Instruments", "Letter-of-Credit Rights", "Deposit Accounts",
-------- ----------- ----------------------- ----------------
"Payment Intangibles", "Health Care Insurance Receivables", "Records",
-------------------- --------------------------------- -------
"Promissory Notes", "Supporting Obligations" and "Proceeds" shall have the same
----------------- ---------------------- --------
respective meanings as are given to those terms in the Uniform Commercial Code
except that the term "Accounts" shall also include all amounts due under any
--------
lease of real property, a note receivable, any right to payment under a note
receivable, any right to payment which has been earned under an Account, a
Contract Right, HealthCare Insurance Receivable, or credit card receivable,
Letter-of-Credit Right, Payment Intangibles and all rights to payment arising
out of or related to any and all personal property lease agreements, personal
property rental agreements and consignment agreements in which any Borrower is
the lessor, renter or consignor, and this Agreement shall also be considered an
assignment of all such lease, rental and consignment agreements.
2) "Account Debtor" shall mean the Person with respect to any Account,
--------------
and/or the prospective purchaser with respect to any Contract Right, and/or any
party who enters into or proposes to enter into any contract or other
arrangement with Borrower pursuant to which Borrower is to deliver any personal
property or perform any service.
3) "Affiliate" shall mean any Person which, directly or indirectly,
---------
controls, is controlled by or is under common control with the Borrower, or any
stockholder, partner, owner or member of the Borrower or any Person which
controls any stockholder, partner, owner or member of the Borrower. For the
purpose of this definition, "control" means the possession, directly or
indirectly, of the power to direct or to cause the direction of management and
policies or having the ordinary voting power to elect the Board of Directors or
other governing body, whether through the ownership of voting securities, by
contract, by agreement or otherwise.
4) "Assets" means all assets that should, in accordance with GAAP,
------
consistently applied, be classified as assets on a balance sheet of the
Borrower.
5) "Authorized Financial Officer" means any corporate officer, proprietor,
----------------------------
partner or any individual designated in writing by Borrower as such.
6) "Base Rate" means the base commercial lending rate of Wilmington Trust
---------
Company of Pennsylvania as publicly announced to be in effect from time to time,
such Base Rate to be adjusted automatically, without notice, on the effective
date of any change in Wilmington Trust's base commercial lending rate. If such
rate ceases to be available or is otherwise not published, Lender may use a
similar published prime or base rate as chosen by Lender. The Base Rate is not
necessarily the lowest or best rate of interest offered by Lender to any
Borrower or class of Borrowers.
7) "Borrowing Base" means an amount equal to the lesser of the Revolving
--------------
Credit Limit or the aggregate of the percentage and other limitations and
sub-limits set forth in Schedule 2 attached hereto and made part hereof, which
----------
Schedule 2 may be amended from time to time by the Lender at its sole
---------
discretion.
---------
8) "Borrowing Base Certificate" means a certificate, satisfactory to Lender,
--------------------------
certified to be true and correct by an Authorized Financial Officer of Borrower
that mathematically computes the Borrowing Base.
9) "Business Day" shall mean any day other than a Saturday, Sunday or other
-------------
day on which banking institutions in the Commonwealth of Pennsylvania are either
authorized or required to be and remain closed to the general public.
10) "Closing" means the receipt or waiver by Lender of all the agreements,
-------
documents and instruments required hereunder in form and content acceptable to
Lender, and the satisfaction by Borrower or waiver or extension by Lender of all
or part of the Conditions Precedent set forth in Section 5 hereof. "Closing
-------
Date", means the date upon which Lender has elected to make the initial
----
disbursement of the Loan(s) to Borrower. The Closing Date shall be November 23,
2004, unless otherwise extended by Lender.
11) "COBRA Violations" shall mean a failure by the Borrower to comply with
----------------
group health plan continuation coverage requirements of Section 601 et seq. of
-------
ERISA.
