Document:

ex10-5.htm

Exhibit 10.5

 

EXECUTION VERSION

 

FIRST AMENDMENT TO CREDIT AGREEMENT

 

           THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this “Agreement”) is dated as of April 16, 2013, by and among CAPLEASE, LP, a Delaware limited partnership, PREFCO DIX-NEUF LLC, a Connecticut limited liability company, PREFCO NINETEEN LIMITED PARTNERSHIP, a Connecticut limited partnership, CLF CANE RUN MEMBER, LLC, a Delaware limited liability company, CLF CANE RUN LOUISVILLE, LLC, a Delaware limited liability company, CLF LANDMARK OMAHA LLC, a Delaware limited liability company, CLF DODGE OMAHA LLC, a Delaware limited liability company, KDC BUSCH BOULEVARD LLC, a Delaware limited liability company, CLF 555 N DANIELS WAY LLC, a Delaware limited liability company, CLF PULCO ONE LLC, a Delaware limited liability company, and CLF PULCO TWO LLC, a Delaware limited liability company (each, a “Borrower” and collectively, the “Borrowers”), the Lenders (as defined below) party hereto, and WELLS FARGO BANK, NATIONAL ASSOCIATION, in its capacity as Administrative Agent for the Lenders (together with its successors and assigns, the “Agent”).

 

W I T N E S S E T H :

 

WHEREAS, Borrowers, the lenders party thereto (the “Lenders”), and Agent entered into that certain Credit Agreement dated as of June 29, 2012 (as amended, restated, supplemented, or otherwise modified from time to time prior to the date hereof, the “Credit Agreement”); and

 

WHEREAS, the Borrowers have requested that the Agent and the Lenders party hereto amend certain provisions of the Credit Agreement as set forth herein, and the Agent and the Lenders party hereto have agreed to such amendments, subject to the terms and conditions hereof.

 

NOW, THEREFORE, for and in consideration of the above premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto, each of the parties hereto hereby covenant and agree as follows:

 

SECTION 1.    Definitions.  Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement.  Each reference to “hereof,” “hereunder,” “herein,” and “hereby” and each other similar reference and each reference to “this Agreement” and each other similar reference contained in the Credit Agreement shall from and after the date hereof refer to the Credit Agreement as amended hereby.

 

SECTION 2.    Amendments to the Credit Agreement.  The parties hereto hereby agree that:

 

(a)           Section 1.1 of the Credit Agreement is hereby amended by amending the definitions of “Maximum Loan Availability” and “Revolving Commitment” so that each reads, in its entirety, as follows:

 

“Maximum Loan Availability” means, at any time, the lesser of (a) the aggregate of the Commitments of all the Lenders, as reduced or increased from time to time pursuant to the terms hereof, (b) the Borrowing Base, and (c) the amount, if any, by which (i) the Borrowing Base exceeds (ii) the aggregate outstanding principal amount of the Loans and the Letter of Credit Liabilities.

 

“Revolving Commitment” means, as to each Lender, such Lender’s obligation to make Revolving Loans pursuant to Section 2.1 and to issue (in the case of the Issuing Bank) and to participate (in the case of the other Lenders) in Letters of Credit pursuant to Section 2.4(i), in an amount up to, but not exceeding the amount set forth for such Lender on Schedule 1 as such Lender’s “Revolving Commitment Amount” or as set forth in any applicable Assignment and Assumption, or agreement executed by a Person becoming a Lender in accordance with Section 2.19, as the same may be reduced from time to time pursuant to Section 2.13 or increased or reduced as appropriate to reflect any assignments to or by such Lender effected in accordance with Section 13.6 or increased as appropriate to reflect any increase effected in accordance with Section 2.19.

 

  

  

  

(b)           Article II of the Credit Agreement is hereby amended by adding the following new Section 2.19:

 

Section 2.19     Increase in Revolving Commitments

 

