RESTATED AND AMENDED
ACCOUNTS RECEIVABLE MANAGEMENT
AND SECURITY AGREEMENT
This Restated and Amended Accounts Receivable Management and Security Agreement
is made as of March 23, 1998 by and between BNY FINANCIAL CORPORATION
("Lender"), having offices at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ and World Airways, Inc. ("Borrower"), having its principal office of
business at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, #▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. This Restated and
Amended Accounts Receivable Management and Security Agreement restates, amends
and replaces in its entirety without break-in-continuity, that certain Accounts
Receivable Management and Security Agreement in effect between the parties
hereto dated December 7, 1993, as amended and supplemented from time to time
(the "Original Agreement").
WHEREAS, the Borrower has requested that Lender make loans and advances
available to Borrower; and
WHEREAS, Lender has agreed to make such loans and advances to Borrower, as
Borrower's sole Lender, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings and
the terms and conditions contained herein, the parties hereto agree as follows:
1. (A) General Definitions. When used in this Agreement the following terms
shall have the following meanings:
"Advance Rates" means the Receivables Advance Rate and the Spare Parts Inventory
Advance Rate.
"Affiliate" of any Person means (a) any Person (other than a Subsidiary) which,
directly or indirectly, is in control of, is controlled by, or is under common
control with such Person, or (b) any Person who is a director or officer (i) of
such Person, (ii) of any Subsidiary of such Person or (iii) of any Person
described in clause (a) above. For purposes of this definition, control of a
Person shall mean the power, direct or indirect, (i) to vote 5% or more of the
securities having ordinary voting power for the election of directors of such
Person, or (ii) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
"Aircraft" means all aircraft owned by Borrower, whether characterized as
Inventory or Equipment, together with all assets and properties of the Borrower
installed in, affixed to, customarily kept within or used in connection with
such aircraft, whether now existing or hereafter acquired or created, wherever
located and whether or not affixed thereto, including (without limitations all
accessions, accessories, additions, air frame components, appliances,
attachments, Avionics, engines, equipment, fixtures, furnishings, instruments,
log books, flyaway kits, maintenance records, manuals, parts and replacements.
"Aircraft Lease" means each and every current or future lease, rental agreement
or other arrangement by which any Aircraft is used by anyone other than the
Borrower, if any, as the same may be renewed, modified, amended or restated from
time to time in the manner provided therein.
"Aircraft Parts Security Agreement" means the security agreement executed by
Borrower in favor of Lender with respect to the Spare Parts Inventory dated
December 7, 1993.
"Alternate Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Rate in
effect on such day plus 1/2 of 1%.
"Alternate Base Rate Loan" shall mean any interest bearing Obligations at any
time bearing interest based on the Alternate Base Rate.
"Alternate Base Rate Margin" means (i) zero percent (0%) with respect to
outstanding Revolving Credit Advances (other than Spare Part Inventory
Advances); and (ii) one-half of one percent (.5%) with respect to outstanding
Spare Parts Inventory Advances.
"Ancillary Agreements" means all agreements, instruments, and documents
including, without limitation, the mortgages, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, trust
agreements, the Letter of Credit Supplement Agreement, (including but not
limited to any such documents executed, in effect or relating to the Original
Agreement, ((other than specific amendments to the original Agreement))),
whether heretofore, concurrently, or hereafter executed by or on behalf of
Borrower or delivered to Lender, relating to this Agreement or to the
transactions contemplated by this Agreement.
"Applicable Sublimits" means the Spare Parts Inventory Sublimit and/or the
Letter of Credit Sublimit.
"Average-Monthly LIBOR Rate" means, as to any one interest period, the average
one month LIBOR as published in The Wall Street Journal over the course of such
one month period.
"Avionics" means any and all communication, computing, navigation, radar and
other electronic equipment installed in, affixed or appurtenant to, customarily
kept within or used or delivered for use in connection with any Aircraft,
whether now existing or hereafter or created, wherever located and whether or
not affixed thereto, including (without limitation) the equipment listed on
Schedule (B) hereto.
"Bank" means The Bank of New York.
"Business Day" means any day other than a day on which commercial banks in New
York are authorized or required by law to close.
"Change of Ownership" means (a) any transfer (whether in one or more
transactions) of ownership of not less than 50% of the common stock of Borrower
held by the Original Owners (including for the purposes of the calculation of
percentage ownership, any shares of common stock into which any capital stock of
Borrower held by any of the Original Owners is convertible or for which any such
shares of the capital stock of Borrower or of any other Person may be exchanged
and any shares of common stock issuable to such Original Owners upon exercise of
any warrants, options or similar rights which may at the time of calculation be
held by such Original Owners) to a Person who is neither an original owner nor
an Affiliate of an original owner or (b) any merger, consolidation or sale of
substantially all of the property or assets of Borrower; provided however, that
it shall not be deemed to be a Change of Ownership if a transfer of capital
stock is made, if after such transfer, the Original Owner retains a material
interest (not to be less than 27% of all outstanding voting capital stock
("Material Ownership")) and the other shares of such capital stock were sold to
the general public and no one owner or affiliated group of owners, (other than
an airline existing under the laws of the United States with its shares listed
on the New York Stock Exchange or the American Stock Exchange or any other
entity acceptable to Lender) of such transferred shares of capital stock owns a
block of shares equal to or larger than the amount of shares retained by the
Original Owner.
"Closing Date" means March ___ , 1998 or such other date as may be agreed upon
by the parties hereto.
"Collateral" means and includes all presently owned or hereafter acquired:
(A) all inventory (including Spare Parts Inventory);
(B) all Equipment;
(C) all General Intangibles;
(D) all Receivables;
(E) all Aircraft (excluding any Aircraft listed on Exhibit X hereof);
(F) all Aircraft Leases;
(G) all books, records, ledger cards, files, correspondence, computer programs,
tapes, disks and related data processing software (owned by Borrower or in which
it has an interest) which at any time evidence or contain information relating
to (A), (B), (C) (D), (E) and (F) above or are otherwise necessary or helpful in
the collection thereof or realization thereupon;
(H) documents of title, policies and certificates of insurance, securities,
chattel paper, other documents or instruments evidencing or pertaining to (A),
(B), (C), (D), (E), (F) and (G) above;
(I) all guaranties, liens on real or personal property, leases, and other
agreements (including but not limited to any contract rights) and property which
in any way secure or relate to (A), (B), (C), (D), (E), (F), (G) and (H) above,
or are acquired for the purpose of securing and enforcing any item thereof;
(J) (i) all cash held by Lender or its parent, subsidiaries or affiliates as
cash collateral to the extent not otherwise constituting Collateral, all other
cash or property at any time on deposit with or held by Lender for the account
of Borrower (whether for safekeeping, custody, pledge, transmission or
otherwise), (ii) all present or future deposit accounts (whether time or demand
or interest or non-interest bearing) of Borrower with Lender or its parent,
subsidiaries, or affiliates including those to which any such cash may at any
time and from time to time be credited, (iii) all investments and reinvestments
(however evidenced) of amounts from time to time credited to such accounts, and
(iv) all interest, dividends, distributions and other proceeds payable on or
with respect to (x) such investments and reinvestments and (y) such accounts;
and
(K) all products and proceeds of (A), (B), (C), (D), (E), (F), (G), (H), (I) and
(J) above (including, but not limited to, all claims to items referred to in
(A), (B), (C), (D), (E), (F), (G), (H), (I) and (J) above) and all claims of
Borrower against third parties (x) for (i) loss of, damage to, or destruction
of, and (ii) payments due or to become due under leases, rentals and hires of,
any or all of (A), (B), (C), (D), (E), (F), (G), (H), (I) and (J) above and (y)
proceeds payable under, or unearned premiums with respect to policies of
insurance in whatever form.
"Contingent Event of Default" means any act or event, which, with the giving of
notice or passage of time or both, would constitute an Event of Default.
"Contract Rate" means an interest rate per annum equal to the (i) Alternate Base
Rate plus (ii) the Alternate Base Rate Margin or (i) LIBOR Rate plus (ii) the
LIBOR Rate Margin, respectively.
"Credit Risk" means the risk of loss resulting solely and exclusively from a
Customer's financial inability to pay at maturity with respect to any Receivable
purchased hereunder.
"Customer" means and includes the account debtor with respect to any Receivable
and/or the prospective purchaser of goods, services or both with respect to any
contract or contract right, and/or any party who enters into or proposes to
enter into any contract or other arrangement with Borrower, pursuant to which
Borrower is to deliver any personal property or perform any services.
"Debt Coverage Ratio" means the ratio obtained by dividing EBITDA by an amount
equal to all interest expenses plus scheduled debt payments due and payable for
the period of such calculation.
"Default Rate" means an interest rate per annum equal to (i) the Contract Rate
plus (ii) two (2%) percent.
"Dissolute" means any cause asserted for nonpayment of Receivables, including,
without limitation, any alleged defense, counterclaim, offset, dispute or other
claim (real or merely asserted) whether arising from or relating to the sale of
goods or rendition of services or arising from or relating to any other
transaction or occurrence.
"Early Termination Fee" shall mean $250,000 during the first year of the Term,
$100,000 during the second year of the Term and $50,000 during the third year.
"Eligible Inventory" means Spare Parts Inventory presently consisting of DC-10,
MD-11 and aircraft parts (including but not limited to any Fly Away Kits), which
Lender, in its sole discretion, commercially reasonably applied, determines: (a)
is subject to the security interest of Lender and is subject to no other liens
or encumbrances whatsoever (other than Permitted Liens except Liens listed on
Schedule D); (b) is in good condition and meets all standards imposed by any
governmental agency, or department or division thereof having regulatory
authority over such Inventory, its use or sale including but not limited to the
Federal Fair Labor Standards Act of 1938 as amended, and all rules, regulations
and orders thereunder; (c) is currently either usable or salable in the normal
course of Borrower's business; (d) is not located in
Malaysia; and (e) is not determined to be ineligible for any other reason.
