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:
---------------------
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:
------------
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:
-----------------
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 bill
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 mark 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
<PAGE>
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
<PAGE>
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
noti