The Borrowers shall have the right to request increases in the aggregate amount of the Revolving Commitments by providing written notice to the Administrative Agent, which notice shall be irrevocable once given; provided, however, that after giving effect to any such increases the aggregate amount of the Revolving Commitments shall not exceed $200,000,000.00.  Each such increase in the Revolving Commitments must be an aggregate minimum amount of $10,000,000 and integral multiples of $5,000,000 in excess thereof or in such other amounts as approved by Administrative Agent in its sole discretion.  The Administrative Agent, in consultation with the Borrowers, shall manage all aspects of the syndication of such increase in the Revolving Commitments, including decisions as to the selection of the existing Lenders and/or other banks, financial institutions and other institutional lenders to be approached with respect to such increase and the allocations of the increase in the Revolving Commitments among such existing Lenders and/or other banks, financial institutions and other institutional lenders.  No Lender shall be obligated in any way whatsoever to increase its Revolving Commitment or provide a new Revolving Commitment, and any new Lender becoming a party to this Agreement in connection with any such requested increase must be an Eligible Assignee.  If a new Lender becomes a party to this Agreement, or if any existing Lender is increasing its Revolving Commitment, such Lender shall on the date it becomes a Lender hereunder (or in the case of an existing Lender, increases its Revolving Commitment) (and as a condition thereto) purchase from the other Lenders its Commitment Percentage (determined with respect to the Lenders’ respective Revolving Commitments and after giving effect to the increase of the Revolving Commitments) of any outstanding Revolving Loans, by making available to the Administrative Agent for the account of such other Lenders, in same day funds, an amount equal to (A) the portion of the outstanding principal amount of such Revolving Loans to be purchased by such Lender, plus (B) the aggregate amount of payments previously made by the other Revolving Lenders under Section 2.4.(j) that have not been repaid, plus (C) interest accrued and unpaid to and as of such date on such portion of the outstanding principal amount of such Revolving Loans.  The Borrowers shall pay to the Revolving Lenders amounts payable, if any, to such Revolving Lenders under Section 5.4 as a result of the prepayment of any such Revolving Loans.  Effecting the increase of the Revolving Commitments under this Section is subject to the following conditions precedent:  (x) no Default or Event of Default shall be in existence on the effective date of such increase, (y) the representations and warranties made or deemed made by the Borrowers and each other Loan Party in any Loan Document to which any of them is a party shall be true and correct in all material respects (except in the case of a representation or warranty qualified by materiality, in which case such representation or warranty shall be true and correct in all respects) on the effective date of such increase except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and correct in all material respects (except in the case of a representation or warranty qualified by materiality, in which case such representation or warranty shall be true and correct in all respects) on and as of such earlier date) and except for changes in factual circumstances specifically and expressly permitted hereunder, and (z)  the Administrative Agent shall have received each of the following, in form and substance satisfactory to the Administrative Agent:  (i) if not previously delivered to the Administrative Agent, copies certified by the Secretary or Assistant Secretary of (A) all partnership and/or member, or other necessary action taken by the Borrowers to authorize such increase and (B) all corporate or other necessary action taken by the Guarantor authorizing the guaranty of such increase; and (ii) an opinion of counsel to the Borrowers and the Guarantor, and addressed to the Administrative Agent and the Lenders covering such matters as reasonably requested by the Administrative Agent; and (iii) new Revolving Notes executed by the Borrowers, payable to any new Revolving Lenders and replacement Revolving Notes executed by the Borrowers, payable to any existing Revolving Lenders increasing their Revolving Commitments, in the amount of such Revolving Lender’s Revolving Commitment at the time of the effectiveness of the applicable increase in the aggregate amount of the Revolving Commitments.  In connection with any increase in the aggregate amount of the Revolving Commitments pursuant to this Section 2.19 any Lender becoming a party hereto shall execute such documents and agreements as the Administrative Agent may reasonably request.

 

  

  

  

(c)           Section 7.2 of the Credit Agreement is hereby amended so that it reads, in its entirety, as follows:

 

Section 7.2 Survival of Representations and Warranties, Etc.

 

All statements contained in any certificate, financial statement or other instrument delivered by or on behalf of any Loan Party or any of their respective Subsidiaries to the Administrative Agent or any Lender pursuant to or in connection with this Agreement or any of the other Loan Documents (including, but not limited to, any such statement made in or in connection with any amendment thereto or any statement contained in any certificate, financial statement or other instrument delivered by or on behalf of any Loan Party prior to the Agreement Date and delivered to the Administrative Agent or any Lender in connection with the underwriting or closing the transactions contemplated hereby) shall constitute representations and warranties made by the Borrowers under this Agreement. All representations and warranties made under this Agreement and the other Loan Documents shall be deemed to be made at and as of the Agreement Date, the date on which any extension of the Maturity Date is effectuated pursuant to Section 2.14, the date on which any increase of the Revolving Commitments is effectuated pursuant to Section 2.19, and at and as of the date of the occurrence of each Credit Event, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and correct in all material respects (except in the case of a representation or warranty qualified by materiality, in which case such representation or warranty shall be true and correct in all respects) on and as of such earlier date) and except for changes in factual circumstances expressly and specifically permitted hereunder. All such representations and warranties shall survive the effectiveness of this Agreement, the execution and delivery of the Loan Documents and the making of the Loans and the issuance of the Letters of Credit.