"Eligible Receivables" means and includes each Receivable which conforms to the
following criteria: (a) shipment of the merchandise or the rendition of services
has been completed; (b) no return, rejection or repossession of the merchandise
has occurred; (c) merchandise or services shall not have been rejected or
disputed by the Customer and there shall not have been asserted any offset,
defense, counterclaim, or Dispute; (d) such Receivable continues to be in full
conformity with the representations and warranties made by Borrower to Lender
with respect thereto; (e) Lender is, and continues to be, satisfied with the
credit standing of the Customer in relation to the amount of credit extended,
(f) such Receivable is documented by an invoice in the form of Exhibit Y hereto
or in such other form as is approved by Lender and shall not be unpaid more than
(i) ninety (90) days from invoice date or (ii) sixty (60) days from due date;
(g) less than 50% of the unpaid amount of invoices due from such Customer
remains unpaid more than sixty (60) days from due date; (h) such Receivable is
not evidenced by chattel paper or an instrument of any kind with respect to or
in payment of such Receivable unless such instrument is duly endorsed to and in
possession of Lender or represents a check in payment of a Receivable; (i) such
Receivable is not subject to any lien, other than Permitted liens; (j) such
Receivable does not arise out of transactions with any employee, officer, agent,
director, stockholder or Affiliate of Borrower, provided however that subject to
any limits which may be imposed by the Lender in its sole discretion,
Receivables outstanding at any time arising from arms-length transactions with
Malaysian Airlines may be eligible if such Receivables meet all other criteria
set forth herein; (k) such Receivable is payable to Borrower; (l) such
Receivable does not arise out of a billing prior to rendering of services and,
if the Receivable arises out of a sale to any Person to which Borrower is
indebted, the amount of such indebtedness, and any anticipated indebtedness, is
deducted in determining the face amount of such Receivable; (m) such Receivable
is net of any returns, discounts, claims, credits and allowances; (n) if the
Receivable arises out of contracts between Borrower and the United States, any
state, or any department, agency or instrumentality of any of them, Borrower has
so notified Lender, and, if Lender so requests, there has been compliance with
any governmental notice or approval requirements, including without limitation,
compliance with the Federal Assignment of Claims Act; (o) such Receivable is a
good and valid account representing an undisputed bona fide indebtedness
incurred by the Customer therein named, for a fixed sum as set forth in the
invoice relating thereto with respect to an unconditional sale and delivery upon
the stated terms of goods sold by Borrower, or work, labor and/or services
rendered by Borrower; and (p) Receivables from International Lease Finance
Company or GATX Inc. which are acceptable to Lender, in its sole discretion
provided there is a no-offset letter in effect with respect to either such
party); and (q) such Receivable is otherwise satisfactory to Lender as
determined in good faith by Lender in its reasonable credit judgment.
"Environmental Complaint" shall have the meaning set forth in Section 12(e)(3).
"Equipment" means and includes all of Borrower's now owned or hereafter acquired
equipment, machinery and goods (excluding Inventory), whether or not
constituting fixtures, including, without limitation: plant and office
equipment, tools dies, parts, data processing equipment, furniture and trade
fixtures, trucks, trailers, loaders and other vehicles and all replacements and
substitutions therefore and all accessions thereto, but Equipment shall exclude
everything listed on Exhibit X.
"Equity Infusion" means any equity cash infusion whereby cash will be exchanged
for the common stock of the Borrower.
"ERISA" shall have the meaning set forth in Section 12 (f) .
"Event of Default" means the occurrence of any of the events and the expiration
of the related grace period, if any, set forth in Section 18.
"FAA" means the United States Federal Aviation Administration, the Administrator
thereof and any agency or instrumentality of the Federal government of the
United States succeeding to their functions.
"Federal Aviation Act" means the Federal Aviation Act of 1958, as amended, or
any subsequent legislation that amends, supplements or supersedes the Federal
Aviation Act and any reference to a provision or provisions of such Act shall
also mean and refer to any successor provisions, however designated or
distributed.
"Federal Funds Rate" means, for any day, the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such day (or if such day is
not a Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York, or if such rate is not so published for any day which is a
Business Day, the average of quotations for such day on such transactions
received by the Bank from three Federal funds brokers of recognized standing
selected by the Bank.
"Formula Amount" shall have the meaning set forth in paragraph 2 (d) .
"GAAP" means generally accepted accounting principles, practices and procedures
in effect from time to time.
"General Intangibles" means and includes all of Borrower's now owned or
hereafter acquired general intangibles as said term is defined in the Uniform
Commercial Code in effect in the State of New York including, without
limitation, trademarks, trade names, tradestyles, trade secrets, equipment
formulation, manufacturing procedures, quality control procedures, product
specifications, patents, patent applications, copyrights, registrations,
contract rights, choses in action, causes of action, corporate or other business
records, inventions, designs, goodwill, claims under guarantees, licenses,
franchises, tax refunds, tax refund claims, computer programs, computer data
bases, computer program flow diagrams, source codes, object codes and all other
intangible property of every kind and nature, but General Intangibles shall
exclude everything listed on Exhibit X.
"Hazardous Discharge" shall have the meaning set forth in Section 12(e)(iii).
"Hazardous Substance" means, without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated byphenyls, petroleum and petroleum products, methane, hazardous
materials, hazardous wastes, hazardous or toxic substances or related materials
as defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49
U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of the New York State
Environmental Conservation Law or any other applicable Environmental Law and in
the regulations adopted pursuant thereto.
"Indebtedness" of a Person at a particular date shall mean all obligations of
such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise) and
in any event, without limitation by reason of enumeration, shall include all
indebtedness (whether installment, serial maturity, sinking fund payment or
otherwise), debt and other similar monetary obligations of such Person whether
direct or guaranteed, and all premiums, if any, due at the required prepayment
dates of such indebtedness, and all indebtedness secured by a Lien on assets
owned by such Person, whether or not such indebtedness actually shall have been
created, assumed or incurred by such Person. Any indebtedness of such Person
resulting from the acquisition by such Person of any assets subject to any Lien
shall be deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the indebtedness secured thereby, whether or not
actually so created, assumed or incurred.
"Inventory" means and includes all of Borrower's now owned or hereafter acquired
goods, merchandise and other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials and supplies of any
kind, nature or description which are or might be used or consumed in Borrower's
business or used in selling or furnishing such goods, merchandise and other
personal property, and all documents of title or other documents representing
them but Inventory shall exclude everything listed on Exhibit X.
"Lien" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien, charge, claim or encumbrance, or
preference, priority or other security agreement or preferential arrangement in
respect of any asset of any kind or nature whatsoever including, without
limitation, any conditional sale or other title retention agreement, any lease
having substantially the same economic effect as any of the foregoing, and the
filing of, or agreement to give, any financing statement under the Uniform
Commercial Code or comparable law any jurisdiction.
"Letter(s) of Credit" means all letters of credit issued or facilitated by the
Lender for the account of the Borrower pursuant to the terms of the Letter of
Credit Agreement
"Letter of Credit Agreement" means the letter of credit financing supplement to
this agreement dated of even date with this agreement as such agreement may
hereafter be amended, modified, supplemented, extended, renewed or replaced.
"Letter of Credit Sublimit" means the aggregate of all face amounts due under
Letters of Credit issued under or in connection with the Letter of Credit
Agreement, not to exceed at any one time, a maximum aggregate amount of
$4,000,000.
"LIBOR Rate" means for each month the rate per annum equal to the Average
Monthly LIBOR Rate in effect during such month. Whenever subsequent to the date
hereof, the average monthly LIBOR Rate is increased or decreased, the LIBOR Rate
shall similarly be changed without notice or demand of any kind, by an equal
amount in such change in the Average Monthly LIBOR Rate during the time such
changes remain in effect.
"LIBOR Rate Loan" shall mean any interest bearing Obligations at any time
bearing interest based on the LIBOR Rate.
"LIBOR Rate Margin" means (i) two and one-half percent (2.5%) with respect to
outstanding Revolving Credit Advances (other than Spare Part Inventory
Advances); and (ii) three percent (3%) with respect to outstanding Spare Parts
Inventory Advances.
"Loans" means the Revolving Credit Advances, Spare Parts Inventory Advances and
all other extensions of credit hereunder.
"Matured Funds" means collected funds in excess of any outstanding Obligations
under this Agreement.
"Matured Funds Rate" means the rate of interest, announced by Lender from time
to time, as the rate applicable to matured funds, such rate to be adjusted
automatically on the effective date of any change in such rate as announced by
Lender.
"Maximum Revolving Amount" means $25,000,000.00 .
"Net Face Amount" of Receivables means the gross face invoice amount thereof,
less returns, discounts (the calculation of which shall be determined by Lender
where optional terms are given), or any other unilateral deductions taken by
Customers, and credits and allowances to Customers of any nature.
"Net Worth" at a particular date means (a) the aggregate amount of all assets of
Borrower as may be properly classified as such in accordance with GAAP
consistently applied less (b) the aggregate amount of all liabilities of the
Borrower as may be properly classified as such in accordance with GAAP
consistently applied.
"Obligations" means and includes all Loans, all advances, debts, liabilities,
obligations, covenants and duties owing by Borrower to Lender (or any
corporation that directly or indirectly controls or is controlled by or is under
common control with Lender) of every kind and description (whether or not
evidenced by any note or other instrument and whether or not for the payment of
money or the performance or non-performance of any act), direct or indirect,
absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, whether existing by operation of law or otherwise
now existing or hereafter arising including, without limitation, any debt,
liability or obligation owing from Borrower to others which Lender may have
obtained by assignment or otherwise and further including, without limitation,
all interest, charges or any other payments Borrower is required to make by law
or otherwise arising under or as a result of this Agreement and the Ancillary
Agreements, together with all reasonable expenses and reasonable attorneys' fees
chargeable to Borrower's account or incurred by Lender in connection with
Borrower's account whether provided for herein or in any Ancillary Agreement.
"Orderly Liquidation Value" shall mean 72.5% of the fair market value of
Borrower's Eligible Inventory.
"Original Owners" means WorldCorp, Inc.
"Overadvance Rate" means a rate equal to one-half percent (1/2%) per annum in
excess of the Contract Rate.
"Permitted Liens" means (i) liens of carriers, warehousemen, mechanics and
materialmen incurred in the ordinary course of business securing sums (a) not
overdue or (b) being diligently contested in good faith provided that adequate
reserves with respect thereto are maintained on the books of Borrower in
conformity with GAAP,; (ii) liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, relating to employees, securing sums (a) not
overdue or (b) being diligently contested in good faith provided that adequate
reserves with respect thereto are maintained on the books of Borrower in
conformity with GAAP, (iii) liens in favor of Lender, (iv) liens for taxes (a)
not yet due or (b) being diligently contested in good faith provided that
adequate reserves with respect thereto are maintained on the books of Borrower
in conformity with GAAP and (v) liens specified on Schedule 1 (D) hereto.
"Person" means an individual, partnership, corporation, trust or unincorporated
organization, or a government or agency or political subdivision thereof.
"Prime Rate" means the prime commercial lending rate of the Bank as publicly
announced in New York, New York to be in effect from time to time, such rate to
be adjusted automatically, without notice, on the effective date of any change
in such rate. This rate of interest is determined from time to time and is
neither tied to any external rate of interest or index nor does it necessarily
reflect the lowest rate of interest actually charged to any particular class or
category of customers.
"Receivables" means and includes all of Borrower's now owned or hereafter
acquired accounts and contract rights, instruments, insurance proceeds (unless
related to property listed on Exhibit X), documents, chattel paper (unless
related to property listed on Exhibit X), letters of credit (unless related to
property listed on Exhibit X) and Borrower's rights to receive payment
thereunder, any and all rights (unless related to property listed on Exhibit X)
to the payment or receipt of money or other forms of consideration of any kind
at any time now or hereafter owing or to be owing to Borrower, all proceeds
thereof and all files in which Borrower has any interest whatsoever containing
information identifying or pertaining to any of Borrower's Receivables, together
with all of Borrower's rights to any merchandise which is represented thereby,
and all Borrower's right, title, security and guaranties with respect to each
Receivable, including, without limitation, all rights of stoppage in transit,
replevin and reclamation and all rights as an unpaid vendor, but Receivables
shall exclude everything listed on Exhibit X.
