CAPCO
CONTRACT OF SALE
SECURITY AGREEMENT
(LOC Form 5)
This Contract of Sale and Security Agreement dated for purposes of
reference January 31, 2005; is between the undersigned, XRG, Inc. and its
wholly owned subsidiaries, XRG Logistics, Inc., Express Frieight Systems,
Inc., and R&R Express Intermodal, Inc., hereinafter called "CLIENT", and
CAPCO Financial Company- a division of Greater Bay Bank N.A. hereinafter
called "CAPCO ", agree as follows:
PURPOSE OF AGREEMENT:
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1. CLIENT desires to obtain short-term financing by selling, to
CAPCO ALL Accounts receivable. CAPCO agrees to Purchase CLIENT's
Accounts from time to time at a discount below face value,
utilizing an advance formula for the purchase of ALL Accounts
based upon advances against Acceptable/Eligible Accounts. It is
clearly understood by both parties that ALL Accounts of CLIENT
are to be sold to CAPCO.
DEFINITIONS:
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2. "Account" means any right of payment for goods sold, or leased,
and delivered, or services rendered, any specific transaction, or
any right of payment.
3. "Advance Formula" means the maximum amount available to CLIENT
from CAPCO for the purchase of All Accounts will not exceed 80%
of Acceptable/Eligible Accounts.
4. "Acceptable/Eligible Account" means an Account conforming to the
Warranties and terms set forth herein that has not been
outstanding for more than 90 DAYS from the date of invoice, has
been underwritten and approved by CAPCO, and has not been reduced
from the original amount billed by, credit memo, offset,
adjustment of any kind, or partial payment subsequent to invoice
date.
5. "Customer" means CLIENT's Customer or the Account debtor.
6. "CLIENT" means the seller of All Accounts.
7. "Collateral" means the intangible or tangible property given as
security to CAPCO by CLIENT for any obligations and liabilities
of CLIENT to CAPCO under the Agreement.
8. "Warrant" means to guarantee, as a material element of this
Agreement.
9. "Credit Problem" means Customer is unable to pay his debts
because of problems or insolvency.
10. "Customer Dispute" means any claim by Customer against CLIENT, of
any kind whatsoever, valid or invalid, that reduces the amount
collectible from Customer by CAPCO.
CLIENT COVENANTS:
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11. CLIENT agrees to sell to CAPCO ALL Accounts Receivable,
(Accounts) mechanic's lien(s), and rights to payment under any
stop notice(s), or bonded stop notice(s) securing payment of
those Accounts created by CLIENT in the course of its business,
existing as of the date of this agreement or thereafter created
during the term of this agreement, subject to approval and
verification by CAPCO. CAPCO is not obligated to advance funds
for the purchase of All Accounts from CLIENT. When CLIENT
notifies CAPCO of it's Accounts, CLIENT shall provide a copy of
the original Assigned Account (Invoice) a copy of the xxxx of
lading contract, purchase order, purchase order number, and/or
any other requisite supporting documentation corresponding to
said Accounts and appropriate to the business of CLIENT, as
requested by CAPCO.
12. CLIENT shall prepare and give to CAPCO proper written assignments
of Accounts, mechanic's lien(s) on forms provided by CAPCO. The
execution of said assignments shall transfer to CAPCO all of
CLIENT's right, title and ownership to ALL Accounts. CLIENT or
CAPCO by this agreement will properly xxxx Accounts, as assigned
and sold to CAPCO, and CAPCO is authorized to notify Customer of
said sale and assignment.
13. CLIENT represents and Warrants to CAPCO that:
a. CLIENT is sole and absolute owner of any and all Accounts and
mechanic's liens and rights to payment under any stop notices, or
bonded stop notices, sold and assigned hereunder, and CLIENT has full
legal right to make said sale, assignment, and/or transfer.
b. All Accounts sold to CAPCO are an accurate statement of a bonafide
sale, delivery and acceptance of merchandise, or performance of
service by CLIENT to / for Account-debtor. Accounts are not contingent
upon the fulfillment by CLIENT and each Account-debtor's business is
believed to be solvent. The terms for payment of said Accounts are Net
30 days or as expressly set forth on the face of said sold and
assigned Accounts, and the payment of said Accounts are not contingent
upon the fulfillment by CLIENT of any further performance of any
nature whatsoever. CLIENT shall accept no returns and shall grant no
allowances or credits to any sold and Assigned Account of any
Account-debtor without the prior written approval of CAPCO.