  

  

  

(d)           Subclause (i) of Section 13.7(b) of the Credit Agreement is hereby amended so that it reads, in its entirety, as follows:

 

(i)           increase the Commitments of the Lenders (except for (x) any increase as a result of an assignment of Commitments permitted under Section 13.6 or (y) as provided in Section 2.19) or subject the Lenders to any additional obligations;

 

SECTION 3.     Miscellaneous.

 

(a)           Effect of Agreement.  Except as set forth expressly hereinabove, all terms of the Credit Agreement and the other Loan Documents shall be and remain in full force and effect, and shall constitute the legal, valid, binding, and enforceable obligations of the Borrowers.

 

(b)           No Novation or Mutual Departure.  Each Borrower expressly acknowledges and agrees that (i) there has not been, and this Agreement does not constitute or establish, a novation with respect to the Credit Agreement or any of the other Loan Documents, or a mutual departure from the strict terms, provisions, and conditions thereof, other than with respect to the amendments contained in Section 2 above; and (ii) nothing in this Agreement shall affect or limit the Agent’s or Lenders’ right to demand payment of liabilities owing from the Borrowers to the Agent or any Lender under, or to demand strict performance of the terms, provisions and conditions of, the Credit Agreement and the other Loan Documents, to exercise any and all rights, powers, and remedies under the Credit Agreement or the other Loan Documents or at law or in equity, or to do any and all of the foregoing, immediately at any time after the occurrence of a Default or an Event of Default under the Credit Agreement or the other Loan Documents.

 

(c)           Ratification.  Each Borrower (i) hereby restates, ratifies, and reaffirms each and every term, covenant, and condition set forth in the Credit Agreement and the other Loan Documents to which it is a party effective as of the date hereof and (ii) restates and renews each and every representation and warranty heretofore made by it in the Credit Agreement and the other Loan Documents as fully as if made on the date hereof and with specific reference to this Agreement and any other Loan Documents executed or delivered in connection herewith (except with respect to representations and warranties made as of an expressed date, in which case such representations and warranties shall be true and correct as of such date).

 

(d)           No Default.  To induce the Agent and the Lenders party hereto to enter into this Agreement and to continue to make advances pursuant to the Credit Agreement (subject to the terms and conditions thereof), each Borrower hereby acknowledges and agrees that, as of the date hereof, and after giving effect to the terms hereof, there exists (i) no Default or Event of Default and (ii) no right of offset, defense, counterclaim, claim, or objection in favor of the Borrowers or arising out of or with respect to any of the Loans or other obligations of the Borrowers owed to the Agent and the Lenders party hereto under the Credit Agreement or any other Loan Document.

 

  

  

  

(e)           Counterparts.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument.  This Agreement may be executed by each party on separate copies, which copies, when combined so as to include the signatures of all parties, shall constitute a single counterpart of the Agreement.

 

(f)           Fax or Other Transmission.  Delivery by one or more parties hereto of an executed counterpart of this Agreement via facsimile, telecopy, or other electronic method of transmission pursuant to which the signature of such party can be seen (including, without limitation, Adobe Corporation’s Portable Document Format) shall have the same force and effect as the delivery of an original executed counterpart of this Agreement.  Any party delivering an executed counterpart of this Agreement by facsimile or other electronic method of transmission shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability, or binding effect of this Agreement.

 

(g)           Recitals Incorporated Herein.  The preamble and the recitals to this Agreement are hereby incorporated herein by this reference.

 

(h)           Section References.  Section titles and references used in this Agreement shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto evidenced hereby.

 

(i)           Further Assurances.  Borrowers agree to take, at Borrowers’ expense, such further actions as the Agent shall reasonably request from time to time to evidence the amendments set forth herein and the transactions contemplated hereby.

 

(j)           Governing Law.  This Agreement shall be governed by and construed and interpreted in accordance with the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York.

 

SECTION 4.     Conditions Precedent.  This Agreement shall become effective only upon the satisfaction of the following conditions precedent:

 

(a)           Receipt by the Agent of counterparts of this Agreement duly executed by the Borrower, Lenders and the Agent.