"Receivables Advance Rate" shall have the meaning set forth in the definition of
Receivables Availability.
"Receivables Availability" means 85% ("Receivables Advance Rate") of the net
face amount of Borrower's Eligible Receivables.
"Reports" shall have the meaning set forth in Section 14.
"Retained Goods" shall have the meaning set forth in Section 8(h).
"Revolving Credit Advances" shall have the meaning set forth in paragraph 2(d).
"Revolving Receivables Advance(s)" shall have the meaning set forth paragraph
2(d).
"Settlement Date" means one (1) Business Day after the day on which the
applicable Receivable is actually collected by Lender.
"Spare Parts Inventory" means any Aircraft engines presently owned or hereafter
acquired by Borrower and parts thereof, DC 10 and MD 11 parts, including MD 11
Fly Away Kits owned by the Borrower listed on Schedule III to the Aircraft Parts
Security Agreement as amended as of this date and such Spare Parts Inventory
listed on the monthly inventory report acceptable to Lender, in its sole
discretion, exercised in a commercially reasonable manner.
"Spare Parts Inventory Advance Rate" shall have the meaning set forth in the
definition of Spare Parts Inventory Availability.
"Spare Parts Inventory Advances" shall have the meaning set forth in paragraph
2(d).
"Spare Parts Inventory Availability" means the lesser of (a) the Spare Parts
Inventory Sublimit or (b) 70%; ("Spare Parts Inventory Advance Rate") of the
Orderly Liquidation Value of Borrower's Eligible Inventory, as reported on a
monthly inventory designation submitted and certified by the Borrower
substantially in the form attached hereto as Exhibit Z.
"Spare Parts Inventory Sublimit" shall mean $11,000,000.00.
"Subsidiary" of any Person means a corporation or other entity of whose shares
of stock or other ownership interests having ordinary voting power (other than
stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Tangible Net Worth" means Net Worth and subordinated debt less intangibles.
"Term" means the Closing Date through the third anniversary date of this
Restated and Amended Accounts Receivable Management and Security Agreement
subject to acceleration upon the occurrence of an Event of Default hereunder or
other termination hereunder.
"Unused Facility Fee" means an annual fee of one-quarter of one percent (.25%)
payable monthly by the Borrower to the Lender, calculated on the amount of the
difference between the average daily amount of Loans outstanding during each
month and the amount of $25,000,000.00 if such average amount of outstanding
Loans during such month is less than $25,000,000.00
(B) Accounting Terms. Any accounting terms used in this Agreement which are not
specifically defined shall have the meanings customarily given them in
accordance with GAAP.
(C) Other Terms. All other terms used in this Agreement and defined in the
Uniform Commercial Code as adopted in the State of New York, shall have the
meaning given therein unless otherwise defined herein.
2. Sale of Receivables; Purchase Price; Accounts Receivables Management; Loans.
(a) Borrower hereby assigns and sells to Lender, as absolute owner, and Lender
hereby purchases from Borrower all Receivables existing on and created after the
date hereof, which arise from Borrower's sale of merchandise or rendition of
services.
(b) Lender shall not assume the Credit Risk on any Receivables. Accordingly, all
Receivables shall be purchased by Lender with full recourse to Borrower in the
event of non-payment thereof for any reason whatsoever and Lender may charge
back to Borrower's account the amount of any Receivable that is not paid on its
due date. The procedure manual Lender has delivered to Borrower describes
Lender's current practices and procedures regarding its accounts receivable
management and record keeping services. Lender reserves the right to vary such
practices and procedures from time to time in its sole discretion. Lender's
liability to Borrower for any alleged failure on Lender's part to provide
adequate accounts receivable management and record keeping services shall be
expressly limited to a refund of commissions paid by Borrower, if any, during
the period of such alleged failure and Lender shall have no liability of any
kind whatsoever for consequential or other damages or penalties based upon any
such alleged failure on Lender's part.
(c) The purchase price of Receivables shall be the Net Face Amount. The purchase
price will be credited to Borrower's account on the Settlement Date. Lender may
in its reasonable discretion deduct from the amount payable to Borrower on any
Settlement Date reserves for all Obligations then chargeable to Borrower's
account and Obligations which in Lender's reasonable discretion may be
chargeable to Borrower's account thereafter.
(d) Subject to the terms and conditions set forth herein and in the Ancillary
Agreements, Lender shall make revolving credit advances, consisting of Revolving
Receivable Advances and Spare Parts Inventory Advances (hereinafter jointly
referred as "Revolving Credit Advances") to Borrower from time to. time during
the Term and issue or facilitate the issuance of Letters of Credit for the
account of the Borrower as follows:
(i) Revolving receivable advances ("Revolving Receivable Advances") which in the
aggregate at any time outstanding, will not exceed the lesser of (x) the Maximum
Revolving Amount, less all outstanding Spare Parts Inventory Advances, less the
face amount of all outstanding Letters of Credit or (y) an amount equal to the
sum of:
(A) Receivables Availability, less
(b) such reserves as Lender may reasonably deem proper and necessary from time
to time.
(ii) Spare parts inventory advances ("Spare Parts Inventory Advances") to
Borrower from time to time during the Term, which in the aggregate at any time
outstanding, will not exceed the lesser of (x) the $11,000,000.00 (y) an amount
equal to the sum of:
(a) Spare Parts Inventory Availability, less
(b) such reserves as Lender may reasonably deem proper and necessary from time
to time.
(iii) Facilitate the opening of Letters of Credit for the account of the
Borrower from time to time during the Term which in the aggregate will have a
face amount not exceeding at any time the sum of $4,000,000.00.
Provided, however, that at no time shall the outstanding amounts of Revolving
Receivable Advances plus Spare Parts Inventory Advances and the face amount of
any outstanding Letters of Credit exceed the Maximum Revolving Amount or any
Applicable Sublimits (including but not limited to the Spare Parts Inventory
Sublimit or the Letter of Credit Sublimit.)
The maximum amounts available for Revolving Credit Advances shall be referred to
as the Formula Amount.
(e) Notwithstanding the limitations set forth above, Lender retains the right to
lend Borrower from time to time such amounts in excess of such limitations as
Lender may determine in its sole discretion.
(f) Borrower acknowledges that the exercise of Lender's rights (discretionary or
otherwise) hereunder may result during the term of this Agreement in one or more
increases or decreases in the Advance Rates and Borrower hereby consents to any
such increases or decreases which may limit or restrict advances requested by
Borrower.
(g) If Borrower does not pay any interest, fees, costs, charges or commissions
to Lender when due, Borrower shall thereby be deemed to have requested, and
Lender is hereby authorized at its discretion to make and charge to Borrower's
account, a Revolving Credit Advance to Borrower as of such date in an amount
equal to such unpaid interest, fees, costs, charges or commissions. Borrower
hereby acknowledges that Lender may charge to Borrower's account all amounts
owing to Lender hereunder when the same are due.
(h) Any sums expended by Lender due to Borrower's failure to perform or comply
with its obligations under this Agreement, including but not limited to the
payment of taxes, insurance premiums or leasehold obligations, shall be charged
to Borrower's account as a Revolving Credit Advance and added to the
obligations, provided however that Lender will use its best efforts to give the
Borrower two Business Days advance notice of its intent to expend such sums.
(i) Lender will account to Borrower monthly with a statement of all Loans and
other advances, charges and payments made pursuant to this Agreement, and such
account rendered by Lender shall be deemed final, binding and conclusive unless
Lender is notified by Borrower in writing to the contrary within thirty (30)
days-of-the date each account was rendered specifying the item or items to which
objection is made.
(j) During the Term, Borrower may borrow, prepay at par and reborrow Revolving
Credit Advances, all in accordance with the terms and conditions hereof.
(k) The aggregate balance of Loans outstanding at any time shall not exceed the
Maximum Revolving Amount or any Applicable Sublimits. The aggregate balance of
Revolving Credit Advances outstanding at any time shall not exceed the Formula
Amount.
(l) Any payments made by Customers constituting advances or deposits which do
not correspond to any Receivable purchased hereunder and which have been
indicated by the Borrower as an advance or deposit, shall be paid by Lender to
Borrower on the same Business Day as such collection (if practical) and
otherwise on the next Business Day after such collection.
(m) As long as no Event of Default exists, Matured Funds shall be paid by Lender
to Borrower at Borrower's request.
(n) Lender will use its best efforts to notify Borrower promptly of any change
in Advance Rates, eligibility of Collateral and reserves.
(o) Lender will use its best efforts to provide the Borrower, upon Borrower's
request, with an account status report reflecting the amount, if any, available
for borrowing hereunder provided that such report shall be subject to Lenders
customary disclaimer.
(p) Any amounts drawn under outstanding Letters of Credit shall be automatically
converted and deemed to be Revolving Receivable Advances as of the date of such
payment.
3. Repayment of Loans/Application of Certain Proceeds.
(a) Borrower shall be required to (i) make a mandatory prepayment hereunder at
any time that the aggregate outstanding principal balance of the Loans made by
Lender to Borrower hereunder is in excess of the Formula Amount in an amount
equal to such excess, and (ii) reuay on the expiration of the Term (x) the then
aggregate outstanding principal balance of Revolving Credit Advances made by
Lender to Borrower hereunder together with accrued and unpaid interest, fees,
charges and commissions and (y) all other amounts owed Lender under this
Agreement and the Ancillary Agreements including but not limited to all
obligations.
(b) Any proceeds from the sale of Spare Parts Inventory shall be applied first
towards the repayment of any outstanding Spare Parts Inventory Advances. Any
excess shall than be applied to any outstanding Revolving Receivables Advances
and to any other Obligations outstanding.
4. Procedure for Revolving Credit Advances
(a) The Borrower may request a borrowing of Revolving Credit Advances prior to
1:00 P.M. New York time on the Business Day of its request to incur, on that
day, a Revolving Credit Advance. All Revolving Credit Advances shall be
disbursed from whichever office or other place Lender may designate from time to
time and, together with any and all other Obligations of Borrower to Lender,
shall be charged to the Borrower's account on Lender's books. The proceeds of
each Revolving Credit Advance made by the Lender shall be made available to the
Borrower on the day so requested by way of credit to the Borrower's operating
account maintained with such bank as Borrower designated to Lender by Federal
Funds Wire. Any and all Obligations due and owing hereunder may be charged to
Borrower's account and shall constitute Revolving Credit Advances.
