Exhibit 10.21
NINTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
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This Ninth Amendment to Loan and Security Agreement ("Amendment") is
made as of the 6th day of April, 2005 by and among XXXXX XX 2005-1, LIMITED, a
Cayman Islands exempted company (successor by assignment to LASALLE BUSINESS
CREDIT, LLC) ("Lender"), PATRIARCH PARTNERS AGENCY SERVICES, LLC, a Delaware
limited liability company, as agent for the Lender (the "Agent"), and STONEPATH
GROUP, INC., a Delaware corporation ("Stonepath"), CONTRACT AIR, INC., a
Minnesota corporation ("Contract Air"), DISTRIBUTION SERVICES, INC., a Minnesota
corporation ("Distribution Services"), GLOBAL CONTAINER LINE, INC., a Washington
corporation ("Global Container"), M.G.R., INC., d/b/a AIR PLUS LIMITED, a
Minnesota corporation ("Air Plus"), NET VALUE, INC., a Delaware corporation
("Net Value"), STONEPATH LOGISTICS DOMESTIC SERVICES, INC., a Delaware
corporation ("Logistics"), STONEPATH LOGISTICS GOVERNMENT SERVICES, INC., f/k/a
Transport Specialists, Inc., a Virginia corporation ("Government Services"),
STONEPATH LOGISTICS INTERNATIONAL SERVICES, INC., a Delaware corporation
("International Services I"), STONEPATH LOGISTICS INTERNATIONAL SERVICES, INC.,
f/k/a Global Transportation Services, Inc., a Washington corporation
("International Services II"), STONEPATH OFFSHORE HOLDINGS, INC., a Delaware
corporation ("Offshore Holdings"), STONEPATH OPERATIONS INC., a Delaware
corporation ("Operations"), and UNITED AMERICAN ACQUISITIONS AND MANAGEMENT,
INC. d/b/a UNITED AMERICAN FREIGHT SERVICES, INC., a Michigan corporation
("United American", and together with Stonepath, Contract Air, Distribution
Services, Global Container, Air Plus, Net Value, Logistics, Government Services,
International Services I, International Services II, Offshore Holdings and
Operations are referred to herein collectively as the "Loan Parties" and each
individually as a "Loan Party").
BACKGROUND
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A. Loan Parties and Lender are parties to a certain Loan and Security
Agreement dated May 15, 2002 (as it may heretofore have been or may hereafter be
from time to time modified, amended, restated or replaced, the "Loan
Agreement"), pursuant to which Loan Parties established certain financing
arrangements with Lender. All capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Loan Agreement. The Loan
Agreement and all of the Other Agreements are referred to herein collectively as
the "Initial Loan Documents".
B. Loan Parties and Lender have agreed that certain modification should
be made to the terms and provisions of the Loan Agreement on the terms and
conditions set forth in and according to the provisions of this Amendment.
NOW, THEREFORE, with the foregoing Background incorporated by reference
and made a part hereof and intending to be legally bound, the parties agree as
follows:
1. Acknowledgement of Successor Lender. All references to LaSalle
Business Credit, LLC contained in the Initial Loan Documents are hereby deemed
to read "Xxxxx XX 2005-1, Limited" as a result of the sale and assignment of the
Loans by LaSalle Business Credit, LLC to Xxxxx XX 2005-1, Limited on April 6,
2005.
2. Confirmation of Indebtedness. Loan Parties confirm and agree that as
of April 6, 2005, immediately prior to giving effect to this Amendment, they are
indebted to Lender under the Loan Agreement and Other Agreements, without any
deduction, defense, setoff, claim or counterclaim of any nature whatsoever, in
the aggregate principal amount of $11,712,060.13, comprised of: (a)
$11,531,500.00 outstanding with respect to the principal amount of the Revolving
Credit Loans, (b) $150,000 outstanding with respect to outstanding Letters of
Credit and (c) all accrued interest, fees, costs and expenses (including
attorneys' fees) incurred to date in connection with the Loan Agreement, Other
Documents and related agreements.
3. Amendments to Loan Agreement. The Loan Agreement is hereby amended
as follows:
a. Amendments to Definitions. Section 1 of the Loan Agreement
shall be amended as follows:
(i) The definition of "Applicable Margin" contained in
Section 1 of the Loan Agreement shall be deleted in its
entirety and replaced by the following;
"Applicable Margin" shall mean 8.00%."
(ii) The following new definitions shall be added to
Section 1 of the Loan Agreement in the appropriate alphabetical order:
"Agent" means Patriarch Partners Agency Services, LLC,
in its capacity as Agent for Lender, or its successor.
"Interest Period" means consecutive one-month periods,
beginning on the date hereof and ending on the last day of the
Term; provided that:
(i) the initial Interest Period shall begin on
the Ninth Amendment Date and end on the last day of
April 2005. Thereafter, each subsequent Interest Period
will begin on the day following the last day of the
preceding Interest Period (with such last day of such
preceding Interest Period determined with reference to
clauses (ii) through (v) below;
(ii) any Interest Period that would otherwise
end on a day that is not a Business Day shall, subject
to the provisions of clause (iv) below, be extended to
the next succeeding Business Day unless such Business
Day falls in the next calendar month, in which case such
Interest Period shall end on the immediately preceding
Business Day;
(iii) any Interest Period that begins on the
last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the
calendar month at the end of such Interest Period)
shall, subject to clause (iv) below, end on the last
Business Day of a calendar month;
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(iv) any Interest Period that would otherwise
end after the last day of the Term shall end on the last
day of the Term; and
(v) except as otherwise provided under clause
(iii) or (iv) above, no Interest Period shall have a
duration of less than one month and if any applicable
Interest Period would be for a shorter period, such
Interest Period shall not be available hereunder.
"Ninth Amendment" means the Ninth Amendment to Loan and
Security Agreement, dated as of April 6, 2005, among the Loan
Parties, the Lender and the Agent.
"Ninth Amendment Date" means the date on which the Ninth
Amendment becomes effective pursuant to the terms therein.