 

(b)           Receipt by the Agent of counterparts of the Consent, Reaffirmation, and Agreement of Guarantor attached hereto duly executed by the Guarantor.

 

 [SIGNATURES ON FOLLOWING PAGES.]

 

  

  

  

IN WITNESS WHEREOF, each of the Borrowers, the Agent, and the Lenders party hereto has caused this Agreement to be duly executed by its duly authorized officer as of the day and year first above written.

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent and Lender

By:  /s/ D. Bryan Gregory                

        D. Bryan Gregory

        Director

 

  

  

  

 

“BORROWERS”

 

CAPLEASE, LP,

a Delaware limited partnership

	
By:

	
CLF OP General Partner LLC,

	
  

	
a Delaware limited liability company,

	
  

	
its general partner

	
  By:    

	
CapLease, Inc.,

	
  

	
a Maryland corporation,

	
  

	
its sole member

  By:    /s/ Robert C. Blanz                

Robert C. Blanz

Senior Vice President

PREFCO DIX-NEUF LLC,

a Connecticut limited liability company

By:  /s/ Robert C. Blanz                      

Robert C. Blanz

Senior Vice President

PREFCO NINETEEN LIMITED PARTNERSHIP,

a Connecticut limited partnership

	
By:

	
PREFCO Dix-Neuf LLC,

	
  

	
a Connecticut limited liability company,

	
  

	
its general partner

By: /s/ Robert C. Blanz                    

Robert C. Blanz

Senior Vice President

CLF CANE RUN LOUISVILLE, LLC,

a Delaware limited liability company

By:  /s/ Robert C. Blanz                             

Robert C. Blanz

Senior Vice President

CLF CANE RUN MEMBER, LLC,

a Delaware limited liability company

By:  /s/ Robert C. Blanz                           

Robert C. Blanz

Senior Vice President

  

  

  

CLF LANDMARK OMAHA LLC,

a Delaware limited liability company

 

By:  /s/ Robert C. Blanz                           

Robert C. Blanz

Senior Vice President

CLF DODGE OMAHA LLC,

a Delaware limited liability company

 

By:  /s/ Robert C. Blanz                           

Robert C. Blanz

Senior Vice President

KDC BUSCH BOULEVARD LLC,

a Delaware limited liability company

By:  /s/ Robert C. Blanz                           

Robert C. Blanz

Senior Vice President

CLF 555 N DANIELS WAY LLC,

a Delaware limited liability company

By:  /s/ Robert C. Blanz                           

Robert C. Blanz

Senior Vice President

 

CLF PULCO ONE LLC,

a Delaware limited liability company

By:  /s/ Robert C. Blanz                           

Robert C. Blanz

Senior Vice President

 

CLF PULCO TWO LLC,

a Delaware limited liability company

By:  /s/ Robert C. Blanz                           

Robert C. Blanz

Senior Vice President

  

  

  

 

CONSENT, REAFFIRMATION, AND AGREEMENT OF GUARANTOR

Guarantor (a) acknowledges receipt of the foregoing First Amendment to Credit Agreement (the “Agreement”), (b) consents to the execution and delivery of the Agreement, and (c) reaffirms all of its obligations and covenants under the (i) Guaranty (as defined in the Credit Agreement defined in the Agreement), (ii) Hazardous Materials Indemnity Agreement (as defined in the Credit Agreement defined in the Agreement), and (iii) each of the Loan Documents (as defined in the Credit Agreement defined in the Agreement) to which it is a party, and agrees that none of its obligations and covenants shall be reduced or limited by the execution and delivery of the Agreements.

 

Delivery of an executed counterpart of this consent via facsimile, telecopy, or other electronic method of transmission pursuant to which the signature of Guarantor can be seen (including, without limitation, Adobe Corporation’s Portable Document Format) shall have the same force and effect as the delivery of an original executed counterpart of this consent.  Guarantor’s delivery of an executed counterpart of this consent by facsimile or other electronic method of transmission shall be made in conjunction with Guarantor’s delivery of an original executed counterpart, but Guarantor’s failure to deliver said original executed counterpart shall not affect the validity, enforceability, or binding effect of this consent.