12) "Collateral Documents" means all other agreements, documents or
--------------------
instruments pursuant to which Lender obtains any Lien or other security interest
in the Collateral or any other property of Borrower.
13) "Control Agreement" shall mean the agreement between Borrower, Lender
-----------------
and Borrower's bank evidencing Lender's security interest in and control of
Borrower's bank account(s).
14) "Debt" shall mean all of Borrower's Liabilities (determined in
-----
accordance with GAAP).
15) "Dollars" and "$" means dollars in the lawful currency of the United
----------------
States.
22
16) "Eligible Account" means an Account that Lender in its reasonable credit
----------------
judgment determines shall be an "Eligible Account" and conforms and continues to
conform to the following conditions which Lender may, in its sole discretion,
establish, determine or adjust from time to time:
a) The Account and all papers and documents relating thereto are
authentic, valid and subsisting and arose from a bona fide outright sale of
Goods, merchandise or other property by Borrower, or for services performed by
Borrower in the ordinary course of Borrower's business, based upon an
enforceable order or contract, written or oral, for Goods shipped or services
performed, and such Goods, merchandise or other property have been shipped to
the appropriate Account Debtor (or the sale has otherwise been consummated), and
the services have been performed for the appropriate Account Debtor in full
compliance with the specifications of the Account Debtor, and an invoice has
been issued for the full amount due from the Account Debtor;
b) Borrower's title to the Account and, except as to the rights of the
Account Debtor, to any Goods, is absolute and is not subject to any prior
assignment, claim, lien or security interest;
c) The amount shown on the books of Borrower and on any invoice or
statement delivered to Lender is owing to Borrower, and no partial payment has
been made thereon by anyone;
d) The Account is not; (i) a contra account, (ii) C.O.D. or sight draft
account, (iii) a commission account (iv) an Intercompany Account, (v) in
de-fault, or (vi) subject to any claim or reduction, counterclaim, set off,
recoupment or any claim for credits, allowances or adjustments by the Account
Debtor because of returned, inferior or damaged Goods or unsatisfactory
services, or for any other reason, except for customary discounts allowed for
prompt payment;
e) The Account is not due from an Account Debtor located outside of the
continental United States;
f) The Account is readily collectible and is not an invalid, disputed
or unenforceable Account, and is not an Account that Lender, in its sole
discretion, has determined to be ineligible, in whole or in part, and has
notified Borrower thereof;
g) The Account Debtor has not returned or re-fused to retain any Goods
from the sale of which the Account arose;
h) The Account is evidenced by an invoice that has a definite due date,
is not pre-billed and is due and payable not more than thirty (30) days from the
invoice date, except for invoices to International Paper, which invoices are due
and payable forty-five (45) days from the invoice date, and is not more than
sixty (60) days past due on such terms, and in any event is not outstanding more
than ninety (90) days from the invoice date;
i) No Account arises out of a contract with or from, an Account Debtor
that, by its terms, forbids or makes void or unenforceable the assignment by
Borrower to Lender of the Account arising with respect thereto;
j) Borrower has not received any note, trade acceptance, draft or other
Instrument with respect to or in pay-ment for the Account, nor any Chattel Paper
with respect to the Goods giving rise to the Account and, if any such Instrument
or Chattel Paper is received, Borrower will immediately notify Lender and, at
the latter's request, endorse or assign and deliver the same to Lender (if
Borrower receives any such Instrument or Chattel Paper, Borrower shall not
replace the Account with such Instrument or Chattel Paper without prior notice
to Lender and delivery of such original Instrument or Chattel Paper to Lender);
k) Borrower has no knowledge of and has not received any notice of the
death of any Account Debtor or a partner thereof if the Account Debtor is an
individual or a partner-ship, nor of the dissolution, termination of existence,
insolvency, business failure, appointment of a receiver for any part of the
property of, assignment for the benefit of creditors by, or the filing of a
petition in bankruptcy or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against the Account Debtor (if Borrower has