"Projected Restructuring Charges" means the charges
resulting from the costs incurred by the Loan Parties in
reducing their personnel, systems, facilities and equipment in
connection with their efforts to integrate their businesses,
estimated at the time of the Ninth Amendment Date to be an
aggregate of approximately $2,600,000 for the first two
calendar quarters of 2005.
b. Amendment to Advance Rate. Section 2(a)(i) of the Loan
Agreement shall be amended to delete the words "or in the case of Eligible
Accounts of United American and Government Services, seventy-five percent (75%)"
after the words "eighty-five percent (85%)", which words were previously added
pursuant to the Seventh Amendment to Loan and Security Agreement dated as of
November 17, 2004 (the "Seventh Amendment").
c. Amendment to Provision Regarding Borrowing Request. The
first sentence of Section 2(a)(ii) of the Loan Agreement is hereby deleted in
its entirety and replaced with the following:
(ii) A request for a Revolving Loan shall be made or shall be
deemed to be made, each in the following manner: the Borrowing
Agent shall give Lender same day written notice no later than
11:30 A.M. (New York City time) for such day of its request
for a Revolving Loan, in which notice the Borrowing Agent
shall specify the amount of the proposed borrowing and the
proposed borrowing date; provided, however, that no such
request may be made at a time when there exists an Event of
Default or an event which, with the passage of time or giving
of notice, or both, will become an Event of Default.
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d. Amendment to Add Provision for Mandatory Prepayment of Loans.
Section 2 of the Loan Agreement is hereby amended by adding the following new
subsection (e) following subsection (d) thereof:
(e) Mandatory Prepayment. If at any time any Loan Party shall
receive any cash proceeds from any equity issuances by such Loan Party
and/or any sale of assets by such Loan Party (other than sale of
Inventory in the ordinary course of business) and/or the incurrence of
any Subordinated Debt and/or any Permitted Secured Mezzanine Debt by
any one or more Loan Parties (in each case to the extent any such
equity issuance or sale of assets or incurrence of Subordinated Debt or
Permitted Secured Mezzanine Debt is permitted under the terms of the
Loan Agreement), Loan Parties shall remit to Lender one hundred percent
(100%) of such cash proceeds (net of any reasonable costs and expenses
of such equity issuance or sale of assets or Subordinated Debt or
Permitted Secured Mezzanine Debt) as a mandatory prepayment of the Loan
or such lesser amount as may be necessary to repay in full all Loans
outstanding under the Loan Agreement; provided, however, (i) the
foregoing mandatory prepayment shall not apply to any funds provided to
the Loan Parties by the Lender and (ii) the Lender may, at its option
(which option shall be in the sole and absolution discretion of the
Lender), waive such mandatory prepayment. Any prepayment of the Loans
under this Section 2(e) shall prepay the Loans, which amounts may be
re-borrowed, and all such prepayments shall include payment of accrued
interest and applicable Prepayment Fee on the principal amount being
prepaid; provided, however, such Prepayment Fee shall not apply to any
prepayment made under this Section 2(e) with proceeds resulting from
the exercise of currently issued and outstanding options and warrants
or from the exercise of any employee stock options to be issued in the
future. All payments made pursuant to this Section 2(e) shall be
applied to the payment of interest before application to principal.
e. Amendment to Delete the Letter of Credit Provisions. Section 3 of
the Loan Agreement shall be deleted in its entirety and replaced with the
following:
3. [RESERVED]
f. Amendment to Interest Rates. The prior amendment to the interest
rate provisions made by Section 4(e) of the Seventh Amendment is hereby deleted
in its entirety. As of the Ninth Amendment Date, the option of Loan Parties to
have any Loans bear interest based or indexed upon the Prime Rate (including
without limitation (i) converting any LIBOR Rate Loans to Prime Rate Loans and
(ii) maintaining any existing Loans which presently are Prime Rate Loans as
Prime Rate Loans after the effectiveness of this Amendment) shall be terminated.
For the avoidance of doubt, as of the Ninth Amendment Date, all Loans shall bear
interest at the LIBOR Rate plus the Applicable Margin.
g. Amendment to Interest Period. Section 4(a)(ii) of the Loan Agreement
is hereby deleted in its entirety and replaced with the following:
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(ii) A per annum rate of interest equal to the LIBOR Rate for
the applicable Interest Period, plus the Applicable Margin, such rate
to remain fixed for such applicable Interest Period. Interest on LIBOR
Rate Loans shall be payable in United States Dollars on the first
Business Day of each month in arrears and also on the last Business Day
of the then applicable Interest Period.
h. Deletion of Certain LIBOR-Related Provisions. The following
subsections of Section 4(b) of the Loan Agreement are hereby deleted in their
entirety: subsections (iii), (iv), (viii) and (ix).
i. Amendment of Certain LIBOR-Related Provision. Section 4(b)(vii) of
the Loan Agreement is hereby deleted in its entirety and replaced with the
following:
(vii) Each request for LIBOR Rate Loans shall be in an amount
not less than $50,000, and in integral multiples of $50,000.
j. Amendment to Unused Line Fee. Section 4(c)(ii) of the Loan Agreement
shall be amended by deleting it in its entirety and replacing it with the
following:
(ii) Unused Line Fee: Loan Parties shall pay to Lender an
unused line fee in United States Dollars of 1.00% of the difference
between (x) the Maximum Loan Limit and (y) the average daily balance of
the outstanding Revolving Loans for each month. Such unused line fees
shall be fully earned by Lender and payable monthly in arrears on the
first Business Day of each month. Said fees shall be calculated on the
basis of a 360 day year for the actual number of days elapsed.
k. Amendment to Terms of Prepayment Fee. Section 4(c)(iii) of the Loan
Agreement shall be deleted in its entirety and replaced with the following:
(iii) Prepayment Fee: In the event that (except as otherwise
provided in Subsection 4(c)(viii) below) Loan Parties elect to
terminate this Agreement prior to the last day of the Term, which Loan
Parties may elect to do at any time upon not less than 10 days prior
written notice to Lender, and prepay all of the Liabilities hereunder,
Loan Parties shall also pay to Lender a prepayment fee ("Prepayment
Fee") in United States Dollars equal to 5.0% of aggregate amount of the
outstanding Revolving Loans at the time of such prepayment; provided,
however, if the Lender shall have provided additional financing to Loan
Parties in excess of $10,000,000 during the period from the Ninth
Amendment Date to the date of such prepayment, the Prepayment Fee shall
be an amount equal to 1.5% of the aggregate amount of the outstanding
Revolving Loans at the time of such prepayment.
l. Amendment to Add Provision for Payment of Fees Related to Monitoring
of Receivables. Section 4(c) of the Loan Agreement is hereby amended by adding
the following new subsection (ix) following subsection (viii) thereof:
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(ix) Reimbursement of Agent's Costs for Monitoring Accounts.