 

 

“GUARANTOR”

 

CAPLEASE, INC.,

a Maryland corporation,

By:  /s/ Robert C. Blanz                           

Robert C. Blanz

Senior Vice Presidentex4-3.htm

Exhibit 4.3

 

 

THIS SECURED DEBENTURE, AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE (COLLECTIVELY, THE "SECURITIES"), HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO REGULATION D OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND THE COMPANY WILL BE PROVIDED WITH OPINION OF COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH EXEMPTIONS ARE AVAILABLE. FURTHER HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT.

POWER2SHIP, INC.

SERIES B

5% SECURED CONVERTIBLE DEBENTURE

JUNE 28, 2004

                                              $1,000,000

This Secured  Debenture (the "Debenture") is issued by POWER2SHIP, INC., a Nevada  corporation  (the  "Company"), to CORNELL CAPITAL PARTNERS, LP (together with  its permitted successors and assigns, the "Holder") pursuant to exemptions from  registration  under  the  Securities  Act  of  1933,  as  amended.

ARTICLE I.

Section  1.01     PRINCIPAL  AND INTEREST.  For value received, on June 28, 2004  (the  "Closing  Date"), the Company hereby promises to pay to the order of the  Holder on June 28, 2006 in lawful money of the United States of America and in  immediately  available  funds  the  principal  sum  of  One  Million Dollars ($1,000,000),  together  with interest on the unpaid principal of this Debenture at  the  rate  of five percent (5%) per year (computed on the basis of a 365-day year  and  the  actual days elapsed) from the date of this Debenture until paid. At  the  Company's  option, the entire principal amount and all accrued interest shall  be either (a) paid to the Holder on the second (2nd) anniversary from the date  hereof  or  (b) converted in accordance with Section 1.02 herein provided, however, that in no event shall the Holder be entitled to convert this Debenture for  a  number  of  shares of Common Stock in excess of that number of shares of Common  Stock  which,  upon  giving  effect  to such conversion, would cause the aggregate  number of shares of Common Stock beneficially owned by the Holder and its  affiliates  to  exceed  4.99% of the outstanding shares of the Common Stock following  such  conversion.

Section 1.02    OPTIONAL CONVERSION. The Holder is entitled, at its option, to  convert,  and sell on the same day, at any time and from time to time, until payment  in  full  of this Debenture, all or any part of the principal amount of the  Debenture  into  shares  (the  "Conversion Shares") of the Company's common stock,  par value $0.001 per share ("Common Stock"), at the price per share (the "Conversion  Price")  equal  to the lesser of (a) an amount equal to one hundred  twenty  percent (120%) of the closing bid price of the Common Stock as listed on a  Principal  Market  (as  defined  herein),  as  quoted  by Bloomberg L.P. (the "Closing  Bid  Price") as of the Closing Date, or (b) an amount equal to 100% of the  average  of  the  three lowest Closing Bid Prices (the "Closing Bid Price") Stock,  as quoted by Bloomberg, LP, for the thirty (30) trading days immediately preceding  the  Conversion  Date (as defined herein).  Subparagraphs (a) and (b) above are individually referred to as a "Conversion Price".  As used herein, "Principal  Market"  shall  mean  The National Association of Securities Dealers Inc.'s  Over-The-Counter  Bulletin  Board,  Nasdaq  SmallCap Market, or American Stock  Exchange.  If the Common Stock is not traded on a Principal Market, the Closing Bid  Price  shall  mean,  the reported Closing Bid Price for the Common Stock, as furnished by the National Association of Securities Dealers, Inc., for the  applicable  periods.  No fraction of shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share.  To convert this Debenture, the Holder hereof  shall  deliver  written  notice  thereof,  substantially  in the form of Exhibit  "A"  to  this  Debenture,  with appropriate insertions (the "Conversion Notice"),  to  the  Company  at  its address as set forth herein.  The date upon which  the conversion shall be effective (the "Conversion Date") shall be deemed to  be  the  date  set  forth  in  the  Conversion  Notice.

  

  

  

Section  1.03     RESERVATION  OF  COMMON  STOCK. The Company shall reserve and  keep  available  out of its authorized but unissued shares of Common Stock, solely  for  the  purpose  of  effecting  the conversion of this Debenture, such number  of  shares  of  Common Stock as shall from time to time be sufficient to effect  such  conversion,  based  upon  the Conversion Price. If at any time the Company  does  not  have a sufficient number of Conversion Shares authorized and available,  then  the  Company  shall  call  and  hold  a special meeting of its stockholders  within  sixty  (60)  days  of  that  time  for the sole purpose of increasing  the  number  of  authorized  shares  of  Common  Stock.