or obtains any such knowledge or upon the receipt by Borrower of any such
notice (whether oral or written), it will immediately give Lender written advice
thereof);
l) The Account Debtor is not a parent, Subsidiary, or an Affiliate of
Borrower nor an officer, director, employee or partner of Borrower or of a
parent, Subsidiary or Affiliate of Borrower nor owned or controlled by any of
the foregoing;
m) The Account is not due from any federal governmental authority
unless such Account, if necessary to perfect Lender's interest therein or
Lender's right of direct payment thereunder, has been properly assigned directly
to Lender (and acknowledged as assigned by the Account Debtor thereon) in form
satisfactory to Lender;
n) The Account is not contingent upon the fulfillment of any
condition or contingent upon the payment of any monies due from a third party;
o) The Account is supported by valid Shipping Documents;
p) The Account is not the result of guaranteed sales nor does it arise
from a consignment arrangement or similar transaction;
q) The Account is not a "▇▇▇▇ and hold" trans-action, nor did it arise
as a result of a billing for Goods which have not been shipped nor a
"pre-billed" transaction, however denominated;
23
r) The Account is not a progress billing (if any Account results from a
progress billing, Borrower shall furnish Lender with copies of all Contracts
related to such Account upon Lender's re-quest, but in any event, prior to the
start of the initial fabrication of the product or shipment or provision of
services);
s) The Account is not a retainer (including, but not limited to
construction retainages), nor does it represent interest or finance charges;
t) Less than 50% of the Account is ineligible for any reason;
u) The Account is an Account on which Lender has a first and exclusive
lien and security interest;
v) The Account meets such other specifications and requirements as
Lender may in its sole discretion establish or determine from time to time.
Lender shall have the right, at any time and from time to time after the Closing
Date, to adjust any such criteria and to establish new criteria, all in its
reasonable credit judgment; and
w) Any Account that was originally an Eligible Account shall cease to
be an Eligible Account in the event (a) it shall not continue to conform to the
conditions and warranties set forth in this Agreement or (b) Lender shall notify
Borrower that such Account or the Account Debtor is unsatisfactory. In the event
of any dispute whether an Account is or has ceased to be an Eligible Account,
the decision of the Lender shall control.
17) "Environmental Laws" shall mean any federal, state, county, regional or
------------------
local statute, law, ordinance, rule, regulation, order, directive, regulations
or requirement, together with all successor statutes, laws, ordinances, rules,
regulations, orders, directives, regulations or requirements governing the
control, storage, removal, spill, release or discharge of Hazardous Materials.
18) "ERISA" shall mean the Employee Retirement Income Security Act of 1974
-----
(together with all rules and regulations promulgated thereunder), as amended,
supplemented, replaced, or modified from time to time.
19) "ERISA Affiliate" shall mean, as to Borrower, any Person (whether or not
---------------
incorporated), which, together with Borrower, would be treated as a single
employer under Section 4001 of ERISA.
20) "Financial Statements" means the consolidated and consolidating balance
--------------------
sheet, statements of income and retained earnings and statements of cash flow of
the Borrower and its Subsidiaries and Affiliates and all other financial
statements of Borrower and its Subsidiaries or Affiliates, prepared in
accordance with GAAP, submitted and to be submitted to Lender hereunder, and in
form and content acceptable to Lender.
21) "Float Factor" shall mean the number of days described in Schedule 2.
------------ ----------
22) "GAAP" or "generally accepted accounting principles" shall mean
--------------------------------------------------
generally accepted accounting principles applied on a consistent basis, in
accordance with the Statement of Auditing Standards No. 69, "The Meaning of
Present Fairly in Conformity with Generally Accepted Accounting Principles in
the Independent Auditor's Report" (SAS 69) or superseding pronouncements, issued
by the Auditing Standards Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting Standards Board
and/or in such other statements by such other entity as Lender may reasonably
approve, which are applicable in the circumstances as of the date in question.