Loan Parties shall reimburse Agent in United States Dollars for all
costs incurred by the Agent in monitoring Accounts and determining
Eligible Accounts, which reimbursement amount shall be payable monthly
in advance on the first Business Day of each month and shall not be
less than $1,500 per month.
m. Amendment of Termination Date. The first sentence of Section 10 of
the Loan Agreement (as previously amended) shall be amended by deleting the date
"May 31, 2006" in the second line of such section and replacing it with "May 31,
2007."
n. Amendment to Correct Subsection Number and to Add Provision for
Notice Regarding Proposed Asset Sales or Equity Offering. Section 12(b) of the
Loan Agreement is hereby amended by correcting subsection "(viii) Notice of
Formation of Subsidiaries", added pursuant to the Fifth Amendment and Joinder to
Loan and Security Agreement dated as of April 6, 2004, to be subsection "(ix)
Notice of Formation of Subsidiaries" and by adding the following new subsection
(x) immediately thereafter:
(x) Notice of Proposed Asset Sales and Equity Issuances.
Provide Agent with at least thirty (30) days advance notice of any (i)
proposed sale of assets (other than sale of Inventory in the ordinary
course of business) or (ii) proposed issuance or sale of additional
equity securities, excluding any issuance of equity securities upon the
exercise of currently issued and outstanding options and warrants or
from the exercise of any employee stock options to be issued in the
future. For the avoidance of doubt, this provision requiring notice of
any proposed sale of assets or issuance of equity securities is not
intended to imply or create permission for Loan Parties to conduct such
sales or issue additional equity securities unless (A) such actions are
otherwise specifically permitted under a separate provision of this
Agreement or (B) Lender shall otherwise give its prior written consent.
o. Amendment to Use of Proceeds Provision. Section 12(g) of the Loan
Agreement is hereby amended by adding the following sentence at the end thereof:
Notwithstanding anything to the contrary in the
preceding sentence, the Loan Parties shall not be
permitted to use the proceeds of the Loans: (i) for
the payment of interest and principal with respect to
any Subordinated Debt, other than Subordinated Debt
to Lender, its affiliates, or their successors or
assigns, (ii) to finance in any way any action, suit,
arbitration, proceeding, application, motion or other
litigation of any type adverse to the interests of
Lender and Agent or their rights and remedies under
this Loan Agreement or the Other Agreements or (iii)
for the payment of interest and principal with
respect to any equipment leases with LaSalle National
Leasing Corporation.
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p. Amendment to Covenant Regarding Indebtedness. Section 13(b) of the
Loan Agreement is hereby deleted in its entirety and replaced with the
following:
(b) Indebtedness.
No Loan Party shall create, incur, assume or become obligated
(directly or indirectly), for any loans or other indebtedness of
borrowed money other than the Loans, except that Loan Parties may (i)
incur either or both of (x) unsecured Subordinated Debt in an amount
not to exceed $25,000,000 in principal outstanding in the aggregate for
all Loan Parties at any one time and/or (y) Permitted Secured Mezzanine
Debt; (ii) maintain the present indebtedness listed on Schedule 11(n)
hereto; (iii) incur unsecured indebtedness to trade creditors in the
ordinary course of business on standard terms; (iv) a capital lease
with a total obligation not exceeding $75,000 (7th Amendment); and (v)
incur indebtedness in respect of unfunded letters of credit obtained in
the ordinary course of the business of the Loan Parties in an aggregate
amount up to $1,000,000 at any time outstanding.
q. Amendment to Earn-Out Payments. Section 13(m) of the Loan Agreement
is hereby deleted in its entirety and replaced with the following:
(m) Earn-Out Payments.
No Loan Party shall make, or provide funds in any manner for
the making by another Loan Party or any Subsidiary thereof of, any
Domestic Earn-Out Payment or Foreign Earn-Out Payment which is not a
Permitted Earn-Out Payment; provided that for the 14-day period
following the Ninth Amendment Date, such Permitted Earn-Out Payment (i)
may not be made unless the Loan Parties have Undrawn Availability
(taking into account all reserves which exist under the Loan Agreement)
to make such Permitted Earn-Out Payment and (ii) shall not exceed
$2,000,000 in the aggregate.
r. Removal of Borrowing Availability Reserves. The borrowing
availability reserve set forth in Section 5(a) of the Seventh Amendment, as
amended by that certain Eighth Amendment to Loan and Security Agreement dated as
of March 31, 2005 (the "Eighth Amendment"), is hereby decreased from $2,750,000
to $0. In addition, the requirement set forth in Section 2(c) of the Eighth
Amendment to maintain Undrawn Availability of at least $1,500,000 is hereby
deleted in its entirety.