c. There are no known setoffs, Customer Disputes, adverse claims,
defenses, and/or liens whatsoever against the payment of Accounts, and
Account's mechanic's liens have not been previously assigned or
encumbered by CLIENT in any manner whatsoever. CLIENT will,
immediately upon sale of Accounts to CAPCO make proper entries on its
books and records disclosing the absolute sale of Accounts to CAPCO
and CLIENT will post no payment unless it is reflected in a payment
report from CAPCO.
d. CLIENT will promptly notify CAPCO in writing of any proposed change
in CLIENT'S place of business, name, legal entity, corporate
structure, record-keeping location, and/or as to any additional place
of business, or expiration of any special license(s), or transfer of
assets, or technology, to a third party, or proposed change in
ownership in excess of twenty five percent, (25%), of outstanding
shares;
e. CLIENT does not own, control, manage, participate in
management, or have any involvement and/or association whatsoever with
the business of any Account-debtor related to any Accounts sold and
assigned hereunder;
f. There are no financing statements now on file
in any public office governing, any Account, Inventory or work in
process of CLIENT in which CLIENT is named in or has signed as the
debtor, except the financing statement or statements filed or to be
filed in respect to this Agreement, or those statements now on file
that have been disclosed in writing by CLIENT to CAPCO. CLIENT will
not execute any financing statements pledging Accounts receivables,
inventory or work in process, in favor of any other person or entity,
excepting CAPCO, for the term of this Agreement;
g. CLIENT'S taxes are
not delinquent nor has CLIENT been subject to a tax levy by any
governmental entity nor are there now on file in any public office tax
liens affecting CLIENT other than those delinquencies, levies and/or
liens which have been disclosed by CLIENT to CAPCO;
h. All records,
statements, books, or other documents shown to CAPCO by CLIENT at any
time, either before, or after the signing of the Agreement are true
and accurate;
i. CLIENT has served or caused to be served any and all
preliminary 10-day notices required by law to perfect or enforce any
mechanic's lien for All Accounts to insure perfection of ownership for
CAPCO and the information contained on those preliminary 10-day
notices is true, correct, and properly recorded, to Seller's knowledge
and belief;
j. Waivers and releases for all labor, services,
equipment, or material of CLIENT and others will be submitted
on CAPCO's form concurrent with Accounts.
14. CLIENT and CAPCO agree that CAPCO will have FULL RECOURSE against
CLIENT and CLIENT shall be liable to repay to CAPCO any amount
paid by CAPCO to CLIENT in consideration for the sale, transfer,
and assignment of Accounts.
15. All Accounts shall be the sole property of CAPCO, but if for any
reason a payment owing on said Accounts shall be paid to CLIENT;
CLIENT shall promptly notify CAPCO of such payment, shall hold
any check, draft or money so received in trust and for the
benefit of CAPCO, and shall pay over such check or draft in-kind,
or money, to CAPCO promptly and without delay. All of CLIENT's
invoices shall bear the address of a Lock Box acceptable to
CAPCO; as the "REMIT TO" address, and CLIENT agrees that ALL
remittances for payment on ALL Accounts shall be made to the Lock
Box or other repository authorized in writing by CAPCO.
16. CLIENT will furnish CAPCO periodic statements, accounts
receivable agings, journals, bank records, and other information
as requested by CAPCO from time to time.
17. CLIENT will not pledge the credit of CAPCO to any other person,
or business for any purpose whatsoever.
18. CLIENT is properly licensed and authorized to operate the
business of XRG, Inc., under the trade name of , and CLIENT'S
trade name has been properly filed and published as required by
the laws of the State of Delaware.
19. CLIENT'S business is solvent.
20. CLIENT will not sell Accounts, or pledge Accounts to any party,
except to CAPCO for the period of this Agreement unless specific
Accounts are subordinated and released by CAPCO in writing.
21. CLIENT will not transfer, pledge, or give a security interest of
the Assets sold or Collateral granted to CAPCO to any other
party.
22. CLIENT will not change, or modify the terms of the original sold
and assigned Account with Customer unless CAPCO first consents to
such change in writing. CAPCO agrees to provide a prompt response
to CLIENT request for modification or change with respect to an
Assigned Account. For example, CLIENT may not extend credit to a
Customer beyond Net 30 days or the time set forth on the face of
the sold and Assigned Account without prior written consent from
CAPCO .
23. NOTICE OF DISPUTE: CLIENT must immediately notify CAPCO of
Customer Disputes greater than $400.00 in total for any one
Customer.