The requirement that such principles be applied on a consistent basis shall mean
that the accounting principles observed in a current period are comparable in
all material respects to those applied in a preceding period, or, in the event
of a material change in any accounting principle from that observed in any
previous period, (a) financial reports covering preceding periods during the
term of this Agreement are restated to reflect such change and provide a
consistent basis for comparison among periods and (b) the financial covenants
set forth herein, if any, shall be adjusted as determined by the Lender to
reflect similar performance standards as those measured by the existing
covenants using the previously observed accounting principles.
23) "Governmental Authority" means any nation or government, any state or
----------------------
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
24) "Indebtedness" means, as to any Obligor, all Liabilities, indebtedness
-------------
or obligations of Borrower to any Person of any kind or nature, now or hereafter
arising, due and payable, or to become due and payable, matured or unmatured,
liquidated or unliquidated, direct, secondary or contingent, fixed or otherwise,
joint or several.
25) "Indemnitor" means ▇▇▇▇▇▇▇ ▇▇▇▇▇ residing at ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇,
----------
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, who has executed a Validity Indemnification in favor of
Lender.
26) "Ineligible Account" means all or any part of any Account that is not an
------------------
Eligible Account.
24
27) "Intercompany Accounts" means all assets and liabilities, however
---------------------
arising, which are due to the Borrower from, which are due from the Borrower to,
or which otherwise arise from any transaction by the Borrower with, any
Affiliate of the Borrower.
28) "Laws" means all ordinances, statutes, rules, regulations, orders,
----
injunctions, writs or decrees of any Governmental Authority or agency thereof or
any court or similar entity established by any thereof.
29) "Lien" means:
----
a) Any interest in real, personal and intangible property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute, or
contract, and including a security interest, charge, claim, or lien arising from
a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit arrangement, agreement, security agreement, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes;
b) To the extent not included under clause (a), any reservation,
exception, encroachment, easement, right-of-way, covenant, condition,
restriction, lease or other title exception or encumbrance affecting property;
and
c) Any contingent or other agreement to provide any of the foregoing.
30) "Loan Documents" shall mean this Agreement, the Revolving Loan Note, the
--------------
Collateral Documents, Surety Agreement(s), Validity Indemnification(s),
Subordination Agreement(s), Letter(s) of Credit and/or any deed of trust,
mortgage, assignment of lease, note, contract, security instrument, encumbrance,
financing statement, certificate, assignment, pledge, report, subordination,
conditional sale, other title retention agreement, or other document related to
or delivered in connection with the transactions contemplated by this Agreement.
31) "Material Adverse Change" shall mean any changes that could result in a
-----------------------
Material Adverse Effect.
32) "Material Adverse Effect" shall mean any set of circumstances or events
-----------------------
which
a) Has or could reasonably be expected to have any material adverse
effect whatsoever upon the validity or enforceability of this Agreement or any
other Loan Document,
b) Is or could reasonably be expected to be material and adverse to the
Accounts of the Borrower,
c) Impairs materially or could reasonably be expected to impair
materially the ability of Borrower, or any Subsidiary to duly and punctually pay
or perform its Obligations, or
d) Materially impairs or could reasonably be expected to materially
impair the ability of the Lender to enforce its legal remedies pursuant to this
Agreement or any other Loan Document.