s. Amendment of Financial Covenants. Section 14(e) of the Loan
Agreement shall be deleted in its entirety and replaced with the following (it
being understood that for the purpose of calculations made in respect of Section
14(e), Consolidated EBITDA shall exclude Projected Restructuring Charges):
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(e) (1) Stonepath shall have a Consolidated EBITDA in the
following minimum amounts for the following periods:
---------------------------- -----------------------
Period Minimum Amount
------ --------------
---------------------------- -----------------------
3 months ended 3/31/05 (635,000)
---------------------------- -----------------------
6 months ended 6/30/05 0
---------------------------- -----------------------
9 months ended 9/30/05 3,700,000
---------------------------- -----------------------
12 months ended 12/31/05 7,100,000
---------------------------- -----------------------
12 months ended 3/31/06 8,500,000
---------------------------- -----------------------
12 months ended 6/30/06 9,000,000
---------------------------- -----------------------
12 months ended 9/30/06 10,000,000
---------------------------- -----------------------
12 months ended 12/31/06 11,000,000
---------------------------- -----------------------
12 months ended 3/31/07 11,000,000
---------------------------- -----------------------
(2) Stonepath shall have a Consolidated EBITDA, without
taking into account the performance and financial
results of all Foreign Subsidiaries, in the
following minimum amounts for the following periods:
---------------------------- -----------------------
Period Minimum Amount
------ --------------
---------------------------- -----------------------
3 months ended 3/31/05 (2,075,000)
---------------------------- -----------------------
6 months ended 6/30/05 (2,350,000)
---------------------------- -----------------------
9 months ended 9/30/05 100,000
---------------------------- -----------------------
12 months ended 12/31/05 2,100,000
---------------------------- -----------------------
12 months ended 3/31/06 3,600,000
---------------------------- -----------------------
12 months ended 6/30/06 4,400,000
---------------------------- -----------------------
12 months ended 9/30/06 5,600,000
---------------------------- -----------------------
12 months ended 12/31/06 6,600,000
---------------------------- -----------------------
12 months ended 3/31/07 6,700,000
---------------------------- -----------------------
(3) Logistics shall have a Consolidated EBITDA in the
following minimum amounts for the following periods:
---------------------------- -----------------------
Period Minimum Amount
------ --------------
---------------------------- -----------------------
3 months ended 3/31/05 (1,490,000)
---------------------------- -----------------------
6 months ended 6/30/05 (2,110,000)
---------------------------- -----------------------
9 months ended 9/30/05 (1,660,000)
---------------------------- -----------------------
12 months ended 12/31/05 (600,000)
---------------------------- -----------------------
(4) International Services shall have a Consolidated
EBITDA in the following minimum amounts for the
following periods:
---------------------------- -----------------------
Period Minimum Amount
------ --------------
---------------------------- -----------------------
3 months ended 3/31/05 (1,055,000)
---------------------------- -----------------------
6 months ended 6/30/05 (695,000)
---------------------------- -----------------------
9 months ended 9/30/05 1,320,000
---------------------------- -----------------------
12 months ended 12/31/05 2,220,000
---------------------------- -----------------------
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t. Events of Default. The following proviso is hereby added to the end
of Section 15 of the Loan Agreement:
; provided that, notwithstanding the foregoing, no Event of
Default shall arise as a result of the Loan Parties' inability
to make a payment prohibited by Section 12(g)(iii) of this
Agreement.
u. Amendment of Indemnification Provision. Section 18(g) of the Loan
Agreement is hereby amended by deleting the words from the beginning of that
subsection up to and including the words "(each an "Indemnified Party")" in the
first four lines of such subsection and replacing them with the following: "Each
Loan Party agrees to defend (with counsel satisfactory to Lender), protect,
indemnify and hold harmless Lender, Agent, each affiliate or subsidiary of
Lender or Agent, and each of their respective officers, directors, mangers,
employees, attorneys and agents (each an "Indemnified Party")".
v. Amendment of Notice Provision. Section 19 of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:
19. NOTICE.
All written notices and other written communications
with respect to this Agreement shall be sent by overnight
mail, by facsimile or delivered in person at the following
addresses:
(a) If to the Lender, to it at:
Xxxxx XX 2005-1, Limited
c/o Patriarch Partners XIV, LLC
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile number: (000) 000-0000
with a copy to
Patriarch Partners Agency Services, LLC
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Loan Administration/Stonepath
Facsimile number: (000) 000-0000
(b) If to the Loan Parties, to them in care of the
Borrowing Agent at its chief executive office set
forth on Schedule 1(a) hereto or as otherwise
directed by Loan Parties in writing.
All notices shall be deemed received upon actual receipt
thereof or refusal of delivery.
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w. Amendment to Add Provision Regarding Agent. The Loan Agreement is
hereby amended by adding the following new Section 29 following Section 28
thereof:
29. THE AGENT.
(a) Appointment of Agent.
Patriarch Partners Agency Services, LLC is hereby
appointed Agent hereunder, and Lender hereby authorizes Agent
to act as its agent in accordance with the terms hereof and
the Other Agreements. The Agent hereby agrees to act upon the
express conditions contained herein and the Other Agreements,
as applicable. The provisions of this Section 29 are solely
for the benefit of Agent and Lender and none of the Loan
Parties shall have any rights as a third party beneficiary of
any of the provisions hereof. In performing its functions and
duties hereunder, Agent shall act solely as an agent of Lender
and does not assume and shall not be deemed to have assumed
any obligation towards or relationship of agency or trust with
or for any Loan Party or any of their Subsidiaries. The Agent,
without consent of or notice to any party hereto, may assign
any and all of its rights or obligations hereunder to any of
its Affiliates.
(b) Agent as Agent under Other Agreements.
Lender hereby further authorizes Agent, on behalf of
and for the benefit of Lender, to be the agent for and
representative of Lender with respect to the Collateral and
the Other Agreements. Agent may execute any documents or
instruments necessary to release any lien encumbering any item
of Collateral that is the subject of a sale or other
disposition of assets permitted hereby or to which Lender has
otherwise consented.
(c) Powers and Duties.
Lender irrevocably authorizes the Agent to take
action on Lender's behalf and to exercise such powers, rights
and remedies hereunder and under the Other Agreements as are
specifically delegated or granted to the Agent by the terms
hereof and thereof, together with such powers, rights and
remedies as are reasonably incidental thereto. Agent shall
have only those duties and responsibilities that are expressly
specified herein and the Other Agreements. Agent may exercise
such powers, rights and remedies and perform such duties by or
through its agents or employees. The Agent shall not have, by
reason hereof or any of the Other Agreements, a fiduciary
relationship in respect of Lender and nothing herein or any of
the Other Agreements, expressed or implied, is intended to or
shall be so construed as to impose upon the Agent any
obligations in respect hereof or any of the Other Agreements
except as expressly set forth herein or therein.
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(d) General Immunity.