(b) Borrower may request that a Revolving Credit Advance be, (subject to
availability and other limitations contained herein, including but not limited
to any Applicable Sublimits), a Revolving Receivable Advance or a Spare Parts
Inventory Advance. Borrower may also, from time to time, request that the
Revolving Credit Advances be made as a Alternate Base Rate Loan or a LIBOR Rate
Loan or the Borrower may request treat an outstanding Alternate Base Rate Loan
be converted to a LIBOR Rate Loan or that a LIBOR Rate Loan be converted to an
Alternate Base Rate Loan. Any of the foregoing requests shall be in writing,
shall be irrevocable and with respect to any conversions shall be effective as
of the first day of the month immediately following the month in which written
notice is received by the Lender. Provided with respect to any conversion that
the Lender shall receive such written notice at least two (2) business days
prior to the last Business Day of such month. Except that the Borrower shall
have no right to request a LIBOR Rate Loan or to convert any Alternate Base Rate
Loan to a LIBOR Rate Loan in the event that an Event of Default exists or has
occurred or is continuing. If any of the foregoing conditions shall exist, then
any request by the Borrower for a LIBOR Rate Loan may be made by the Lender as &
Alternate Base Rate Loan upon giving proper notice to the Borrower of its
decision to do so. Notwithstanding anything to the contrary contained herein,
the Lender shall not be required to purchase United States Dollar deposits in
the London Interbank Market or other applicable LIBOR market to fund any LIBOR
Rate Loans, but the provisions of this agreement shall be deemed to apply as if
the Lender had purchased such deposits to fund the LIBOR Rate Loans;
(c) any LIBOR Rate Loans shall, at Lender's option convert to Alternate Base
Rate Loans in the event that (i) an Event of Default shall have occurred or is
continuing or (ii) this agreement shall terminate and not be renewed.
(d) Notwithstanding anything to the contrary contained herein, all LIBOR Rate
Loans shall upon notice by the Lender to the Borrower convert to Alternate Base
Rate Loans in the event that, (i) any change in applicable law, treaty or
regulation (or the interpretation or administration thereof), shall either (A)
make it unlawful for the Lender or the Bank to make or maintain LIBOR Rate Loans
or to comply with the terms hereof in connection with the LIBOR Rate Loans or
(B) shall result in increased costs to the Lender or the Bank of making or
maintaining any LIBOR Rate Loans by an amount deemed by the Lender to be
material or (C) reduce the amounts received or receivable by the Lender, in
respect thereof, by an amount deemed by the Lender to be material or (ii) the
cost to the Lender or the Bank of making or maintaining any LIBOR Rate Loan
shall otherwise increase by an amount deemed by the Lender to be material. The
Borrower shall pay to the Lender, upon demand by the Lender,( or the Lender may
at its option charge the Borrower's account) any amounts required to compensate
Lender or the Bank for any loss (including loss of anticipated profits), cost or
expense incurred by such Person as a result of the foregoing events, including
without limitations any such loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Person
to make or maintain the LIBOR Rate Loans or any portion thereof. A certificate
from the Lender setting forth the basis for the determination of such amount
necessary to compensate the Lender as aforesaid shall be delivered to the
Borrower and shall be conclusive, absent manifest error.
5. Interest; Fees
(a) Interest.
(i) Except as modified by Section 5(a)(iii) below, interest on Revolving Credit
Advances shall be payable in arrears on the last day of each month. Interest
payments hereunder may, at Lender's option be charged by Lender to Borrower's
account. Interest charges shall be computed on the unpaid balance of the
Revolving Credit Advances for each day they are outstanding at a rate per annum
equal to the Contract Rate. In the event the aggregate amount of Revolving
Credit Advances exceeds the Formula Amount for ten (10) or more days in any
during the Term, the average daily balance of Revolving Credit Advances in that
month shall bear interest at the Overadvance Rate.
(ii) Interest shall be computed on the basis of actual days elapsed over a
360-day year.
(iii) Upon the occurrence and during the continuance of an Event of Default
described in Section 18(a) interest shall be payable at the Default Rate on the
amount overdue.
(iv) Notwithstanding the foregoing, in no event shall interest exceed the
maximum rate permitted under any applicable law or regulation, and if any
provision of this Agreement or an Ancillary Agreement is in contravention of any
such law or regulation, such provision shall be deemed amended to provide for
interest at said maximum rate and any excess amount shall either be applied, at
Lender's option, to the outstanding Loans in such order as Lender shall
determine or refunded by Lender to Borrower.
(v) Borrower shall pay principal, interest and all other amounts payable
hereunder, or under any Ancillary Agreement, without any deduction whatsoever,
including, but not limited to, any deduction for any set-off or counterclaim
(b) Fees.
(i) Audit Fee. Upon Lender's performance of any collateral monitoring - namely
any field examination, collateral analysis or other business analysis, the need
for which is to be determined by Lender and which monitoring is undertaken by
Lender or for Lender's benefit, an amount equal to $600.00 per day, per person,
for each person employed to perform such monitoring together with all reasonable
out-of-pocket costs, disbursements and expenses incurred by the Lender and the
person performing such collateral monitoring shall be charged to Borrower's
account provided that such charges shall not exceed $25,000.00 annually.
(ii) Unused Facility Fee. Borrower shall pay to the Lender monthly, the Unused
facility fee.
(iii) Letter of Credit Fees. The Borrower shall pay to the Lender an issuance
fee of one-eighth of one percent (.125%) of the face amount for every Letter of
Credit and a monthly availability fee of one-eighth of one percent (.125%) per
month calculated on the face amount of any Letter of Credit. The Borrower shall
pay to the Lender a minimum issuance of $75.00 per Letter of Credit.
(iv) Administrative/Collateral Monitoring Fee. Borrower shall pay to the Lender
monthly a $5,000.00 administrative/collateral monitoring fee.
(c) Increased Costs. In the event that a change shall occur after the Closing
Date in any applicable law, treaty or governmental regulation, or in the
interpretation or application thereof, or compliance by Lender (for purposes of
this Section 5(c), the term "Lender" shall include Lender and any corporation or
bank controlling Lender) with any request or directive (whether or not having
the force of law) from any central bank or other financial, monetary or other
authority, if such request results from such a change, shall:
(i) subject Lender to any stamp, documentary or similar tax with respect to this
Agreement or any Ancillary Agreements;
(ii) impose, modify or hold applicable with respect to the Loans any reserve,
special deposit, assessment, or similar requirement against assets held by, or
deposits in or for the account of, advances or loans by, or other credit
extended by, any office of Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(iii) impose on Lender any other condition with respect to this Agreement or any
Ancillary Agreements;
and the result of any of the foregoing is to increase the cost to Lender of
making, renewing or maintaining its Loans hereunder by an amount that Lender
deems to be material or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of the Loans by an amount
that Lender deems to be material, then, in any case Borrower shall promptly pay
Lender, upon its demand, such additional amount as will compensate Lender for
such additional cost or such reduction, as the case may be. Lender shall certify
the amount and method of calculation of such additional cost or reduced amount
to Borrower, and such certification shall be conclusive absent manifest error.
Lender shall take such reasonable steps, as Borrower may request and at
Borrower's expense, to minimize such costs provided such steps have no adverse
effect on Lender.
(d) Capital Adequacy.
(i) In the event that a change after the Closing Date in any applicable law,
rule, regulation or guideline regarding capital adequacy, or in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Lender (for purposes of this Section 5(d), the term
"Lender" shall include Lender and any corporation or bank controlling Lender)
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency,
which request or directive results from such a change, has the effect of
reducing the rate of return on Lender's capital as a consequence of its
obligations hereunder to a level below that which Lender could have achieved but
for such adoption, change or compliance (taking into consideration Lender's
general policies with respect to capital adequacy) by an amount deemed by Lender
to be material, then, from time to time, Borrower shall pay upon demand to
Lender such additional amount or amounts as will compensate Lender for such
reduction. In determining such amount or amounts, Lender may use any reasonable
averaging or attribution methods. The protection of this Section shall be
available to Lender regardless of any possible contention of invalidity or
inapplicability with respect to the applicable 1aw, regulation or condition.
Lender shall take such reasonable steps, as Borrower may request and at
Borrower's expense, to minimize such costs provided such steps have no adverse
effect on Lender.
(ii) A certificate of Lender setting forth such amount or amounts as shall be
necessary to compensate Lender with respect to Section 5(d) hereof and the
method of calculation thereof when delivered to Borrower shall be conclusive
absent manifest error. (iii) impose on Lender any other condition with respect
to this Agreement or any Ancillary Agreements;
and the result of any of the foregoing is to increase the cost to Lender of
making, renewing or maintaining its Loans hereunder by an amount that Lender
deems to be material or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of the Loans by an amount
that Lender deems to be material, then, in any case Borrower shall promptly pay
Lender, upon its demand, such additional amount as will compensate Lender of
such additional cost or such reduction, as the case may be. Lender shall certify
the amount and method of calculation of such additional cost or reduced amount
to Borrower, and such certification shall be conclusive absent manifest error.
Lender shall take such reasonable steps, as Borrower may request and at
Borrower's expense, to minimize such costs provided such steps have no adverse
effect on Lender.
(d) Capital Adequacy.
(i) In the event that a change after the Closing Date in any applicable law,
rule, regulation or guideline regarding capital adequacy, or in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Lender (for purposes of this Section 5(d), the term
"Lender" shall include Lender and any corporation or bank controlling Lender)
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency,
which request or directive results from such a change, has the effect of
reducing the rate of return on Lender's capital as a consequence of its
obligations hereunder to a level below that which Lender could have achieved but
for such adoption, change or compliance (taking into consideration Lender's
general policies with respect to capital adequacy) by an amount deemed by Lender
to be material, then, from time to time, Borrower shall pay upon demand to
Lender such additional amount or amounts as will compensate Lender for such
reduction. In determining such amount or amounts, Lender may use any reasonable
averaging or attribution methods. The protection of this Section shall be
available to Lender regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or condition
Lender shall take such reasonable steps, as Borrower may request and at
Borrower's expense, to minimize such costs provided such steps have no adverse
effect on the Lender
(ii) A certificate of Lender setting forth such amount or amounts as shall be
necessary to compensate Lender with respect to Section 5(d) hereof and the
method of calculation thereof when delivered to Borrower shall be conclusive
absent manifest error.
(e) Matured Funds. On the last day of each month during the Term, Lender shall
credit Borrower's account with interest at the Matured Funds Rate in effect
during such month on the average daily balance during such month of any amounts
payable by Lender to Borrower hereunder which are not drawn by Borrower on the
Settlement Date.
6. Security Interest
(a) To secure the prompt payment to Lender of Obligations, Borrower hereby
assigns, pledges and grants to Lender a continuing security interest in and to
the Collateral, whether now owned or existing or hereafter acquired or arising
and wheresoever located (whether or not the same is subject to Article 9 of the
Uniform Commercial Code). All of the Borrower's ledger sheets, files, records,
books of account, business papers and documents relating to the Collateral
shall, until delivered to or removed by Lender, be kept by Borrower in trust for
Lender until all Obligations have been paid in full. Each confirmatory
assignment schedule or other form of assignment hereafter executed by Borrower
shall be deemed to include the foregoing grant, whether or not the same appears
therein.
(b) Lender may file one or more financing statements disclosing Lender's
security interest in the Collateral without Borrower's signature appearing
thereon or Lender may sign on Borrower's behalf as provided in paragraph 13
hereof. The parties agree that a carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement. If any Receivable
becomes evidenced by a promissory note or any other instrument for the payment
of money, Borrower will immediately deliver such instrument to Lender
appropriately endorsed.