33) "Obligations" means the obligations of any Obligor:
-----------
a) To pay the principal of and all interest on all present and future
Loans and advances made hereunder in accordance with the terms hereof or
otherwise to or for the benefit of Borrower and to satisfy all of its other
Indebtedness, obligations, liabilities, covenants, duties and Debts to Lender
for payment or performance, whether hereunder or otherwise, whether now existing
or hereafter incurred or arising, matured or unmatured, due or to become due,
absolute, direct or contingent, joint or several, primary or secondary,
including any extensions, modifications, renewals thereof and substitutions
therefor, whether or not evidenced by any note, agreement or other Instrument or
Document, whether arising from an extension of credit, opening of a Letter of
Credit, acceptance, loan, guaranty, indemnification, overdraft or otherwise
including all Indebtedness, liabilities or obligations arising from any Obligor
to others which the Lender may have obtained by purchase, negotiation, discount,
assignment or otherwise;
b) To repay to Lender all amounts advanced by Lender hereunder or under
the Loan Documents or otherwise on behalf of (or for the benefit of) any Obligor
including, without limitation, advances for principal or interest payments to
prior or subordinate secured parties, mortgagees, or lienors, or for taxes,
levies, insurance, rent, repairs to, maintenance or storage of any of the
Collateral; and
c) To pay all of Lender's expenses and costs including without
limitation, all filing, recording and satisfaction fees, or taxes, and the fees
and expenses of its counsel in connection with the preparation, administration,
amendment, modification or enforcement of this Agreement and the documents
required here-under, the perfection or maintenance of Lender's Liens on and
security interests in the Collateral, or any proceeding brought or threatened to
enforce payment of any of the Obligations referred to in the foregoing.
34) "Obligor" means Borrower, Surety, Indemnitor and any other Person
-------
directly or indirectly obligated with respect to the Obligations.
35) "Perfection Certificate" means the Perfection Certificate to be
----------------------
completed and delivered by Borrower prior to Closing with appropriate insertions
and signed by an Authorized Financial Officer of Borrower.
25
36) "Permit" means any permit, license, registration, authorization or other
------
governmental approval required to be obtained and maintained under any
Environmental Law or other applicable law, rule or regulation of any
Governmental Authority.
37) "Person" means any individual, sole proprietorship, corporation,
------
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture, limited liability company, court, Governmental
Authority, government or political subdivision or agency thereof or any other
entity.
38) "Plan" shall mean any pension plan, which is covered by Title IV of
----
ERISA and in respect of which Borrower, or any ERISA Affiliate thereof is an
"employer" as defined in Section 3(5) of ERISA.
39) "Pledge Agreement" means an agreement in favor of Lender, in form and
----------------
content acceptable to Lender executed by any Person maintaining any property on
behalf of the Borrower, acknowledging Lender's control over and rights in and to
the pledged property.
40) "Records" means correspondence, memoranda, tapes, discs, CD-ROMS,
-------
papers, books and other documents, or transcribed information of any type,
whether expressed in ordinary, computer, machine or electronic language and the
Equipment in which such information is stored or by which it is retrieved.
41) "Remittances" means (a) all checks, drafts, cash and other remittances
-----------
in payment of or on account of payment of all its Accounts (including Ineligible
Accounts and Accounts with respect to which Lender has made no loan or advance
hereunder) and (b) whenever expressly required by Lender, the cash Proceeds of
any returned Goods from the sale of which any Account arose.
42) "Reportable Event" shall mean any of the events set forth in Section
----------------
4043(b) of ERISA or the regulations thereunder.
43) "Subordinated Debt" or "Subordinated Indebtedness" shall mean
------------------------------------------------
obligations of Borrower evidenced by a promissory note or notes or other written
instrument in form and content reasonably acceptable to Lender and all
collateral therefor, which are subordinated in right of payment, priority and in
all other respects to the right of Lender to receive payments on the Loans and
all collateral therefor, provided that the holder of the subordinated debt has
--------
executed a subordination agreement in form and content reasonably acceptable to
Lender or the instrument evidencing the subordinated debt expressly includes a
provision, in form and content acceptable to Lender, specifying that the
instrument and all collateral therefor is subordinated to the Obligations to and
that Lender is an intended beneficiary of such provision.