(i) No Responsibility for Certain Matters. The Agent
shall not be responsible to Lender for the execution,
effectiveness, genuineness, validity, enforceability,
collectability or sufficiency hereof or any Other Agreement or
for any representations, warranties, recitals or statements
made herein or therein or made in any written or oral
statements or in any financial or other statements,
instruments, reports or certificates or any other documents
furnished or made by the Agent to Lender or by or on behalf of
any Loan Party to the Agent or Lender in connection with the
Loan Agreement, Other Agreements and the transactions
contemplated thereby or for the financial condition or
business affairs of any Loan Party or any other Person liable
for the payment of any Liabilities, nor shall the Agent be
required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions,
covenants or agreements contained in the Loan Agreement or any
of the Other Agreements or as to the use of the proceeds of
the Loans or as to the existence or possible existence of any
Event of Default. Anything contained herein to the contrary
notwithstanding, Agent shall not have any liability arising
from confirmations of the amount of outstanding Loans.
(ii) Exculpatory Provisions. None of the Agent or any
of its officers, trustees, members, partners, directors,
employees or agents shall be liable to Lender for any action
taken or omitted by the Agent under or in connection with the
Loan Agreement or any of the Other Agreements except to the
extent caused by the Agent's gross negligence or willful
misconduct. Agent shall be entitled to refrain from any act or
the taking of any action (including the failure to take an
action) in connection herewith or any of the Other Agreements
or from the exercise of any power, discretion or authority
vested in it hereunder or thereunder unless and until the
Agent shall have received instructions in respect thereof from
Lender and, upon receipt of such instructions from Lender,
Agent shall be entitled to act or (where so instructed)
refrain from acting, or to exercise such power, discretion or
authority, in accordance with such instructions. Without
prejudice to the generality of the foregoing, (A) Agent shall
be entitled to rely, and shall be fully protected in relying,
upon any communication, instrument or document believed by it
to be genuine and correct and to have been signed or sent by
the proper Person or Persons, and shall be entitled to rely
and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for the Loan Parties and their
Subsidiaries), accountants, experts and other professional
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advisors selected by it, and (B) Lender shall not have any
right of action whatsoever against Agent as a result of Agent
acting or (where so instructed) refraining from acting
hereunder or any of the Other Agreements in accordance with
the instructions of Lender.
(e) Lender Representations, Warranties and
Acknowledgment.
Lender represents and warrants that it has made its
own independent investigation of the financial condition and
affairs of the Loan Parties and their Subsidiaries in
connection with Loan hereunder and that it has made and shall
continue to make its own appraisal of the creditworthiness of
the Loan Parties and their Subsidiaries. Agent shall not have
any duty or responsibility, either initially or on a
continuing basis, to make any such investigation or any such
appraisal on behalf of Lender or to provide Lender with any
credit or other information with respect thereto, whether
coming into its possession before the making of the Loans or
at any time or times thereafter, and Agent shall not have any
responsibility with respect to the accuracy of or the
completeness of any information provided to Lender.
(f) Right to Indemnity.
Lender agrees to indemnify Agent, to the extent that
Agent shall not have been reimbursed by the Loan Parties, for
and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses
(including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever which may be imposed on,
incurred by or asserted against Agent in exercising its
powers, rights and remedies or performing its duties hereunder
or under Other Agreements or otherwise in its capacity as
Agent in any way relating to or arising out hereof or Other
Agreements; provided, Lender shall not be liable for any
portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Agent's gross negligence or
willful misconduct.
(g) Successor Agent.
The Agent may resign at any time by giving 30 days'
prior written notice thereof to Lender, and Agent may be
removed at any time with or without cause by an instrument or
concurrent instruments in writing, delivered to Agent and
signed by Lender. Upon any such notice of resignation or any
such removal, Lender shall have the right to appoint a
successor Agent. If no successor Agent is appointed prior to
the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lender, a successor Agent.
Upon the acceptance of any appointment as Agent hereunder by a
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successor Agent, that successor Agent shall thereupon succeed
to and become vested with all the rights, powers, privileges
and duties of the retiring or removed Agent and the retiring
or removed Agent shall promptly (i) transfer to such successor
Agent all Collateral held under the Loan Agreement or Other
Agreements, together with all records and other documents
necessary or appropriate in connection with the performance of
the duties of the successor Agent under the Loan Agreement or
Other Agreements, and (ii) execute and deliver to such
successor Agent such amendments to financing statements, and
take such other actions, as may be necessary or appropriate in
connection with the assignment to such successor Agent of the
security interests created under the Loan Agreement or Other
Agreements, whereupon such retiring or removed Agent shall be
discharged from its duties and obligations hereunder. After
any retiring or removed Agent's resignation or removal
hereunder as Agent, the provisions of this Section 29 shall
inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent hereunder.
(h) Agent's Right to Realize on Collateral.
Anything contained in the Loan Agreement of any of
the Other Agreements to the contrary notwithstanding, Loan
Parties, Agent and Lender hereby agree that in the event of a
foreclosure by Agent on any of the Collateral pursuant to a
public or private sale, Agent or Lender may be the purchaser
of any or all of such Collateral at any such sale and Agent,
as agent for and representative of Lender shall be entitled,
for the purpose of bidding and making settlement or payment of
the purchase price for all or any portion of the Collateral
sold at any such public or private sale, to use and apply any
of the Liabilities as a credit on account of the purchase
price for any Collateral payable by Agent at such sale.
(i) Agent Appointed Attorney-in-Fact; Rights and
Duties of Agent.
Loan Parties hereby irrevocably appoint Agent (with
full power of substitution) the Loan Parties'
attorney-in-fact, with full authority in the place and stead
of the Loan Parties and in the name of the Loan Parties or
otherwise, from time to time in Agent's discretion, to execute
any instrument and to take any other action that Agent may
deem necessary or advisable to accomplish the purposes of the
Loan Agreement, including, without limitation:
(i) Further Documents. To execute, deliver
and file on behalf of and in the name of the Loan
Parties one or more financing statements, notices or
such other documents, and amendments and
continuations to those statements or documents,
13
relating to all or any part of the Collateral without
the signature of Loan Parties where permitted by law.
Loan Parties agree that a photographic or other
reproduction of the Loan Agreement, any financing
statement, notice or other document covering the
Collateral shall be sufficient as a financing
statement where permitted by law.