7. Representation Concerning The Collateral. Borrower represents and warrants
(each of which such representations and warranties shall be deemed repeated upon
the making of each request for a Revolving Credit Advance and made as of the
time of each and every Revolving Credit Advance.
(a) all the Collateral (i) is owned by Borrower free and clear of all claims,
liens, security interests and encumbrances (including without limitation any
claims of infringement) except (A) those in Lender's favor and (B) Permitted
Liens and (ii) is not subject to any agreement prohibiting the granting of a
security interest or requiring notice of or consent to the granting of a
security interest;
(b) all receivable except those with respect to which Borrower has notified
Lender at the time of assignment were not to be treated as Eligible Receivable
(i) represent complete bona fide transactions which require no further act under
any circumstances on Borrower's part to make such Receivables payable by
customers, (ii) to the best of Borrower's knowledge, are not subject to any
present, future or contingent Disputes and (iii) do not represent ▇▇▇▇ and hold
sales, consignment sales, guaranteed sales, sale or return or other similar
understandings or obligations of any Affiliate or Subsidiary of Borrower.
8. Covenants Concerning the Collateral During the Term, Borrower covenants that
it shall:
(a) not dispose of any of the Collateral whether by sale, lease or otherwise
except for (i) the sale of Inventory in the ordinary course of business, (ii)
the sale of Spare Parts Inventory, (iii) the disposition or transfer of obsolete
and worn-out Equipment in the ordinary course of business during any fiscal year
having an aggregate -fair market value of not more than $200,000 and, if in
excess of said amount, only to the extent that (x) the proceeds of any such
disposition are used to acquire replacement Equipment which is subject to
Lender's first priority security interest or (y) the proceeds of which are
remitted to Lender in reduction of the Obligations and (iv) disposition of
General Intangibles in the ordinary course of business;
(b) not encumber, mortgage, pledge, assign or grant any security interest in any
Collateral to anyone other than Lender except as set forth on Schedule l(B)
attached hereto and made a part hereof;
(c) place notations upon Borrower's books of account: and any financial
statement prepared by Borrower to disclose Lender's security interest in the
Collateral;
(d) defend the Collateral against the claims and demands of all parties;
(e) keep and maintain the Equipment in good operating condition, except for
ordinary wear and tear, and shall make all necessary repairs and replacements
thereof so that the value and operating efficiency shall at all times be
maintained and preserved, ordinary-wear and tear excepted. Borrower shall not
permit any such items to become a fixture to real estate or accessions to other
personal property;
(f) not extend the payment terms of any Receivable without prompt notice thereof
to Lender;
(g) perform all other steps requested by Lender to create and maintain in
Lender's favor a valid perfected first. security interest in all Collateral; and
(h) Borrower shall promptly provide Lender with duplicate originals of all
credits which Borrower issues to its Customers and immediately notify Lender of
any merchandise returns or Disputes. Borrower shall settle all Disputes at no
cost or expense to Lender. Should Lender so elect, during the continuation of
any Event of Default, Lender may at any time in its discretion (i) withdraw
Borrower's authority to issue credits to its Customers without Lender's prior
written consent; (ii) litigate Disputes or settle them directly with Customers
on terms acceptable to Lender; or (iii) direct Borrower to set aside and
identify as Lender's property any returned or repossessed merchandise or other
goods which by sale resulted in Receivables theretofore assigned to Lender
("Retained Goods"). All Retained Goods (and the proceeds thereof) shall be (A)
held by Borrower in trust for Lender as Lender's property, (B) subject to
Lender's security interest hereunder and (C) disposed of only in accordance with
Lender's express written instructions.
9. Collection and Maintenance of Collateral and Re cords. Lender may at any time
verify Borrower's Receivables utilizing an audit control company or any other
agent of Lender, provided however, that absent an Event of Default, or a reason
to suspect fraud such action may only be taken during normal business hours upon
one Business Day's notice to the Borrower. Lender or Lender's designee may, but
only while an Event of Default in continuing, notify Customers, at any time at
Lender's sole discretion, of Lender's security interest in Receivables, collect
them directly and charge the collection costs and expenses to Borrower's
account, but, unless and until Lender does so or gives Borrower other
instructions, Borrower shall instruct all of its Customers to make payments on
account of Receivables to an account under Lender's dominion or control at such
bank as Lender may designate, as provided by the terms of Section 23. To the
extent Borrower receives any payments on account of Receivables, it shall hold
such payments for Lender's benefit in trust as Lender's trustee and immediately
deliver them to Lender in their original form with all necessary endorsements
or, as directed by Lender, deposit such payments as directed by Lender pursuant
to Section 22 hereof. Lender will credit (conditional upon final collection) all
such payments to Borrower's account on the Settlement Date. Once each week
Borrower shall provide Lender with schedules describing all Receivables created
or acquired by Borrower during the preceding seven days and shall execute and
deliver confirmatory written assignments of such Receivables in the form of
Schedule 9 to Lender, but Borrower's failure to execute and deliver such
schedules or written confirmatory assignments of such Receivables shall not
affect or limit Lender's security interest or other rights in and to the
Receivables. Borrower shall furnish, at Lender's request, copies of contracts
(including but not limited to any government or governmental agency contracts),
invoices or the equivalent, and any original shipping and delivery receipts for
all merchandise sold or services rendered and such other related documents and
information as Lender may require. All of Borrower's invoices shall bear the
payment terms stated on the applicable customer order, and no change from the
original payment terms of such customer order shall be made without the prior
written consent Lender. Borrower shall provide Lender on a monthly (within
twenty (20) days after the end of each month), or more frequent basis, as
requested by Lender, a summary report of Borrower's current Spare Parts
Inventory, certified as true and accurate by Borrower's President or Chief
Financial Officer. Borrower shall provide Lender, as requested by Lender, such
other schedules, documents and/or information regarding the Collateral as Lender
may reasonably require.
10. Inspections and Appraisals. At all times during normal business hours,
Lender shall have the right to (a) visit and inspect Borrower's properties and
the Collateral, (b) inspect, audit and make extracts from Borrower's relevant
books and records, including, but not limited to, management letters prepared by
independent accountants, and (c) discuss with Borrower's principal officers, and
independent accountants, Borrower's business, assets, liabilities, financial
condition, results of operations and business prospects provided that absent an
Event of Default or a reason to suspect fraud, such action may be taken only
upon one Business Day's notice to the Borrower. Borrower will deliver to Lender
any instrument necessary for Lender to obtain records from any service bureau
maintaining records for Borrower. Lender may, at its option, once annually, at
Borrower's expense, undertake or have undertaken a professional appraisal of the
Spare Parts Inventory.
In addition to the foregoing, Borrower shall also provide Lender, at Lender's
request, with an aging of accounts payable, in a format acceptable to and at
intervals, as may be requested by the Lender.
11. Financial Information. Borrower shall provide Lender (a) as soon as
available, but in any event within ninety (90) days after the end of each of
Borrower's fiscal years, Borrower's balance sheet as at the end of such fiscal
year and the related statements of income, retained earnings and statement of
cash flow for such fiscal year, setting forth in comparative form the figures as
at the end of and for the previous fiscal year, which shall have been reported
on by Peat Marwick & Co. or such other independent certified public accountants
who shall reasonably satisfactory to Lender and shall be accompanied by an
unqualified audit report issued by such independent certified public
accountants; (b) as soon as available, drafts of Borrower's balance sheet as at
the end of each of Borrower's fiscal years and the related statements of income,
retained earnings and statement of cash flow for such fiscal year, which have
been internally prepared by Borrower; (c) as soon as available, but in any event
within forty-five (45) days after the end of each quarter, Borrower's balance
sheet as at the end of such quarter and the related statements of income,
retained earnings and statement of cash flow for such quarter, setting forth in
comparative form the figures as at the end of and for the previous quarter,
which shall have been internally prepared by Borrower and certified as being
prepared in accordance with GAAP, subject to year-end adjustments by its Chief
Financial Officer; (d) as soon as available, but in any event within thirty (30)
days after the close of each month, the balance sheet as at the end of such
month and the related statements of income, retained earnings and statement of
cash flow for such month, which have been internally prepared by Borrower and
certified by its Chief Financial officer as being prepared in accordance with
GAAP, subject to year-end adjustments. All financial statements required under
(a), (b), (c) and (d) above shall be prepared in accordance with GAAP, subject
to year-end adjustments in the case of monthly and quarterly statements. At the
times the financial statements are furnished pursuant to (a), (b), (c) and (d)
above, a certificate of Borrower's President or Chief Financial Officer shall be
delivered to Lender stating that, based on an examination sufficient to enable
him to make an informed statement, no Event of Default or Contingent Event of
Default exists, or, if such is not the case, specifying such Event of Default or
Contingent Event of Default and its nature, when it occurred, whether it is
continuing and the steps being taken by Borrower with respect to such event. If
any internally prepared financial information, including that required under
this paragraph, is unsatisfactory in any manner to Lender, and an. Event of
Default is continuing Lender may at its own expense request that Borrower's
independent certified public accountants review same.
In addition to the foregoing financial statements, Borrower shall furnish Lender
(i) no less than thirty (30) days after the close of each month a borrowing base
certificate in the form of Schedule 11 and (ii) no less than thirty (30) days
prior to the beginning of each fiscal year, or such other reasonable intervals
as may be requested by Lender, commencing with fiscal year 1998, a month by
month projected operating budget and cash flow for such fiscal year (including
an income statement for each month and a balance sheet as at the end of the last
month in each fiscal quarter), such projections to be accompanied by a
certificate signed by Borrower's President or Chief Financial officer to the
effect that such projections have been prepared on the basis of sound financial
planning practice consistent with past budgets and financial statements and that
such officer has no reason to question the reasonableness of any material
assumptions on which such projections we're prepared. If any such projections
are unsatisfactory in any manner to Lender, and an Event of Default exists and
is continuing, Lender may at Borrower's expense request that Borrower's
independent certified public accountants compile or review same. Borrower shall
also furnish, upon Lender's request, as long as the Original Owner retains at
least a Material Ownership interest in the Borrower copies of the 10Q, 10K and
8K Statements of WorldCorp, Inc.
12. Additional Representations, Warranties and Covenants. Borrower represents
and warrants (each of which such representations and warranties shall be deemed
repeated upon the making of a request for a Revolving Credit Advance and made as
of the time of each Revolving Credit Advance made hereunder), and covenants
that:
(a) Borrower is a corporation duly organized and validly existing under the laws
of the State of Delaware and duly qualified and in good standing in every other
state or jurisdiction in which the nature of Borrower's business requires such
qualification;
(b) the execution, delivery and performance of this Agreement and the Ancillary
Agreements (i) have been duly authorized, (ii) are not in contravention of
Borrower's certificate of incorporation, by-laws or of any indenture, agreement
or undertaking to which Borrower is a party or by which borrower is bound and
(iii) are within Borrower's corporate powers;
(c) this Agreement and the Ancillary Agreements executed and delivered by
Borrower are Borrower's legal, valid and binding obligations, enforceable in
accordance with their terms;
(d) it keeps and will continue to keep all of its books and records concerning
the Collateral at Borrower's executive offices located at the address set forth
in the introductory paragraph of this Agreement and will not move such books and
records without giving Lender at least thirty (30) days prior written notice;
(e) (i) the operation of Borrower's business is and will continue to be in
compliance in all material respects with all applicable federal, state and local
laws, including but not limited to all applicable environmental laws and
regulations.