Section  1.04     RIGHT OF REDEMPTION. The Company at its option shall have the right to redeem, with three (3) business days advance written notice (the "Redemption Notice"),  a  portion,  or  all,  of the outstanding Debenture. The redemption  price  shall  be  one  hundred  twenty  percent (120%) of the amount redeemed  plus  accrued  interest  unless  the  Redemption is consummated within thirty (30) days of the Closing Date in which case the redemption price shall be one  hundred  ten  percent  (110%) of the amount redeemed plus accrued interest.

In  the event the Company exercises a redemption of either all or a portionthe  Debenture,  the Holder shall receive a warrant to purchase 35,000 shares of the  Company's  Common  Stock  for  every  One  Hundred  Thousand  U.S.  Dollars (US$100,000) redeemed, pro rata (the "Warrant").  The Warrant shall be exercisable on  a  "cash  basis"  and have an exercise price of one hundred and twenty percent (120%) of the Closing Bid Price of the Company's Common Stock on the  Closing  Date.  The Warrant shall have "piggy-back" and demand registration rights  and  shall  survive  for  two  (2)  years  from  the  Closing  Date.

Section 1.05     REGISTRATION RIGHTS.  The Company is obligated to register the  resale  of  the  Conversion  Shares  under  the  Securities Act of 1933, as amended,  pursuant  to the terms of a Registration Rights Agreement, between the Company  and the Holder of even date herewith (the "Investor Registration Rights Agreement").

Section 1.06     INTEREST PAYMENTS. The interest so payable will be paid at the  time of maturity, redemption or conversion to the person in whose name this Debenture  is  registered. At the time such interest is payable, the Company, in its sole discretion, may elect to pay the interest in cash (via wire transfer or certified  funds)  or  in  the form of Common Stock. In the event of default, as described  in  Article III Section 3.01 hereunder, the Holder may elect that the interest  be  paid in cash (via wire transfer or certified funds) or in the form of  Common Stock. If paid in the form of Common Stock, the amount of stock to be issued  will  be  calculated  as  follows:  the  value of the stock shall be the Closing  Bid  Price on: (i) the date the interest payment is due; or (ii) if the interest  payment is not made when due, the date the interest payment is made. A number  of  shares  of Common Stock with a value equal to the amount of interest due  shall  be  issued.  No  fractional shares will be issued; therefore, in the event  that  the  value  of  the Common Stock per share does not equal the total interest  due,  the  Company  will  pay  the  balance  in  cash.

Section 1.07    PAYING AGENT AND REGISTRAR. Initially, the Company will act as  paying  agent  and  registrar.  The  Company  may  change  any paying agent, registrar,  or  Company-registrar  by  giving  the Holder not less than ten (10) business  days'  written  notice  of its election to do so, specifying the name, address, telephone number and facsimile number of the paying agent or registrar. The  Company  may  act  in  any  such  capacity.

 

  

  

  

Section  1.08     SECURED NATURE OF DEBENTURE. This Debenture is secured by all  of  the assets and property of the Company and its wholly owned subsidiary, all as more particularly described in those two Security Agreements of even date herewith  (collectively,  the  "Security  Agreements").

ARTICLE II.

Section  2.01     AMENDMENTS  AND WAIVER OF DEFAULT.  The Debenture may not be amended. Notwithstanding the above, without the consent of the Holder, the Debenture may  be amended to cure any ambiguity, defect or inconsistency, or to provide  for  assumption  of  the  Company  obligations  to  the  Holder.

 

ARTICLE III.

Section  3.01     EVENTS  OF  DEFAULT.  An Event  of Default is defined as follows:  (a) failure by the Company to pay amounts due hereunder within fifteen (15)  days of the date of maturity of this Debenture; (b) failure by the Company to comply with the terms of the Irrevocable Transfer Agent Instructions attached to  the  Securities  Purchase  Agreement;  (c) failure by the Company's transfer agent  to  issue  freely  tradeable  Common  Stock to the Holder within five (5) business days of the Company's receipt of the attached Notice of Conversion from Holder; (d) failure by the Company for ten (10) business days after notice to it to  comply  with  any  of  its  other agreements in the Debenture; (e) events of bankruptcy  or  insolvency; (f) a breach by the Company of its obligations under the  Securities Purchase Agreement or the Investor Registration Rights Agreement which is not cured by the Company within ten (10) business days after receipt of written  notice thereof.  Upon the occurrence of an Event of Default, the Holder may,  in  its  sole  discretion,  accelerate  full  repayment  of all Debentures outstanding and accrued interest thereon or may, notwithstanding any limitations contained  in  this Debenture and/or the Securities Purchase Agreement dated the date  hereof  between  the  Company  and  Cornell  Capital  Partners,  L.P. (the "Securities Purchase Agreement"), convert all Debentures outstanding and accrued interest  thereon  into  shares of Common Stock pursuant to Section 1.02 herein.