(ii) Continue Perfection. To take any and
all actions on behalf of and in the name of Loan
Parties, at Loan Parties' expense, which are
necessary or advisable to ensure that (A) the liens
granted pursuant to the Loan Agreement at all times
constitute perfected liens in favor of Agent, for the
benefit of the Lender and the Agent, and (B) such
liens are at all times prior to all other liens on
the Collateral, and will be enforceable as such
against (w) all creditors of, and purchasers from,
Loan Parties, (x) any owner or purchaser of the real
property where any of the Equipment is located, (y)
any present or future creditor obtaining a lien on
such real property, and (z) any other third party.
(iii) Insurance Matters. To obtain and
adjust insurance required to be paid to Agent, for
the benefit of Lender and Agent, pursuant to Section
12(e) and cancel, assign, and surrender any policies
of insurance.
(iv) Pay Taxes. To pay or discharge taxes
and liens levied or placed on or threatened against
the Collateral, to effect any repairs called for by
the terms of the Loan Agreement and to pay all or any
part of the costs thereof.
(v) Collect Collateral. Upon the occurrence
and during the continuation of an Event of Default,
to ask, demand, collect, xxx for, recover,
compromise, receive, indorse and give acquittance,
discharge and receipts for moneys or other
instruments, documents and chattel paper due and to
become due under or in respect of all or any part of
the Collateral (whether as interest, dividend, other
distribution or otherwise) and to direct any party
liable for any payment under any of the Collateral to
make such payment directly to Agent, for the benefit
of Lender and Agent, or as Agent shall direct.
(vi) Institute Proceedings. Upon the
occurrence and during the continuation of an Event of
Default, to file any claims, proofs of claim,
subrogation receipts or take any action or commence
or institute any proceedings which Agent may deem
necessary or desirable for the collection of all or
any part of the Collateral or otherwise to enforce
the rights of the Agent with respect to all or any
part of the Collateral.
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(vii) Transfer Collateral Into the Agent's
Name. Upon the occurrence and during the continuation
of an Event of Default, to transfer any Collateral
into Agent's or its nominee's name, for the benefit
of Lender and Agent.
(viii) Vote Collateral. Upon the occurrence
and during the continuation of an Event of Default,
to exercise all or any of the voting rights and other
consensual rights pertaining to the Collateral.
(ix) Other Actions. Upon the occurrence and
during the continuation of an Event of Default, to
take any other action it deems advisable with respect
to the Collateral or to accomplish the purposes of
the Loan Agreement, including, but not limited to,
(A) sell or assign any Account upon such terms, for
such amount and at such time or times as Agent deems
advisable, (B) notify the post office authorities to
change the address for delivery of any Loan Party's
mail to an address designated by Agent, and open all
mail addressed to any Loan Party and (C) do all other
acts and things necessary, in Agent's determination,
to fulfill Loan Parties' obligations under the Loan
Agreement or any Other Agreement.
(x) Actions of Agent. The Loan Parties may
rely upon any decision, act, consent or instruction
of the Agent as being the decision, act, consent or
instruction of the Lender. Any payment required to be
made by the Loan Parties to the Lender may be made to
the Agent unless otherwise directed by the Lender
hereunder or under any Other Agreement.
At any time that Agent determines that it is
necessary or appropriate to preserve, protect, insure or
maintain its rights hereunder, Agent may (i) take control, in
any manner, of any item of payment or proceeds of any
Collateral, (ii) sign any Loan Party's name on any documents
to be executed, recorded or filled in order to perfect or
continue perfected Agent's security interest in the Collateral
and file or record any of the foregoing documents, (iii)
endorse any Loan party's name on any items of payment or
proceeds thereof and deposit the same to the account of Agent
for application to the Liabilities, (iv) sign any Loan Party's
name on any invoices, bills of lading, freight bills, chattel
paper, documents, instruments or similar documents or
agreement relating to any Accounts or any goods pertaining
thereto or any other Collateral, (v) sign any Loan Party's
name on any verification of Accounts and notices thereof to
Account Debtors.
15
Each Loan Party hereby ratifies all that
said attorney shall lawfully do or cause to be done
by virtue hereof. This power of attorney is a power
coupled with an interest and shall be irrevocable.
(j) The Agent May Perform.
If Loan Parties fail to perform any
obligation under the Loan Agreement or under or in
respect of any Collateral or any representation of
the Loan Parties contained in the Loan Agreement or
in any document included in the Collateral shall be
untrue or incorrect in any material respect, the
Agent may, but shall be under no obligation to,
perform the obligation or remedy that breach, or
cause it to be performed or remedied, and the
expenses incurred by or on behalf of the Agent in
connection with the performance of the obligation or
the remedy of the breach shall constitute Liabilities
hereunder.
x. Removal of Capital Injection Requirements. Section 4 of the Eighth
Amendment (Capital Injection) is hereby deleted in its entirety and replaced
with the following:
4. [RESERVED]
4. Agency Fee. Loan Parties covenant and agree that, in consideration for
the accommodations and amendments provided for herein, Loan Parties shall pay to
Agent an annual agency fee ("Agency Fee") equal to $75,000 contemporaneously
with the execution hereof, which such fee shall be nonrefundable.
5. Representations and Warranties. Each Loan Party represents and warrants
to Lender that:
a. All warranties and representations made to Lender under the Loan
Agreement, as amended or otherwise modified by the additional disclosures set
forth in Schedule I hereto, and related agreements and documents are true and
correct as to the date hereof.
b. The execution and delivery by each Loan Party of this Amendment and
the performance by each such Loan Party of the transactions herein contemplated
(i) are and will be within its powers, (ii) have been authorized by all
necessary corporate action, and (iii) are not and will not be in contravention
of any order of any court or other agency of government, or of any law, or be in
conflict with, result in a breach of, or constitute (with due notice and/or
lapse of time) a default under any such indenture, agreement or undertaking or
result in the imposition of any lien, charge or encumbrance of any nature on any
of the properties of such Loan Party or under the articles or certificate of
incorporation or bylaws or other corporate governance document of any such Loan
Party.
16
c. This Amendment and any related agreement or document will be valid
and binding on and enforceable against each Loan Party in accordance with its
respective terms.
6. Collateral. As security for the payment of all Liabilities now or in the
future existing, each Loan Party hereby confirms and agrees that all security
interests and liens granted to Lender and Agent by any one of them continue in
full force and effect and shall continue to secure all such Liabilities. All
Collateral remains free and clear of any liens other than Permitted Liens.
