Port Elizabeth Terminal & Warehouse Corp. - DIP Terms

DIP Terms

Borrower(s) / Guarantor(s)

• The Debtors

Agent / Lender(s)

• First Business Specialty Finance, LLC (“FBSF”), as Purchaser

DIP Commitments

• A new factoring agreement (the “DIP Factoring Agreement”) under which FBSF will purchase the debtors’ prepetition and postpetition accounts receivable.
  • Advance Rate: 93% of the face value of eligible accounts receivable, less any chargebacks.
  • Reinstatement of Existing Debt: Prepetition obligations of approximately $2.5 million are reinstated and become part of the obligations owed under the DIP Factoring Agreement.

Cash Collateral

• The debtors seek authority to use cash collateral, including cash and accounts receivable submitted to FBSF for purchase, to fund operations and expenses in accordance with an approved budget.

Fees

• Discount Fee: Prime rate plus 1%, multiplied by the unpaid face amount of purchased accounts, less any reserve.
• Factoring Fee: 0.6% of the face value of a purchased account that remains unpaid.
• FBSF is also entitled to its actual fees and costs incurred in connection with enforcing its rights or preparing documents under the DIP Factoring Agreement.

Maturity / Termination

• The agreement is subject to termination upon the occurrence of certain events of default, including but not limited to:
  • Default in the payment of any obligations or performance of any covenant.
  • Any warranty or representation proving to be false.
  • Entry of a bankruptcy court order that modifies a factoring order without FBSF’s consent, avoids or requires disgorgement of payments to FBSF, or seeks to use collateral proceeds without FBSF’s consent.
  • Any guarantor failing to perform its obligations or attempting to rescind its guaranty.
  • A guarantor becoming subject to bankruptcy or insolvency proceedings.

Use of Proceeds

• To provide working capital and fund postpetition operations.
• To pay for administrative expenses, including U.S. Trustee fees.
• To pay for employee wages and benefits.

Securities and Priorities

• Pursuant to sections 364(c) and 364(d) of the Bankruptcy Code, the debtors’ obligations to FBSF are secured by perfected liens on and security interests in all of the debtors’ current and future personal property and fixtures, with the following priorities:
  • First-priority priming liens on all assets, superior to any existing perfected and unavoidable liens, except for certain equipment or machinery to which FBSF has agreed to subordinate its interests.
  • Collateral includes, but is not limited to, accounts, chattel paper, inventory, equipment, instruments, general intangibles, and all proceeds thereof.
• The obligations are also granted a superpriority administrative expense claim with priority over all other administrative expenses.
• Upon entry of the court order, the liens are deemed perfected without the need to file additional financing statements.

Adequate Protection

FBSF

• Replacement liens on the debtors’ assets to the same extent as its prepetition security interests.

Junior Lienholders

• The debtors identify three categories of junior lienholders: equipment lenders, the U.S. Small Business Administration, and a merchant cash advance provider.
• Junior lienholders will be adequately protected through the continuation of periodic cash payments consistent with their underlying loan terms, funded by the DIP Factoring Agreement.

Avoidance Actions

• Upon entry of a final order, FBSF will be granted a first-priority lien on and security interest in all of the debtors’ causes of action under chapter 5 of the Bankruptcy Code.

Budget

• The debtors will operate pursuant to a budget, which lists expected expenses and revenues and makes certain assumptions about future expenses.

Waivers

• Modification of the automatic stay to the extent necessary to permit FBSF to implement the terms of the DIP Factoring Agreement.
• Waiver of the notice requirements under Bankruptcy Rule 6004(a) and the 14-day stay under Bankruptcy Rule 6004(h).

Stipulations / Releases

• The debtors stipulate that FBSF’s prepetition liens are valid and perfected and that purchased accounts receivable constitute a “true sale” and are not property of the bankruptcy estates.
• The debtors and other releasing parties provide a full release of any and all claims against FBSF and its affiliates related to the prepetition factoring agreement and related documents.

Conditions Precedent

• Entry of interim and final orders approving the motion.
• Delivery by the debtors of all documents necessary to implement the DIP Factoring Agreement.