24. POWER OF ATTORNEY: In order to carry out this Agreement and avoid
unnecessary notification of Customers. CLIENT irrevocably
appoints CAPCO, or any person designated by CAPCO, as its special
attorney in fact, or agent, with power to:
a. strike out CLIENT'S address on all Accounts mailed to Customers and
put on CAPCO 's address.
b. receive, direct and forward, open, and
dispose of all mail addressed to CLIENT, or to CLIENT'S fictitious
trade name via CAPCO's address.
c. endorse the name of CLIENT, or CLIENT'S fictitious trade name on
any checks or other evidences of payment that may come into the
possession of CAPCO on Accounts purchased by CAPCO and on any other
documents relating to any of the Accounts or to assigned Collateral.
d. in CLIENT'S name, or otherwise, demand, xxx for, collect, and give
release for any and all monies due, or to become due on Accounts sold
and assigned hereunder.
e. do any and all things necessary and proper
to carry out the purpose intended by this Agreement.
f. execute any documents necessary to perfect or to continue any
Security Interest and without further authorization from CLIENT file a
carbon, photograph, facsimile, or other reproduction of any financing
statement for use as a financing statement The authority granted CAPCO
shall remain in full force and effect until all Accounts are paid in
full and any indebtedness of CLIENT to CAPCO is discharged.
CAPCO COVENANTS:
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25. CAPCO reserves the sum of ($10,000,000.00) Ten Million and 00/100
for the purchase of ALL of CLIENT's Accounts. These funds are
available daily at CLIENT'S option, subject to restriction as
governed by the Advance Formula. Daily availability will be
communicated to CLIENT via CAPCO'S Availability / Advance
Request.
26. This Agreement shall have an initial term ending with the first
full (12) Twelve calendar months and unless terminated by either
party giving not less than thirty (30) days prior written notice.
27. STATEMENT OF Acceptable/Eligible Accounts: CAPCO shall identify
in writing all Acceptable/Eligible Accounts and provide to
CLIENT, upon request, a written statement thereof (Weekly Aging
Report).
ACCOUNTING & FEES:
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28. Funds advanced by CAPCO to CLIENT are subject to daily fee of
Greater Bay Bank N.A. Prime Rate + 7.000% /360 (equivalent to a
monthly discount fee of Greater Bay Bank N.A. Prime Rate + 7.000%
/12) percent calculated on the daily balance (as reported on the
CLIENT Liability Detail Report) owing to CAPCO. This period will
usually be 1 calendar day except for weekends and or weeks where
holidays or other non-operating days prevent the fee from being
taken on a daily basis.
29. CAPCO will provide to the CLIENT daily, via fax, an advance and
availability request. This report must be acknowledged and
returned, via fax, to CAPCO no later than 11:30AM if a deposit or
wire transfer is to be made the same date as the request form was
issued to the CLIENT by CAPCO.
30. PAYMENT PROCESSING: All payments received by CAPCO will be
applied to CLIENT's Outstanding Balance daily following a 3
(Three) business day hold to allow for the application of
collected funds.
31. DISPUTED ACCOUNT: CLIENT will immediately notify CAPCO of any
Account subject to a Customer Dispute (See Paragraph 10 for
definition) of any kind whatsoever and said Account shall be
removed as an Acceptable/Eligible Account.
32. INVOICING ERRORS: Mistaken, incorrect and/or erroneous invoicing,
submitted by CLIENT to CAPCO may at CAPCO 's discretion be deemed
a Customer Disputed sold and Assigned Account and shall be
removed as an Acceptable/Eligible Account.
COLLATERAL:
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33. As Collateral for the payment of any indebtedness now owing, or
in the future owing, by CLIENT to CAPCO, CLIENT hereby grants to
CAPCO a security interest in the following property:
a. See Exhibit A attached.
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34. CLIENT will maintain such insurance covering CLIENT'S business
and/or the property of CLIENT's Customers as is customary for
businesses similar to the business of CLIENT.
35. CLIENT shall complete any and all documents required to provide
CAPCO a perfected security interest/lien in the Collateral
pledged to CAPCO.