Nothing herein contained is intended in any way to impair or limit the validity,
priority and extent of the existing security interest of Lender or Agent in and
liens upon the Collateral of any Loan Party.
7. Effectiveness Conditions. This Amendment shall be effective upon
completion of the following conditions precedent (all documents to be in form
and substance satisfactory to Lender and Lender's counsel):
a. Execution and delivery of this Amendment by all parties hereto;
b. Delivery of (i) an incumbency certificate from the secretary or
other appropriate officer of each Loan Party certifying the name, title and
signature of the officer of each such Loan Party executing this Amendment on
behalf of such party and (ii) a copy of the resolutions and/or written actions
or consents of the boards of directors of each Loan Party authorizing the
execution of this Amendment and the performance of the transactions contemplated
hereby, certified as complete and correct and in full force and effect by the
secretary or other appropriate officer of each such Loan Party;
c. Payment to Agent of the Agency Fee required to be paid on the date
hereof plus all fees and expenses (specifically including attorneys' fees)
incurred in relation to the preparation and execution of this Amendment;
d. Execution and delivery of that certain letter agreement among
Lender, Loan Parties and LaSalle Business Credit, LLC, dated as of the date
hereof, regarding existing letters of credit and Lockbox Account Control
Agreement; and
e. Execution and/or delivery of any and all other agreements,
instruments and documents requested by Lender to effectuate and implement the
terms hereof.
8. Ratification of Loan Documents. Except as expressly set forth herein,
all of the terms and conditions of the Loan Agreement are hereby ratified and
confirmed and continue unchanged and in full force and effect. All references to
the Loan Agreement shall mean the Loan Agreement as modified by this Amendment.
No modification hereof shall be binding or enforceable unless in writing and
signed by the party against whom enforcement is sought.
9. Governing Law. THIS AMENDMENT, AND ALL MATTERS RELATING HERETO OR
ARISING HEREFROM, SHALL BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA (WITHOUT REGARD TO PENNSYLVANIA'S OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS) AS TO INTERPRETATION, ENFORCEMENT,
VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER RESPECTS, EXCLUDING PERFECTION
OF THE SECURITY INTERESTS IN COLLATERAL LOCATED OUTSIDE OF THE COMMONWEALTH OF
PENNSYLVANIA, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT
JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED. If any provision of this
17
Amendment shall be held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or remaining
provisions of this Amendment.
10. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts together shall constitute one and the same respective
agreement. Signature by facsimile shall bind the parties hereto.
[SIGNATURES ON FOLLOWING PAGE]
18
IN WITNESS WHEREOF, the parties have executed this Ninth Amendment to
Loan and Security Agreement the day and year first written above.
LENDER:
XXXXX XX 2005-1, LIMITED
By: Patriarch Partners XIV, LLC,
its Collateral Manager
By: /s/ Xxxx Xxxxxx
-------------------------------
Name: Xxxx Xxxxxx
Title: Manager
AGENT:
PATRIARCH PARTNERS AGENCY SERVICES, LLC
By: /s/ Xxxx Xxxxxx
------------------------------
Name: Xxxx Xxxxxx
Title: Manager
19
LOAN PARTIES:
STONEPATH GROUP, INC.
CONTRACT AIR, INC.
DISTRIBUTION SERVICES, INC.
GLOBAL CONTAINER LINE, INC.
M.G.R. INC., d/b/a AIR PLUS LIMITED
NET VALUE, INC.
STONEPATH LOGISTICS DOMESTIC SERVICES,
INC.
STONEPATH LOGISTICS GOVERNMENT SERVICES,
INC., f/k/a Transport Specialists, Inc.
STONEPATH LOGISTICS INTERNATIONAL
SERVICES, INC, a Delaware Corporation
STONEPATH LOGISTICS INTERNATIONAL
SERVICES, INC., f/k/a/ Global
Transportation Services, Inc.,
a Washington Corporation
STONEPATH OFFSHORE HOLDINGS, INC.
STONEPATH OPERATIONS, INC.
UNITED AMERICAN ACQUISITIONS AND
MANAGEMENT, INC. d/b/a UNITED AMERICAN
FREIGHT SERVICES, INC.
BY: /s/ Xxxxxx Xxxxxx
------------------------------
Name: Xxxxxx Xxxxxx
Title: President
20
SCHEDULE I
----------
1. The Loan Parties and their subsidiaries have made intercompany loans and/or
advances to as permitted by Section 13(f)(ii) of the Loan Agreement.
2. Stonepath is a party to the following actions:
The Company was named as a defendant in eight purported class action
complaints filed in the United States Court for the Eastern District of
Pennsylvania between September 24, 2004 and November 19, 2004. Also named as
defendants in these lawsuits were officers Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxx
and former officer Xxxx X. Xxxxx. These cases have now been consolidated for all
purposes in that Court under the caption In re Stonepath Group, Inc. Securities
Litigation, Civ. Action No. 04-4515 and the lead plaintiff, Globis Capital
Partners, LP, filed an amended complaint in February 2005. The lead plaintiff
seeks to represent a class of purchasers of the Company's shares between March
29, 2002 and September 20, 2004, and alleges claims for securities fraud under
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. These claims
are based upon the allegation that certain public statements made during the
period from March 29, 2002 through September 20, 2004 were materially false and
misleading because they failed to disclose that the Company's Domestic Services
operations had improperly accounted for accrued purchased transportation costs.
The plaintiffs are seeking compensatory damages, attorneys' fees and costs, and
further relief as may be determined by the Court.
The Company has been named as a nominal defendant in a shareholder
derivative action on behalf of the Company that was filed on October 12, 2004 in
the United States District Court for the Eastern District of Pennsylvania under
the caption Xxxxxx Xxxxxxx Xxxx v. Xxxxxx X. Xxxxxx, et al., Civ. A. No.
04-cv-4971. Also named as defendants in the action are all of the individuals
who were serving as directors of the Company when the complaint was filed
(Xxxxxx X. Xxxxxx, J. Xxxxxxx Xxxxxx, Xxxxxx XxXxxx, Xxxxx X. Xxxxx, Xxxxxxxx X.