44) "Subsidiary" shall mean, as to Borrower, any corporation of which
----------
Borrower directly or indirectly through one or more intermediaries owns or
controls at the time (i) at least a majority of the outstanding stock having,
under ordinary circumstances (not dependent upon the happening of a
contingency), voting power to elect a majority of the board of directors (in the
case of a corporation having directors), or (ii) a majority of the voting stock
of any corporation not having directors. The term "Subsidiary" shall also mean
any general or limited partnership or other entity of which more than fifty
percent (50%) of the outstanding partnership interests or ownership interests
shall, at the time of determination, be owned, directly or indirectly, through
one or more intermediaries, by Borrower.
45) "Uniform Commercial Code" or "UCC" shall mean the Uniform Commercial
--------------------------------
Code as in effect in the Commonwealth of Pennsylvania or of any other state in
which any Collateral is located from time to time, (or any successor statute)
the laws of which are required, as a result thereof, to be applied in connection
with the perfection of security interest in the Collateral.
46) "Validity Indemnification" means a duly authorized and executed
------------------------
indemnification agreement in favor of Lender.
47) Other Definitional Provisions and Interpretive Provisions.
---------------------------------------------------------
a) The meanings of defined terms are equally applicable to the singular
and plural forms of the defined terms.
b) The words "hereof," "herein," "hereunder" and similar words refer to
this Agreement as a whole and not to any particular provision of this Agreement;
and Paragraph, Subparagraph, Subsection, Section, Schedule references are to
this Agreement unless otherwise specified.
c) The term "documents" includes any and all instruments, documents,
agreements, certificates, indentures, notices and other writings, however
evidenced.
d) The term "including" is not limiting and means "including without
limitation."
e) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including", the words "to"
and "until" each mean "to but excluding" and the word "through" means "to and
including."
f) Unless otherwise expressly provided herein, (a) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (b) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
g) This Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
h) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Lender, the Borrower
and the other parties, and are the products of all parties. Accordingly, they
shall not be construed against the Lender merely because of the Lender's
involvement in their preparation.
26
SCHEDULE 2
----------
This Schedule 2 dated this 2nd day of December, 2004, is attached to and
----------
made part of that certain Loan and Security Agreement between POWER2SHIP, INC.,
a Corporation organized and existing under the laws of State of Nevada with a
principal place of business located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
("Borrower") and MERCANTILE CAPITAL, L.P. ("Lender") dated the 2nd day of
December, 2004 (the "Agreement").
The Agreement is hereby modified by the additional terms and provisions set
forth in this Schedule 2 as such schedule may from time to time be amended and
----------
supplemented by Lender in its sole discretion ("Additional Terms"), all of which
are incorporated into and made part of the Agreement as of the date hereof. If
there is a conflict or discrepancy between the terms and provisions of this
Schedule 2, and any other Schedule 2 dated prior to the date hereof, or of the
---------- ----------
Agreement, the terms and provisions of this Schedule 2 shall continue and
----------
prevail. All other terms and provisions of all Schedule 2's dated prior to the
----------
date hereof, and of the Agreement are hereby ratified and confirmed in all
respects and without condition are all incorporated herein by reference as if
set forth at length herein.
1) Borrowing Base Rates of Advance:
-------------------------------
a) Eighty Percent (80%) of Eligible Accounts, subject to the following
limitation: Prior to receiving the Subordination Agreements as provided in, and
required by, Section 7.1.36 of this Agreement, the Borrower may borrow the
lesser of Eighty Percent (80%) of Eligible Accounts or Two Hundred and Fifty
Thousand and 00/100 Dollars ($250,000.00). In the event the Lender is not
provided with acceptable Subordination Agreements in accordance with Section
7.1.36 of this Agreement such failure shall constitute an Event of Default under
Section 8.1.15, which default shall relieve lender from any obligation to make
additional advances under this Agreement and shall entitle the Lender to
exercise any and all of its rights and remedies under this Agreement. In the
event Lender is provided with copies of acceptable Subordination Agreements
within sixty (60) days of closing which, when taken with all Subordination
Agreements previously executed in favor of Lender in form acceptable to Lender,
have the effect of subordinating 90% of the sum of the face value of all 14.25%
Secured Convertible Debentures issued plus the face value of all Series B 5%
Secured Convertible Debentures issued, the Borrower may then borrow, repay
with-out penalty or premium and re-borrow hereunder the amount equal to Eighty
Percent (80%) of Eligible Accounts;
b) Such other percentages of the above as Lender may, from time to time at
its sole discretion, determine and give advance notice to Borrower).