(ii) In the event the Borrower obtains, gives or receives notice of any release
or threat of release of a reportable quantity of any Hazardous Substances on its
property (any such event being hereinafter referred to as a "Hazardous
Discharge") or receives any notice of violation, request for information or
notification that it is potentially responsible for investigation or cleanup of
environmental conditions on its property, demand letter or complaint, order,
citation, or other written notice with regard to any Hazardous Discharge or
violation of any environmental laws affecting its property or Borrower's
interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Person or entity, including any state agency
responsible in whole or in part for environmental matters in the state in which
such property is located or the United States Environmental Protection Agency
(any such person or entity hereinafter the "Authority"), then the Borrower
shall, within five (5) Business Days, give written notice of same to the Lender
detailing facts and circumstances of which the Borrower is aware giving rise to
the Hazardous Discharge or Environmental Complaint and periodically inform
Lender of the status of the matter. Such information is to be provided to allow
the Lender to protect its security interest in the Collateral and is not
intended to create nor shall it create any obligation upon the Lender with
respect thereto.
(iii) Borrower shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral to any lien, charge,
claim or encumbrance. If Borrower shall fail to respond promptly to any
Hazardous Discharge or Environmental Complaint or Borrower shall fail to comply
with any of the requirements of any environmental laws, the Lender may, but
without the obligation do so, for the sole purpose of protecting the Lender's
interest in Collateral: (A) give such notices or (B) enter onto Borrower's
property (or authorize third parties to enter onto such property) and take such
actions as the Lender (or such third parties as directed by the Lender) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by the Lender (or such third parties) in
the exercise of any such rights, including any sums paid in connection with any
judicial or administrative investigation or proceedings, fines and penalties,
together with interest thereon from the date expended at the Default Rate for
Revolving Credit Advances shall be paid upon demand by the Borrower, and until
paid shall be added to and become a part of the obligations secured by the Liens
created by the terms of this Agreement or any other agreement between Lender and
Borrower.
(iv) Borrower shall defend and indemnify the Lender and hold the Lender harmless
from and against all loss, liability, damage and expense, claims, costs, fines
and penalties, including reasonable attorney's fees, suffered or incurred by the
Lender under or on account of any environmental laws, including, without
limitation, the assertion of any lien thereunder, with respect to any Hazardous
Discharge by Borrower or on its property, the presence of any Hazardous
Substances affecting Borrower's property, whether or not the same originates or
emerges from Borrower's property or any contiguous real estate, including any
loss of value of the Collateral as a result of the foregoing except to the
extent such loss, liability, damage and expense is attributable to any Hazardous
Discharge resulting from actions on the part of the Lender. The Borrower's
obligations under this paragraph 12(e) shall arise upon the discovery of the
presence of any Hazardous Substances on the Borrower's property, whether or not
any federal, state, or local' environmental agency has taken or threatened any
action in connection with the presence of any hazardous substances. The
Borrower's obligation and the indemnifications hereunder shall survive the
termination of this Agreement.
(v) For purposes of Paragraph 12(e) all references to Borrower's property shall
be deemed to include all of Borrower's right, title and interest in and to all
owned and/or leased premises;
(f) based upon the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the regulations and published interpretations thereunder: (i)
Borrower has not engaged in any Prohibited Transactions as defined in paragraph
406 of ERISA and paragraph 4975 of the Internal Revenue Code, as amended; (ii)
Borrower has met all applicable minimum funding requirements under paragraph 302
of ERISA in respect of its plans; (iii) Borrower has no knowledge of any event
or occurrence which would cause the Pension Benefit Guaranty Corporation to
institute proceedings under Title IV of ERISA to terminate any employee benefit
plan(s); (iv) Borrower has no fiduciary responsibility for investments with
respect to any plan existing for the benefit of persons other than Borrower's
employees; and (v) since September, 1986 Borrower has not withdrawn, completely
or partially, from any multi-employer pension plan so as to incur liability
under the Multi employer Pension Plan Amendments Act of 1980;
(g) it has capital sufficient to carry on its business and all businesses in
which it is about to engage
(h) except as described in Borrower's financial statements which have been
delivered to Lender, there is no pending or threatened litigation, actions or
proceeding which involve the possibility of materially and adversely affecting
the Borrower's business, assets, operations, condition or prospects, financial
or otherwise, or the Collateral or the ability of Borrower to perform this
Agreement;
(i) all balance sheets and income statements which have been delivered to Lender
fairly, present Borrower's financial condition on a basis consistent with that
of previous financial statements and there has been no material adverse change
in Borrower's financial condition as reflected in its September 30, 1997 (unless
such financial statements for the fiscal year ending 12/31/97 are available
prior to the Closing Date, in which case such 12/31/97 financial statements
shall be deemed to be the financial statements against which any material
adverse change shall be calculated by) financial statements since the date
thereof and such statements do not fail to disclose any fact or facts which
materially and adversely affect Borrower's financial condition;
(j) (x) it possesses all of the licenses, patents, copyrights, trademarks, trade
names and permits necessary to conduct its material business, (y) there has been
no assertion claim of violation or infringement with respect thereof which would
have a material adverse affect on the Borrower's business and (z) all such
licenses, patents, copyrights, trademarks, trade names and permits are listed on
Schedule 12(j);
(k) it will pay or discharge when due all taxes, assessments and governmental
charges or levies imposed upon it unless such tax, charge or levy is being
diligently contested in good faith provided that adequate reserves with respect
thereto are maintained on the books of Borrower in conformity with GAAP;
(l) it will promptly inform Lender in writing of: (i) the commencement of all
proceedings and investigations by or before and/or the receipt of any notices
from, any governmental or nongovernmental body and all actions and proceedings
in any court or before any arbitrator against or in any way concerning any of
Borrower's properties, assets or business, which might singly or in the
aggregate, have a materially adverse effect on Borrower; (ii) any amendment of
Borrower's certificate of incorporation or by-laws; (iii) any change in
Borrower's business, assets, liabilities, condition (financial or otherwise),
results of operations or business prospects which has had or might have a
materially adverse effect on Borrower; (iv) any Event of Default or Contingent
Event of Default; (v) any default or any event which with the passage of time or
giving of notice or both would constitute a default under any agreement for the
payment of money to which Borrower is a party or by which Borrower or any of
Borrower's properties may be bound which would have a material adverse effect on
Borrower's business, operations, property or condition (financial or otherwise)
or Collateral; (vi) any change in the location of Borrower's executive offices;
(vii) any change in the location of Borrower's Spare Parts Inventory from the
locations listed on Schedule 12 (l), attached hereto, (viii) any change in
Borrower's corporate name; (ix) any material delay in Borrower's performance of
any of its obligations to any Customer and of any assertion of any material
claims, offsets, counterclaims or Disputes by any Customer and any allowances,
credits and/or other monies granted by it to any Customer; (x) furnish to and
inform Lender of all material adverse information relating to the financial
condition of any account debtor owing more than $100,000 to Borrower with
respect to which Borrower has actual knowledge; and (xi) any material return of
goods;
(m) it will not (i) create, incur, assume or suffer exist any Indebtedness in
excess of $1,000,000.00 (exclusive of trade debt) whether secured or unsecured
other than (A) capital leases or purchase money security interests which do not
exceed an aggregate amount of $50,000,000.00 and (B) Borrower's Indebtedness to
Lender and as set forth on Schedule 12(m) attached hereto and made a part
hereof; (ii) declare, pay or any dividend or distribution on any shares of the
common stock or preferred stock of Borrower or apply any of its funds, property
or assets to the purchase, redemption or other retirement of any common or
preferred stock of Borrower, in excess of five percent (5%) of the total
aggregate outstanding amount of such stock of the Borrower, (provided however,
that any such repurchase of Borrower's stock in excess of five percent (5%) may
be made with the prior written consent of the Lender) except that Borrower may
make quarterly dividends so long as in any six month period such dividends do
not exceed 50% of Borrower's aggregate net income for the previous six months
and; (iii) directly or indirectly, prepay any Indebtedness (other than to
Lender), or repurchase, redeem, retire or otherwise acquire any indebtedness of
Borrower except without the prior written approval of the Lender which
concurrence shall not be unreasonably withheld; (iv) makes advances, loans or
extensions of credit in excess of $100,000.00 to any Person; (v) become either
directly or contingently liable upon the obligations of any Person by
assumption, endorsement or guaranty thereof or otherwise; (vi) enter into any
merger, consolidation or other reorganization with or into any other Person or
acquire all or a portion of the assets or stock of any Person or permit any
other Person to consolidate with or merge with it except with the prior written
consent of the Lender; (vii) form any Subsidiary or enter into any partnership,
joint venture or similar arrangement provided that Borrower may do so as long as
its aggregate loans and investments to such entities do not exceed $500,000-00
in each fiscal year; (viii) materially change the nature of the business in
which it is presently engaged; (ix) change its fiscal year or make any changes
in accounting treatment and reporting practices without prior written notice to
Lender except as required by GAAP or in the tax reporting treatment or except as
required by law; (x) enter into any transaction with any Affiliate, except in
ordinary course on arms-length terms; or (xi) ▇▇▇▇ Receivables under any name
except the present name of the Borrower;
(n) it shall not permit its Tangible Net Worth to be less than the following
amounts at any time during the following periods provided that (A) each such
amount shall be decreased by the cumulative amount of dividends paid in
accordance herewith and (B) upon an Equity Infusion, each such amount shall be
increased by the amount of such Equity Infusion:
Quarter Ending Amount
-------------- ---------------
3/31/98 $ 36,000,000.00
6/30/98 $ 38,000,000.00
9/30/98 $ 42,000,000.00
12/31/98 $ 43,000,000.00
3/31/99 $ 40,000,000.00
6/30/99 $ 40,000,000.00
9/30/00 $ 44,000,000.00
12/31/99 $ 47,000,000.00
3/31/00 $ 47,000,000.00
6/30/00 $ 47,000,000.00
9/30/00 $ 51,000,000.00
12/31/00 $ 54,000,000.00
(o) it shall not permit its net income, before taxes, to be less than the
following amounts for the following periods:
Date Amount
-------- ----------------
3/31/98 $ (3,000,000.00)
6/30/98 $ 1,000,000.00
9/30/98 $ 3,700,000.00
12/31/98 $ 2,000,000.00
3/31/99 $ 2,000,000.00)
6/30/99 $ 1,000,000.00
9/30/00 $ 3,800,000.00
12/31/99 $ 2,000,000.00
3/31/00 $ 1,000,000.00
6/30/00 $ 1,000,000.00
9/30/00 $ 3,000,000.00
12/31/00 $ 1,500,000.00
provided that in any quarter that the net income exceeds the applicable amount
set forth above, such excess may be applied to the consecutive quarter for
purposes of this Section 12(o).