Section  3.02    FAILURE TO  ISSUE  UNRESTRICTED COMMON STOCK. As indicated in  Article  III  Section 3.01, a breach by the Company of its obligations under the  Investor Registration Rights Agreement shall be deemed an Event of Default, which  if  not  cured within ten (10) business days, shall entitle the Holder to accelerate  full  repayment  of  all Debentures outstanding and accrued interest thereon  or,  notwithstanding any limitations contained in this Debenture and/or the  Securities  Purchase  Agreement,  to convert all Debentures outstanding and accrued  interest  thereon  into shares of Common Stock pursuant to Section 1.02 herein.  The Company  acknowledges that failure to honor a Notice of Conversion shall  cause  irreparable  harm  to  the  Holder.

ARTICLE IV.

Section  4.01     RIGHTS AND TERMS OF CONVERSION.  This Debenture, in whole or in part, may be converted at any time following the Closing Date, into shares of Common Stock at a price equal to the Conversion Price as described in Section 1.02  above.

Section  4.02     RE-ISSUANCE OF DEBENTURE. When the Holder elects to convert  a  part  of  the  Debenture  or  the  Company  redeems a portion of the Debenture,  then  the  Company shall reissue a new Debenture in the same form as this  Debenture  to  reflect  the  new  principal  amount.

Section  4.03     TERMINATION  OF  CONVERSION  RIGHTS.  The Holder's  right to convert the Debenture into the Common Stock in accordance with paragraph 4.01 shall  terminate  on the date that is the second (2nd) anniversary from the date hereof  and  this  Debenture  shall  be  automatically converted on that date in accordance  with  the  formula  set  forth  in  Section  4.01  hereof,  and  the appropriate shares of Common Stock and amount of interest shall be issued to the Holder.

 

  

  

  

ARTICLE V.

Section 5.01     ANTI-DILUTION.  In the event that the Company shall at any time  subdivide  the  outstanding shares of Common Stock, or shall issue a stock dividend  on  the  outstanding  Common  Stock,  the  Conversion  Price in effect immediately  prior to such subdivision or the issuance of such dividend shall be proportionately  decreased,  and in the event that the Company shall at any time combine  the  outstanding shares of Common Stock, the Conversion Price in effect immediately  prior  to  such  combination  shall  be  proportionately increased, effective  at the close of business on the date of such subdivision, dividend or combination  as  the  case  may  be.

Section  5.02     CONSENT  OF  HOLDER  TO  SELL  CAPITAL STOCK OR GRANT SECURITY INTERESTS.  Except  for the Standby Equity Distribution Agreement dated the date hereof between the Company and Cornell Capital Partners, LP, so long as any  of  the  principal  of  or  interest  on  this Debenture remains unpaid and unconverted,  the  Company  shall  not, without the prior consent of the Holder, issue  or  sell (i) any Common Stock or Preferred Stock without consideration or for  a  consideration  per  share  less  than  its  fair market value determined immediately  prior  to  its  issuance,  (ii)  issue or sell any Preferred Stock, warrant, option, right, contract, call, or other security or instrument granting the  holder  thereof  the right to acquire Common Stock without consideration or for  a  consideration  per share less than such Common Stock's fair market value determined  immediately  prior  to  its  issuance, (iii) enter into any security instrument  granting  the holder a security interest in any of the assets of the Company,  except that the Company may grant a security interest to a lender that provides  purchase money financing for inventory and equipment and such security interest  relates  solely  to the inventory and equipment so purchased, or (iv) file  any  registration  statement  on  Form  S-8.

ARTICLE VI.

Section 6.01     NOTICE.  Notices regarding this Debenture shall be sent to the  parties  at  the  following  addresses,  unless  a party notifies the other parties,  in  writing,  of  a  change  of  address:

If to the Company, to:                 Power2Ship, Inc.