2) Interest Rate(s):
-----------------
a) Eligible Accounts: Base Rate plus 3%, but not to be less than 7% for
advances against accounts receivable;
3) Fees:
-----
a) Origination Fee. Borrower shall pay to Lender, on or before the Closing
---------------
Date a non-refundable origination fee ("Origination Fee") in an amount equal to
One Percent (1%) percent of the Revolving Credit Limit.
b) Facility Fee. Borrower shall pay to Lender, on or before the annual
------------
anniversary of the Closing Date a non-refundable commitment fee ("Facility Fee")
equal to One Percent (1%) of the Revolving Credit Limit.
c) Audit Fee. Borrower shall reimburse Lender for the cost of and related
---------
travel, out-of-pocket and other expenses. Audits shall be performed at such
times as the Lender deems necessary or advisable in its sole discretion.
d) Collateral Management Fee. Borrower shall pay Lender monthly, a
-------------------------
collateral management fee of 0.90% of the average loan balance. Such fee shall
be due and payable on the first day of each month in arrears.
4) Float Factor: Five Business Days for all funds received, with the
------------
exception of good funds received via wire transfer or via cashier's check, which
shall be credited the next Business Day following receipt of the same.
27
SCHEDULE 3
----------
COLLATERAL
----------
1) All money and cash of Borrower and all property of Borrower which at
any time Lender shall have in its possession, or which is in transit to it, all
amounts that may be owing from time to time by Lender to Borrower, and any
balance or share belonging, in whole or in part, to Borrower, in any deposit,
agency, trust, escrow or other account or accounts with any bank or other
financial institution (excluding all ▇▇▇, ▇▇▇▇▇▇ and any trust, pension, profit
sharing and similar accounts subject to ERISA), including any certificate of
deposit;
2) All Assets, including without limitation, all now owned or hereafter
acquired present and future Accounts (including Ineligible Accounts), Contract
Rights, Contracts, Chattel Paper, accounts receivable, notes receivable,
Documents, machinery, Equipment, Fixtures, furniture, Instruments, Inventory,
Investment Property, Letter-of- Credit Rights, Deposit Accounts, Payment
Intangibles, Health Care Insurance Receivables, Promissory Notes, Supporting
Obligations, General Intangibles, Goods, including any returned or repossessed
Goods and all rights of stoppage in transit and similar rights, Proceeds, all
lease or consignment agreements in which Borrower is lessor, consignor or
consignee and all rights of payment related to any of the foregoing, and all
liens and security instruments, books and Records evidencing, securing or
relating to the foregoing including, all data processing cards, tapes,
tabulating runs, programs, software and similar materials;
3) All guarantees, sureties and endorsements of Borrower's existing and
future Accounts, Contracts, Contract Rights, Chattel Paper, Documents,
Instruments, accounts receivable, Investment Property, Letter-of-Credit Rights,
Deposit Accounts, Payment Intangibles, Health Care Insurance Receivables,
Promissory Notes, Supporting Obligations, and Inventory;
4) All security or collateral held or taken by Borrower to secure the
payment and/or satisfaction of any Account, Chattel Paper, Contract, Contract
Rights, Document, Instrument, account receivable, Investment Property,
Letter-of-Credit Rights, Deposit Accounts, Payment Intangibles, Health Care
Insurance Receivables, Promissory Notes, Supporting Obligations, or Inventory,
including any returned or repossessed Goods;
5) All notes, drafts, acceptances, documents or certificates of title,
including bills of lading, warehouse receipts, policies and certificates of
insurance (including without limitation credit insurance), and securities
(domestic and foreign) now or hereafter owned by Borrower or in which Borrower