DEFAULT:
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36. Any one or more of the following shall constitute an event of
default:
a. If CLIENT shall fail to pay any amount of indebtedness to
CAPCO when owing;
b. If CLIENT shall be in breach of any term,
provision, Warranty, or representation under this Agreement, or any
other agreement related hereto;
c. If bankruptcy or insolvency
proceedings shall be instituted by or against CLIENT.
d. If the
Collateral shall be attached, levied upon, seized in any legal
proceeding, and not released within 5 working days thereof;
e. If
CLIENT shall cease doing business and there shall exist any
indebtedness or commitments by CLIENT to CAPCO;
f. Any Accounts,
documents, statements, or other writings submitted by CLIENT to CAPCO
prove false or inaccurate in any material respect;
g. If CLIENT has
contributed to, or aggravated Account debtor's problem, insolvency,
and/or said Account debtor's ability and/or willingness to pay any
Accounts;
h. If any unpaid judgment or tax lien exists against CLIENT;
i. If CAPCO with reasonable cause and in good faith determines that
it's purchased asset or collateral is impaired for any reason
whatsoever;
j. Terminating prior to end of initial term;
k. Any change
in CLIENT's place of business, name, legal entity, corporate
structure, record-keeping location, and/or as to any additional place
of business, or expiration of any special license(s), or transfer of
assets, or technology, to a third party, or proposed change in
ownership in excess of twenty five percent, (25%), of outstanding
shares.
REMEDIES AFTER DEFAULT:
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37. In the event of any default CAPCO may do any one or more of the
following:
a. Declare any indebtedness secured hereby immediately
due and payable;
b. Increase the daily fee by five percent / 360 (equivalent to an
increase in the monthly discount fee of 5.000% / 12).
c. Notify any and all Customers and take possession of the Accounts
and Collateral and collect any receivables or funds paid to CLIENT all
without judicial process;
d. Require CLIENT to assemble the Collateral
and the records pertaining to receivables or other assets pledged as
collateral, and make them available to CAPCO, at a place designated by
CAPCO;
e. Enter the premises of CLIENT and take possession of the
Collateral and of the records pertaining to the receivables and any
other Collateral;
x. Xxxxx extensions, compromise claims and settle
receivables for less than face value, all without prior notice to
CLIENT;
g. Use, in connection with any assembly or disposition of the
Collateral, any trademark, trade name, trade style, copyright, patent
right or technical process used or utilized by CLIENT;
h. Return any
surplus realized to CLIENT after deduction of reasonable expenses,
attorney's fees, attorney's fees on appeal, collection costs,
independent third party auditors, incurred by CAPCO in resolving said
default;
i. Hold CLIENT liable for any deficiency.
j. Establish a
reserve from the collection of Accounts to meet reasonable legal
expenses associated with a future defense resulting from an action
brought against CAPCO by CLIENT, CLIENT's customer, or other third
party, as a result of an action of default.
k. Injunction against
CLIENT taking any action with regard to the Accounts or Collateral.
l.CAPCO is authorized by CLIENT to receive, direct and forward, open,
and dispose of all mail addressed to CLIENT at any address used by
CLIENT to receive mail.
GENERAL:
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38. After termination CLIENT remains fully responsible to CAPCO for any
indebtedness existing, or which may yet arise in connection with
Accounts that remain unpaid.
39. If during the term hereof CLIENT fails to make any payment required,
CAPCO may at its discretion pay the same and charge CLIENT therefore.
40. CLIENT will not, under any circumstances, or in any manner
whatsoever, interfere with any of CAPCO's rights under this Agreement.
41. TAX COMPLIANCE: CLIENT will furnish CAPCO upon request satisfactory
proof of payment and/or compliance with all Federal, State and/or
Local tax requirements.
42. NOTICE OF LEVY: CLIENT will promptly notify CAPCO of any attachment
or any other legal process levied against CLIENT.
43. LEGAL FEES: The losing party will pay any and all legal expenses and
reasonable attorney's fees, paralegal fees, staff overtime expense,
travel costs, costs on appeal, or other reasonable collection costs,
that the prevailing party may incur as a result of either CLIENT or
CAPCO enforcing this Agreement one against the other.
44. HOLD HARMLESS: CLIENT shall hold CAPCO harmless against any
liability, damages, loss, attorneys' fees and costs of any type due to
any action by a Customer arising from CAPCO'S collecting or attempting
to collect any Accounts so long as these collections are performed in
a commercially reasonable manner and in compliance with all applicable
laws, rules and regulations. CLIENT maintains the primary
responsibility for collections efforts, until the occurrence of an
event of default.
45. BINDING ON FUTURE PARTIES: This Agreement inures to the benefit of
and is binding upon the heirs, executors, administrators, successors
and assigns of the parties thereto.