(p) it will maintain a Debt Coverage Ratio, of at least 1.00 to 1.00. at all
times, of at least 1.00 to 1.00
(q) all financial projections of Borrower's performance prepared by Borrower or
at Borrower's direction and delivered to Lender will represent, at the time of
delivery to Lender, Borrower's best estimate of Borrower's future financial
performance and will be based upon assumptions which are reasonable in light of
Borrower's past performance and then current business conditions;
(r) Deliberately left blank.
(s) none of the proceeds of the Loans hereunder will be used directly or
indirectly to "purchase" or "carry" "margin stock" or to repay indebtedness
incurred to "purchase" or "carry" "margin stock" within the respective meanings
of each of the quoted-terms under Regulation G of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect; and
(t) it will bear the full risk of loss from any loss of any nature whatsoever
with respect to the Collateral. At its own cost and expense in amounts and with
carriers used by companies engaged in business similar to Borrowers, it shall
(i) keep all its insurable properties and properties in which it has an interest
insured against the hazards of fire, flood, sprinkler leakage, those hazards
covered by extended coverage insurance and such other hazards, and for such
amounts, as is customary in the case of companies engaged in businesses similar
to Borrower's; (ii) maintain a bond in such amounts as is customary in the case
of companies engaged in businesses similar to Borrower's insuring against
larceny, embezzlement or other criminal misappropriation of insured's officers
and employees who may either singly or jointly with others at any time have
access to the assets or funds of Borrower either directly or through authority
to draw upon such funds or to direct generally the disposition of such assets;
(iii) maintain public and product liability insurance against claims for bodily
injury, death or property damage suffered by others; (iv) maintain all such
workmen's compensation or similar insurance as may be required under the laws of
any state or jurisdiction in which Borrower is engaged in business; (v) furnish
Lender with copies of certificates of insurance evidencing the maintenance of
such policies at least thirty (30) days before any expiration date, and (y)
appropriate loss payable endorsements in form and substance satisfactory to
Lender, naming Lender as loss payee and providing that as to Lender the
insurance coverage shall not be impaired or invalidated by any act or neglect of
Borrower and the insurer will provide Lender with at least thirty (30) days
notice prior to cancellation. Borrower shall instruct the insurance carriers
that in the event of any loss thereunder, the carriers shall make payment for
such loss to Borrower and Lender jointly. Upon an Event of Default, if any
insurance losses are paid by check, draft or other instrument payable to
Borrower and Lender jointly, Lender may endorse Borrower's name thereon and do
such other things as Lender may deem advisable to reduce the same to cash. Upon
an Event of Default, Lender is hereby authorized to adjust and compromise
claims. All loss recoveries received by Lender upon any such insurance may be
applied to the obligations, in such order as Lender in its sole discretion shall
determine. Any surplus shall be paid by Lender to Borrower or applied as may be
otherwise required by law. Any deficiency thereon shall be paid by Borrower to
Lender, on demand.
(u) without Lender's prior written consent, it shall not acquire any interest
other than leasehold interests in any Aircraft, airframe or engine unless at
Borrower's expense (i) Borrower grants a first priority perfected security
interest therein to Lender, (ii) executes and delivers to Lender an amendment to
the Aircraft Security Agreement with respect to such Aircraft, airframe or
engine, in form and substance satisfactory to, and approved in writing by,
Lender, (iii) causes such agreement to be immediately filed for recording with
the FAA pursuant to the Federal Aviation Act and (iv) Borrower delivers to
Lender an opinion of counsel satisfactory, in form and substance to Lender with
respect to the acquisition of such Aircraft, airframe or engine, Borrower's
title thereto, the validity and perfection of the security interest of Lender
therein, and such other matters as may reasonably be requested by Lender,
provided however, that if Borrower is able to make any such acquisitions as
described in the first to third lines of this paragraph, at financing rates or
terms more favorable to Borrower than Lender would have been willing to offer to
the Borrower for such acquisitions, then after being given written notice of
intent by the Borrower of such terms, evidenced by a written proposal from a
refutable financing company, Lender after receiving such notice does not agree
to match such terms, then Lender's consent to such acquisitions shall not be
unreasonably withheld.
(v) Schedule 1(A) sets forth a list of each engine owned by Borrower that
comprises Spare Parts inventory, together with the serial number of each such
engine and the book value of each such engine. No further action, including any
filing or recording of any document, is necessary or advisable in order to
establish and perfect Borrower's title to the engines owned by Borrower,
respectively, as against any other Person. Except for the filing for recordation
pursuant to the Federal Aviation Act of the Aircraft Security Agreement, no
further action, including any filing or recordation of any document (including,
without limitation, any financing statement in respect thereof under Article 9
of the Uniform commercial Code), is necessary or advisable in order to create
and perfect the security interest created under the Aircraft Security Agreement
in favor of the Lender in engines listed on Schedules 1(A).
(w) it shall no later than thirty days after the Closing Date take all steps
necessary to protect Lender's interest in Borrower's Receivables under the
Federal Assignment of Claims Act or other applicable state or local statutes or
ordinances and deliver to Lender appropriately endorsed, any instrument or
chattel paper connected with any Receivable arising out of contracts between it
and the United States, any state or any department, agency, instrumentality or
any of them.
13. Power of Attorney . Borrower hereby appoints Lender or any other Person whom
Lender may designate as Borrower's attorney, with power to: (i) endorse
Borrower's name on any checks, notes, acceptances, money orders, drafts or other
forms of payment or security that may come into Lender's possession; (ii) sign
Borrower's name on any invoice or ▇▇▇▇ of lading relating to any Receivables,
drafts against Customers, schedules and assignments of Receivables, notices of
assignment, financing statements and other public records, verifications of
account and notices to or from Customers; (iii) verify the validity, amount or
any other matter relating to any Receivable by mail, telephone, telegraph or
otherwise with Customers provided that so long as no Event of Default is
continuing, Lender will use its best efforts not to disclose any aspect of this
Agreement or any Ancillary Agreements to any Customer; (iv) execute customs
declarations and such other documents as may be required to clear Inventory
through Customs; (v) while an Event of Default is continuing, do all things
necessary to carry out this Agreement, any Ancillary Agreement and all related
documents; and (vi) on or after the occurrence and continuation of an Event of
Default, should Lender determine that Borrower is not cooperating with Lender,
notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, and to receive, open and
dispose of all mail addressed to Borrower. Borrower hereby ratifies and approves
all acts of the attorney executed as aforesaid. Absent gross negligence, neither
Lender nor the attorney will be liable for any acts or omissions or for any
error of judgment or mistake of fact or law. This power, being coupled with an
interest, is irrevocable so long as any Receivable which is assigned to Lender
or in which Lender has a security interest remains unpaid and until the
Obligations have been fully satisfied.
14. Expenses. Borrower shall pay all of Lender's reasonable out-of-pocket costs
and expenses, including without limitation reasonable fees and disbursements of
counsel retained or employed by Lender and appraisers, in connection with the
preparation, execution, administration and delivery of this Agreement and the
Ancillary Agreements, and in connection with the prosecution or defense of any
action, contest, dispute, suit, or proceeding concerning any matter in any way
arising out of, related to or connected with this Agreement or any Ancillary
Agreement. Borrower shall also pay all of Lender's reasonable out-of-pocket
costs and expenses, including without limitation reasonable fees and
disbursements of counsel retained or employed by Lender, in connection with (a)
the preparation, execution and delivery of any waiver, any amendment thereto or
consent proposed or executed in connection with the transactions contemplated by
this Agreement or the Ancillary Agreements, if requested by Borrower, (b)
Lender's obtaining performance of the Obligations under this Agreement and any
Ancillary Agreements, including, not limited to, the enforcement or defense of
Lender's security interests, assignments of rights and liens hereunder as valid
perfected security interests, and (c) subject to any limitations contained in
this Agreement any attempt to inspect or verify any Collateral and (d) if an
Event of Default is continuing, the protection, collection, sale liquidation or
other disposition of Collateral. Borrower shall also pay Lender's then standard
price for furnishing Borrower or its designees copies of any statements,
records, files or other data (collectively, "Reports") requested by Borrower or
its designees, other than reports of the kind furnished to Borrower and Lender's
other borrowers on a regular, periodic basis in the ordinary course of Lender's
business. Borrower shall also pay Lender's customary bank charges, including,
without limitation, all wire transfer fees incurred by Lender, for all bank
services Performed or caused to be performed by Lender for Borrower at
Borrower's request. All such costs and expenses together with all filing,
recording and search fees, taxes and interest payable by Borrower to Lender
shall be payable on demand and shall be secured by the Collateral. Borrower
hereby acknowledges that Lender shall-not be liable in any manner whatsoever for
any selling expenses, orders, purchases or contracts of any kind resulting from
any transaction between Borrower and any other Person and Borrower hereby
indemnifies and holds Lender harmless with respect thereto, which indemnity
shall survive termination of this Agreement.
15. Assignment By Lender. In the event of a sale of its assets or stock, Lender
may assign any or all of the Obligations together with any or all of the
security therefor and any transferee shall succeed to all of Lender's rights
with respect thereto. Upon such transfer, Lender shall be released from all
responsibility for the Collateral to the extent same is assigned to any
transferee. Lender may from time to time sell or otherwise grant participation
in any of the Obligations but only if Lender retains full decision making
authority and administrative responsibility for the transactions contemplated
hereby and the holder of any such participation shall, subject to the terms of
any agreement between Lender and such holder, be entitled to the same benefits
as Lender with respect to any security for the obligations in which such holder
is a participant. Borrower agrees that each such holder may exercise any and all
rights of banker's lien, set-off and counterclaim with respect to its
participation in the Obligations as fully as though Borrower were directly
indebted to such holder in the amount of such participation.
16. Waivers. Except as expressly provided herein, Borrower waives presentment
and protest of any instrument and notice thereof, notice of default and all
other notices to which Borrower might otherwise be entitled.
17. Term of Agreement. This Agreement shall continue in full force until the
expiration of the Term. If Lender receives written notice from the Borrower of
its request to extend the Term 60 days prior to the last day of the initial Term
or any renewal Term, and Lender agrees to do so, the Term shall be extended for
a period of one year from the expiration date of such Term. The Borrower may
terminate this Agreement effective as of any time during the Term by (a) giving
Lender sixty (60) days, prior written notice (via certified mail, return receipt
requested) and (b) paying Lender, in addition to all other obligations, the
Early Termination Fee. Upon termination of this Agreement and full satisfaction
of all Obligations Lender shall at Borrower's request and expense execute
documents terminating the lien of this Agreement and the Ancillary Agreements
and reselling to Borrower all Receivables at their original purchase price from
Borrower.