has or acquires an interest in connection with its Accounts, Contracts, Contract
Rights, Chattel Paper, Documents, Instruments, accounts receivable, Investment
Property, Letter-of-Credit Rights, Deposit Accounts, Payment Intangibles, Health
Care Insurance Receivables, Promissory Notes, Supporting Obligations, and
Inventory;
6) All other rights of Borrower to the payment of money, including,
without limitation, tax refunds and amounts due from Affiliates, and rights
under any Letter of Credit;
7) All rights in connection with the residual value of any Goods or
Inventory sold, leased, consigned or otherwise disposed of, including but not
limited to, the proceeds of any third party's option to purchase such Inventory;
8) All of Borrower's rights in sale agreements, rental agreements,
lease agreements, bills of lading, documents of title, warehouse receipts,
charters, charter parties, bills of sale and other agreements arising out of or
relating to purchase of Goods or Inventory by or to Borrower, whether directly
or through any Affiliate of Borrower, or the sale, rental, lease, consignment or
other disposition of the such property or any portion thereof;
9) All patents, processes, trade names, trademarks, copyrights,
licenses, now or hereafter affixed thereto, arising therefrom, used in
connection therewith, or related to the possession, use, manufacture,
processing, advertisement, sale, consignment, lease, other disposition or
operation thereof;
10) Any and all replacements and substitutions of all or any of the
property described in subparagraphs 1) through 10);
11) All insurance and all rights of payment or other rights of Borrower
arising out of, related to, or in connection with any of the foregoing;
28
12) All General Intangibles now or hereafter related to or arising
from, used in connection with or related to the pos-session, use, sale, lease,
consignment or other disposition of any of the foregoing and all insurance and
all rights of payment or other rights of Borrower arising out of, related to, or
in connection with any of the foregoing;
13) and all Records pertaining to any of the foregoing.
29
SCHEDULE 4
----------
EXCEPTIONS/ADDITIONAL INFORMATION
---------------------------------
Section 4.6 Additional Accounts:
--------------------
None
Section 5.3.4 Permitted Liens:
----------------
Security interests granted by Power2Ship, Inc. in
favor of Cornell Capital Partners, LP, as
evidenced by Florida Department of State UCC
Filing No. 200407348563, with the exception of the
liens granted therein relating to accounts
receivables, chattel paper, promissory notes,
deposit accounts, cash, documents, contract
rights, letter-of-credit rights, payment
intangibles, and any replacements, substitutions
or proceeds of the foregoing, which liens shall be
subordinated to the lien granted to Lender under
this Agreement and any other Loan Documents
between Borrower and Lender.
Security interests granted by Power2Ship, Inc. in
favor of Holders of 14.25% Secured Convertible
Debentures c/o Newbridge Securities Corporation,
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, as evidenced by Florida
Department of State UCC Filing No. 200406470039,
with the exception of the liens granted therein
relating to accounts receivables, chattel paper,
promissory notes, deposit accounts, cash,
documents, contract rights, letter-of-credit
rights, payment intangibles, and any replacements,
substitutions or proceeds of the foregoing, which
liens shall be subordinated to the lien granted to
Lender under this Agreement and any other Loan
Documents between Borrower and Lender.
Section 6.1.4 Litigation/Claims:
------------------
None
Section 6.1.9, 6.1.15 & 7.2.2 Indebtedness/Leases/Contracts:
------------------------------
None
Section 6.1.14 Other Liens
-----------
None
Section 6.1.22 Finder's Fees:
--------------
Payable to Capital Solutions Group, LLC -
$22,000.00
30