903 Clint Moore Road

Boca Raton, Florida 33487

Attention: Richard Hersh, Chief Executive Officer

Telephone: (561) 998-7557

Facsimile: (561) 998-7821

 

With a copy to:                            Schneider Weinberger LLP

2200 Corporate Boulevard, N.W., Suite 210

Boca Raton, Florida 33431

Attention: James M. Schneider, Esquire

Telephone: (561) 362-9595

Facsimile: (561) 362-9612

 

If to the Holder:                            Cornell Capital Partners, LP

101 Hudson Street - Suite 3700

Jersey City, NJ 07302

Attention: Mark A. Angelo

Portfolio Manager

Telephone: (201) 985-8300

Facsimile: (201) 985-8266

 

With a copy to:                            Cornell Capital Partners, LP

101 Hudson Street - Suite 3700

Jersey City, NJ 07302

Attention: Troy J. Rillo

Senior Vice President

Telephone: (201) 985-8300

Facsimile: (201) 985-8266

  

  

  

Section  6.02     GOVERNING LAW.  This Debenture shall be deemed to be made under  and  shall  be  construed in accordance with the laws of the State of New Jersey  without  giving  effect  to  the principals of conflict of laws thereof. Each  of  the  parties  consents  to the jurisdiction of the U.S. District Court sitting  in  the  District of the State of New Jersey or the state courts of the State  of New Jersey sitting in Hudson County, New Jersey in connection with any dispute  arising  under  this Debenture and hereby waives, to the maximum extent permitted  by  law,  any  objection,  including any objection based on forum non conveniens  to  the  bringing  of  any  such  proceeding  in such jurisdictions.

Section  6.03     SEVERABILITY.  The invalidity of any of the provisions of this  Debenture  shall  not  invalidate  or  otherwise  affect  any of the other provisions  of  this  Debenture,  which  shall  remain in full force and effect.

Section 6.04     ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the  entire  agreement  between  the  parties hereto with respect to the subject matter  hereof  and  there  are  no  representations, warranties or commitments, except  as set forth herein. This Debenture may be amended only by an instrument in  writing  executed  by  the  parties  hereto.

Section  6.05     COUNTERPARTS.  This Debenture may be executed in multiple counterparts,  each  of  which  shall  be an original, but all of which shall be deemed  to  constitute  on  instrument.

IN WITNESS WHEREOF, with the intent to be legally bound hereby, the Company as  executed  this  Debenture  as  of  the  date  first  written  above.

	 	POWER2SHIP, INC.	 
	 	 	 	 
	 	
By: 

	/s/ Richard Hersh	 
	 	Name:	Richard Hersh	 
	 	Title:	Chief Executive Officer	 

 

 

 

 

 

EXHIBIT "A"

NOTICE OF CONVERSION

        (TO BE EXECUTED BY THE HOLDER IN ORDER TO CONVERT THE DEBENTURE)

TO:

The  undersigned  hereby  irrevocably  elects  to  convert  US$__________ of  the  principal amount of the above Debenture into Shares of Common Stock of Power2Ship,  Inc.,  according  to  the  conditions  stated  therein,  as  of the Conversion  Date  written  below.

 

	CONVERSION DATE:	 	 	 
	 	 	 	 
	APPLICABLE CONVERSION PRICE:	 	 	 
	 	 	 	 
	SIGNATURE: 	 	 	 
	 	 	 	 
	NAME:	 	 	 
	 	 	 	 
	ADDRESS: 	 	 	 
	 	 	 	 
	AMOUNT TO BE CONVERTED:	US$	 	 
	 	 	 	 
	

AMOUNT OF DEBENTURE UNCONVERTED: 

	US$	 	 
	 	 	 	 
	

CONVERSION PRICE PER SHARE: 

	US$	 	 
	 	 	 	 
	

NUMBER OF SHARES OF COMMON STOCK TO BE ISSUED:

	 	 	 
	 	 	 	 
	

PLEASE ISSUE THE SHARES OF COMMON STOCK IN THE FOLLOWING 

NAME AND TO THE FOLLOWING ADDRESS:

	 	 	 
	 	 	 	 
	ISSUE TO: 	 	 	 
	 	 	 	 
	AUTHORIZED SIGNATURE:	 	 	 
	 	 	 	 
	

NAME: 

	 	 	 
	 	 	 	 
	TITLE:	 	 	 
	 	 	 	 
	PHONE NUMBER:	 	 	 
	 	 	 	 
	BROKER DTC PARTICIPANT CODE:	 	 	 
	 	 	 	 
	ACCOUNT NUMBER:

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