18. Events of Default. The occurrence of any of following shall constitute an
Event of Default:
(a) failure to make payment of any of the Obligations when required hereunder if
such failure continues for five (5) days;
(b) failure to pay any taxes for 20 days after being due unless such taxes are
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been provided on Borrower's books;
(c) failure to perform under and/or committing any breach of this Agreement or
any Ancillary Agreement or any other agreement between Borrower and Lender and
such Failure or breach is not cured within 10 days of Lender's notice thereof to
Borrower;
(d) occurrence of a default under any agreement to which Borrower is a party
with third parties which default has a material adverse affect upon Borrower's
business, operations, property or condition (financial or otherwise) including
all leases for any premises where Inventory or Equipment is located;
(e) any representation, warranty or statement made by Borrower hereunder, in any
Ancillary Agreement, any certificate, statement or document delivered pursuant
to the terms hereof, or in connection with the transactions contemplated by this
Agreement should at any time be false or misleading in any material respect and
has not been cured within 10 days of Lender's notice thereof to Borrower;
(f) an attachment or levy is made upon any of Borrower's assets and such
attachment or levy is for an aggregate value in excess of $500,000.00 or a
judgment is rendered against Borrower or any of Borrower's property involving a
liability of more than $500,000, which shall not have been vacated, discharged,
stayed or bonded pending appeal within thirty (30) days from the entry thereof;
(g) any change in Borrower's condition or affairs (financial or otherwise) which
in Lender's good faith opinion impairs the Collateral or the ability of Borrower
to perform its Obligations;
(h) Subject to liens permitted hereunder, any lien created hereunder or under
any Ancillary Agreement for any reason ceases to be or is not a valid and
perfected lien having a first priority interest and such deficiency has not been
cured within 10 days of Lender's notice thereof to Borrower;
(i) if Borrower shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property, (ii) make a general assignment
for the benefit of creditors, (iii) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt
or insolvent, (v) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vi) acquiesce to, or fail to have
dismissed, within sixty (60) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing;
(j) Borrower shall admit in writing its inability, or be generally unable to pay
its debts as they become due or cease operations of its present business;
(k) as long as Original Owner retains ownership of at: least an interest equal
to Material ownership of the Borrower, then if the Original Owner or any
Subsidiary of the Borrower shall (i) apply for or consent to the appointment of,
or the taking possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii) admit in writing
its inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business, (iii) make a general assignment for
the benefit of creditors, (iv) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt
or insolvent, (vi) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, within sixty (60) days, any petition filed against it in any
involuntary case under such bankruptcy laws, (viii) take any action for the
purpose of effecting any of the foregoing;
(1) Borrower directly or indirectly sells, assigns, transfers, conveys, or
suffers or permits to occur any sale, assignment, transfer or conveyance of any
assets of Borrower which are subject to Lender's security interest of lien or
any interest therein with an aggregate value of more than $1,000,000.00 except
as permitted herein;
(m) Lender shall in good ▇▇▇▇▇ ▇▇▇▇ itself insecure or unsafe or shall fear
diminution in value, removal or waste of the Collateral in an amount in excess
of $500,000.00 as measured from the Closing Date;
(n) a default by Borrower in the payment, when due, any principal of or interest
on any indebtedness for money borrowed in excess of the aggregate amount of
$1,000,000.00;
(p) any Change of Ownership;
(q) merger by the Borrower with any other entity or Person without the prior
written consent by the Lender.
19. Remedies. (a) upon the occurrence of an Event of Default pursuant to Section
18(i) herein, all Obligations shall be immediately due and payable and this
Agreement shall be deemed terminated; upon the occurrence and continuation of
any other the Events of Default, Lender shall have the right to demand repayment
in full of all Obligations, whether or not otherwise due. Until all Obligations
have been fully satisfied, Lender shall retain its security interest in all
Collateral. Lender shall have, in addition to all other rights provided herein,
the rights and remedies of a secured party under the Uniform Commercial Code,
and under other applicable law, all other legal and equitable rights to which
Lender may be entitled, including without limitation, the right to take
immediate possession of the Collateral, to require Borrower to assemble the
Collateral, at Borrower's expense, and to make it available to Lender at a place
designated by Lender which is reasonably convenient to both parties and to enter
any of the premises of Borrower or wherever the Collateral shall be located,
with or without force or process of law, and to keep and store the same on said
premises until sold (and if said premises be the property of Borrower, Borrower
agrees not to charge Lender for storage thereof for a period up to at least
sixty (60) days after sale or disposition of said Collateral). Further, Lender
may, at any time or times after default by Borrower, sell and deliver all
Collateral held for or by Lender at public or private sale for cash, upon credit
or otherwise, at such prices and upon such terms as Lender, in Lender's sole
discretion, deems advisable or Lender may otherwise recover upon the Collateral
in any commercially reasonable manner as Lender, in its sole discretion, deems
advisable. Except as to that part of the Collateral which is perishable or
threatens to decline speedily in nature or is of a type customarily sold on a
recognized market, the requirement of reasonable notice shall be met if such
notice is received by Borrower at Borrower's address as set forth herein, at
least ten (10) days before the time of the event of which notice is being given.
Lender may be the purchaser at any sale, if it is public. In connection with the
exercise of the foregoing remedies, Lender is granted permission to use all of
Borrower's trademarks, tradenames, tradestyles, patents, patent applications,
licenses, franchises and other proprietary rights which are used in connection
with (a) Inventory for the purpose of disposing of such Inventory and (b)
Equipment for the purpose of completing the manufacture of unfinished goods. The
proceeds of sale shall be applied first to all costs and expenses of sale,
including attorneys, fees, and second to the payment (in whatever order Lender
elects) of all Obligations. Lender will return any excess to Borrower and
Borrower shall remain liable to Lender for any deficiency.
20. Waiver; Cumulative Remedies. Failure by Lender to exercise any right, remedy
or option under this Agreement or any supplement hereto or any other agreement
between Borrower and Lender or delay by Lender in exercising the same, will not
operate as a waiver; no waiver by Lender will be effective unless it is in
writing and then only to the extent specifically stated. Lender's rights and
remedies under this Agreement will be cumulative and not exclusive of any other
right or remedy which Lender may have.
21. Application of Payments. Borrower irrevocably waives the right to direct the
application of any and all payments at any time or times hereafter received by
Lender or on Borrower's behalf and Borrower hereby irrevocably agrees that
Lender shall have the continuing exclusive right to apply and reapply any and
all payments received at any time or times hereafter against Borrower's
obligations hereunder in such manner as Lender may deem advisable
notwithstanding any entry by Lender upon any of Lender's books and records.
22. Depository Accounts. Any payment received by Borrower on account of any
Receivables or Spare Parts Inventory shall be held by Borrower in trust for
Lender and Borrower shall promptly deliver same in kind to Lender or deposit all
such payments into a cash collateral account at such bank as Lender may
designate for application to payment of the Obligations.
23. Lock Box Accounts. Borrower shall, at Lender's request, instruct all of its
Customers to make such payments on account of Receivables to an account under
Lender's dominion and control at such bank in the United States as Lender may
designate.
24. Revival. Borrower further agrees that to the extent Borrower makes a payment
or payments to Lender, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any ocher party under any
bankruptcy act, state or federal law, common law or equitable cause, then, to
the extent of such payment or repayment, the obligation or part thereof intended
to be satisfied shall be revived and continued in full force and effect as if
said payment had not been made.
25. Notices. Any notice or request (except a request under Section 4 hereof)
hereunder may be given to Borrower or Lender at the respective addresses set
forth below or as may hereafter be specified in a notice designated as a change
of address under this paragraph. Any notice or request (except a request under
Section 4 hereof) hereunder shall be given by registered or certified mail,
return receipt requested, or by overnight mail or by telecopy (confirmed by
mail). Notices and requests shall be, in the case of those by mail or overnight
mail, deemed to have been given when received
Notices shall be provided as follows:
If to the Lender:
BNY Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Borrower:
WORLD AIRWAYS, INC.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, CFO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
26. Governing Law and Waiver of Jury Trial. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT TAKING INTO ACCOUNT THE CONFLICT OF LAWS PROVISIONS THEREOF. LENDER
SHALL HAVE THE RIGHTS AND REMEDIES OF A SECURED PARTY UNDER APPLICABLE LAW
INCLUDING, BUT NOT LIMITED TO, THE UNIFORM COMMERCIAL CODE OF NEW YORK. BORROWER
AGREES THAT ALL ACTIONS AND PROCEEDINGS RELATING DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT OR ANY ANCILLARY AGREEMENT OR ANY OTHER OBLIGATIONS SHALL BE LITIGATED
IN THE FEDERAL DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK AND THAT SUCH
COURTS ARE CONVENIENT FORUMS AND BORROWER SUBMITS TO THE PERSONAL JURISDICTION
OF SUCH COURTS. BORROWER WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS SERVICE
OF PROCESS UPON BORROWER MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, DIRECTED TO BORROWER AT BORROWER'S ADDRESS APPEARING ON
LENDER'S RECORDS, AND SERVICE SO MADE SHALL BE DEEMED COMPLETED WHEN RECEIVED BY
BORROWER. BOTH PARTIES HERETO WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING BETWEEN BORROWER AND LENDER AND BORROWER WAIVES THE RIGHT TO
ASSERT IN ANY ACTION OR PROCEEDING INSTITUTED BY LENDER WITH REGARD TO THIS
AGREEMENT OR ANY OF THE OBLIGATIONS ANY OFFSETS OR COUNTERCLAIMS WHICH IT MAY
HAVE.
27. Limitation of Liability. Borrower acknowledges and understands that in order
to assure repayment of the Obligations hereunder Lender may be required to
exercise any and all of Lender's rights and remedies hereunder and agrees that
neither Lender nor any of Lender's agents shall be liable for acts taken or
omissions made in connection herewith or therewith except for actual bad faith
or gross negligence.
28. Entire Understanding. This Agreement and the Ancillary Agreements contain
the entire understanding between Borrower and Lender and any promises,
representations, warranties or guarantees not herein contained shall have no
force and effect unless in writing, signed by the Borrower's and Lender's
respective officers. Neither this Agreement, the Ancillary Agreements, nor any
portion or provisions thereof may be changed, modified, amended, waived,
supplemented, discharged, cancelled or terminated orally or by any course of
dealing, or in any manner other than by an agreement in writing, signed by the
party to be charged.
29. Modification. This Agreement and the Ancillary Agreements constitute the
complete agreement between the parties with respect to the subject matter hereof
and thereof and may not be modified, altered or amended except by an agreement
in writing signed by the parties hereto and thereto.
30. Severability. Wherever possible each provision of this Agreement or the
Ancillary Agreements shall be interpreted in such manner as to be effective and
valid under applicable but if any provision of this Agreement or the Ancillary
Agreements shall be prohibited by or invalid under applicable law such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions
thereof.
31. Captions. All captions are and shall be without substantive meaning or
content of any kind whatsoever.
32. Counterparts. This Agreement may be executed in one or more counterparts,
each of which taken together shall constitute one and the same instrument.
33. Construction. The parties acknowledge that each party and its counsel have
reviewed this Agreement and that the normal rule of construction to the effect
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments, schedules or
exhibits thereto.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first above written.
WORLD AIRWAYS, INC
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CFO
Name:
Title:
[CORPORATE SEAL]
BNY FINANCIAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name:
Title