Lawn and Xxxx X. Xxxxxxxx), former directors Xxxxxx Xxxxx, Xxx X. Xxxxxx, Xxxx
Xxxx, Xxxxxxx Xxxxxx, Xxxxxxx X'Xxxxxx-Xxxxxx, and Xxxxx Xxxxx, officer Xxxxxx
X. Xxxxxx and former officers Xxxx X. Xxxxx and Xxxxxxx X. Xxxxx. The derivative
action alleges breach of fiduciary duty, abuse of control, gross mismanagement,
waste of corporate assets, unjust enrichment and violations of the
Xxxxxxxx-Xxxxx Act of 2002. These claims are based upon the allegation that the
defendants knew or should have known that the Company's public filings for
fiscal years 2001, 2002 and 2003 and for the first and second quarters of fiscal
year 2004, and certain press releases and public statements made during the
period from January 1, 2001 through August 9, 2004, were materially misleading.
The complaint alleges that the statements were materially misleading because
they understated the Company's accrued purchase transportation liability and
related costs of transportation in violation of generally accepted principles
and they failed to disclose the Company lacked internal controls. The derivative
action seeks compensatory damages in favor of the Company, attorneys' fees and
costs, and further relief as may be determined by the Court. The Defendants have
filed a motion to dismiss the complaint in this action.
The Company has received notice that the Securities and Exchange
Commission ("Commission") is conducting an informal inquiry to determine whether
certain provisions of the federal securities laws have been violated in
connection with the Company's accounting and financial reporting. As part of the
inquiry, the staff of the Commission has requested information relative to the
restatement amounts, personnel at the Air Plus subsidiary and Stonepath Group,
Inc. and additional background information for the period from October 5, 2001
to December 2, 2004. The Company is voluntarily cooperating with the staff.
On October 22, 2004, Xxxxxxx Xxxxx filed a two-count action against
United American Acquisitions, Inc. ("UAF"), Stonepath Logistics Domestic
Services, Inc., and the Company in the Circuit Court for Xxxxx County, Michigan.
Xx. Xxxxx is the former President and Chief Executive Officer of UAF. The
Company purchased the stock of UAF from Xx. Xxxxx on May 30, 2002 pursuant to a
Stock Purchase Agreement. At the closing of the transaction Xx. Xxxxx received
$5.1 million and received the right to receive an additional $11.0 million in
four annual installments based upon UAF's performance in accordance with the
Stock Purchase Agreement. Stonepath Logistics Domestic Services, Inc. and Xx.
Xxxxx also entered into an Employment Agreement. Xx. Xxxxx'x complaint alleges
that the defendants breached the terms of the Employment Agreement and Stock
Purchase Agreement and seeks, among other things, the production of financial
information, unspecified damages, attorney's fees and interest. UAF has filed a
counterclaim against Xx. Xxxxx seeking the recovery of the installment payments
made to him to date (approximately $467,000) and other damages.
Xxxxxxxx Xxxxx, a former employee of UAF and Stonepath Logistics
Domestic Services, Inc. has filed a complaint against Stonepath Logistics
Domestic Services, Inc., the Company, and UAF seeking damages in excess of
$75,000 and relief from her covenant not to compete. The complaint alleges
sexual harassment and retaliation by the defendants.
By letters dated February 23, 2005 and March 22, 2005, an attorney
representing Customs Services International, Inc. Xxxxxx X. Xxxx, Xx., and Xxxxx
X. Xxxxxx claimed that the Company and its subsidiary Stonepath Logistics
Domestic Services, Inc. breached certain provisions of the Asset Purchase
Agreement pursuant to which the business of Customs Services International, Inc.
was acquired, as well as certain provisions of the employment agreements entered
into with Xx. Xxxx and Xx. Xxxxxx.
The Company and its subsidiary M.G.R., Inc. are parties to a lawsuit
filed by Opus Real Estate America IV IN, LLC in the District Court for the First
Judicial District of the State of Minnesota, Dakota County seeking the recovery
of in excess of $264,870.00 for physical damages at a warehouse leased by
M.G.R., Inc. and owned by the plaintiff.
Xxxxx Northern, the former President of Transport Specialists, Inc. has
filed an action in the Circuit Court of Loudoun County, Virginia, Xxxxxx X.
Northern v. Stonepath Logistics Government Services, Inc., (Chancery No. 23405)
seeking injunctive and declaratory relief against the Company relating to the
termination of his employment. Mr. Northern is seeking a declaration by the
court that the termination of his employment was not for "cause" under the terms
of his employment agreement. In the event it is ultimately determined that the
termination of his employment was not for "cause" under the terms of his
employment agreement, he would be entitled to the payments arising from such a
termination. However, we understand that the Company may have certain
counterclaims against Mr. Northern which could reduce the amount arising from
any such determination. Mr. Northern initially sought a preliminary injunction
in this proceeding which was denied in November 2003.
By letter dated March 25, 2005, the court-appointed receiver (the
"Receiver") of Lancer Management Group, LLC and certain related parties asserted
that he has determined that payments made by Lancer Partners, L.P. totaling
$3,000,000 and payments made by related entities totaling $5,349,000 were
avoidable as fraudulent transfers. Lancer Partners, L.P. and certain related
entities purchased securities of the Company in past private placement
transactions. The letter provides no basis for the Receiver's determination and
seeks evidence from the Company establishing that the payments are not avoidable
or the payment of $8,349,000.
By letter dated March 29, 2005, an attorney for BFS US Special
Operations Trust PLC and Renaissance US Growth Investment Trust PLC has asserted
a claim for $194,293.04 for damages allegedly incurred by those parties in
connection with sales they made at a time when the Company's registration
statement covering the resale of those shares could not be used.
3. Stonepath did not timely filed its Form 10-K Annual Report for the period
ending December 31, 2004.
4. The Loan Parties have incurred Indebtedness permitted by the Loan Agreement.
5. Since the initial date of the Loan Agreement, the organizational structure
has been revised to reflect the addition of the businesses that have been
acquired by Stonepath within the terms permitted by the Loan Agreement.
6. Stonepath Group, Inc. has, with the consent of the Lender, guarantied the
obligations of Stonepath Holdings (Hong Kong) Limited under the Term Credit
Agreement dated October 27, 2004.