46. CUMULATIVE RIGHTS: All rights, remedies and powers granted to CAPCO
in this Agreement, or in any note, or other agreement given by CLIENT
to CAPCO, are cumulative and may be exercised singularly or
concurrently with such other rights as CAPCO may have. These rights
may be exercised from time to time as to all or any part of the
pledged Collateral as CAPCO in its discretion may determine.
47. WRITTEN WAIVER: CAPCO may not waive its rights and remedies unless
the waiver is in writing and signed by CAPCO. A waiver by CAPCO of a
right, or remedy under this Agreement on one occasion is not a waiver
of the right, or remedy on any subsequent occasion.
48. WASHINGTON LAW: This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington. CLIENT hereby
consents to the exclusive jurisdiction of the State of Washington in
any dispute arising hereunder or related hereto. Venue for any actions
shall be in King Co. Washington.
49. INVALID PROVISIONS: If any provision of this Agreement shall be
declared illegal or contrary to law, it is agreed that such provision
shall be disregarded and this Agreement shall continue in force as
though such provision had not been incorporated herein.
50. ENTIRE AGREEMENT: This instrument contains the entire Agreement
between the parties. Any addendum or modification hereto will be
signed by both parties and attached hereto.
51. EFFECTIVE: This Agreement becomes effective when it is accepted and
executed by the authorized officers of CAPCO.
52. Execution of this document may contain multiple signature pages; each
shall be considered, when combined, as one signed and executed
document.
Executed the 31st day of January, 2005 at Clearwater, Florida.
XRG, Inc.
By:_____________________________
Title: ___________________________
By:_____________________________
Title: ___________________________
CAPCO Financial Company- a division of Greater Bay Bank N.A.
Accepted this _____ day of _____________, 200_, at Bellevue, Washington
By:_________________________________________
Title: ____________________________
CONTRACT OF SALE
SECURITY AGREEMENT
XRG, Inc.
EXHIBIT "A"
All personal property, now owned or hereafter acquired, including without
limitation accounts, contract rights, chattel paper, documents,
instruments, deposit accounts, investment property, letters of credit,
commercial tort claims, general intangibles, inventory, raw materials, work
in progress, finished goods, equipment, accessions, substitutions and
accessions, and proceeds (cash and non-cash) including, without limitation,
insurance proceeds, thereof.
AMENDMENT # 1
TO CAPCO CONTRACT OF SALE SECURITY AGREEMENT
January 31, 2005
CLIENT COVENANTS:
Paragraph 13c as follows:
There are no known setoffs, Customer Disputes, adverse claims,
defenses, and/or liens whatsoever against the payment of Accounts,
and Account's mechanic's liens have not been previously assigned or
encumbered by CLIENT in any manner whatsoever. CLIENT will,
immediately upon sale of Accounts to CAPCO make proper entries on its
books and records disclosing the absolute sale of Accounts to CAPCO
and CLIENT will post no payment unless it is reflected in a payment
report from CAPCO .
Is replaced by:
Other than those previously disclosed, there are no known setoffs,
Customer Disputes, adverse claims, defenses, and/or liens whatsoever
against the payment of Accounts, and Account's mechanic's liens have
not been previously assigned or encumbered by CLIENT in any manner
whatsoever. CLIENT will, immediately upon sale of Accounts to CAPCO
make proper entries on its books and records disclosing the absolute
sale of Accounts to CAPCO and CLIENT will post no payment unless it
is reflected in a payment report from CAPCO .
DEFAULT:
Paragraph 36b as follows:
If CLIENT shall be in breach of any term, provision, Warranty, or
representation under this Agreement, or any other agreement related
hereto;
Is replaced by:
If CLIENT shall be in breach of any material term, provision,
Warranty, or representation under this Agreement, or any other
agreement related hereto;
DEFAULT:
Paragraph 36h as follows:
If any unpaid judgment or tax lien exists against CLIENT;
Is replaced by:
If any unpaid judgment or tax lien exists against CLIENT in excess
of $25,000;
This amendment is effective and applicable to invoices purchased on or
after January 31, 2005. All other terms, covenants and conditions will
remain in effect and unchanged.
XRG, Inc.
By:_____________________________
Title: ___________________________
By:_____________________________
Title: ___________________________
CAPCO Financial Company- a division of Greater Bay Bank N.A.
Accepted this _____ day of _____________, 200_, at Bellevue, Washington
By:_________________________________________
Title: ____________________________
