-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E9Hf3CoJjwUXH0mo219xNa4ZWQPg4ieAeE6dXTNjiKhmjXuyNXxwI8LLJVG0iXdc jknO8A0m+zqbu39i7Amajw== 0001016843-97-000372.txt : 19970521 0001016843-97-000372.hdr.sgml : 19970521 ACCESSION NUMBER: 0001016843-97-000372 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970520 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WORLD FUEL SERVICES CORP CENTRAL INDEX KEY: 0000789460 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PETROLEUM & PETROLEUM PRODUCTS (NO BULK STATIONS) [5172] IRS NUMBER: 592459427 STATE OF INCORPORATION: FL FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09533 FILM NUMBER: 97611892 BUSINESS ADDRESS: STREET 1: 700 S ROYAL POINCIANA BLVD STREET 2: STE 800 CITY: MIAMI SPRINGS STATE: FL ZIP: 33166 BUSINESS PHONE: 3058842001 MAIL ADDRESS: STREET 1: 700 SOUTH ROYAL POINCIANA STREET 2: STE 800 CITY: MIAMI SPRINGS STATE: FL ZIP: 33166 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL RECOVERY CORP DATE OF NAME CHANGE: 19920703 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED MARCH 31, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM___________TO__________ COMMISSION FILE NUMBER 1-9533 WORLD FUEL SERVICES CORPORATION ---------------------------------------------------- (Exact name of registrant as specified in its charter) FLORIDA 59-2459427 - --------------------------------- --------------------------------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 700 SOUTH ROYAL POINCIANA BLVD., SUITE 800 MIAMI SPRINGS, FLORIDA 33166 - ------------------------------------------ ------------ (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including area code: (305) 884-2001 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS: ON WHICH REGISTERED: - ------------------------ ---------------------- Common Stock, New York Stock Exchange par value $0.01 per share Pacific Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definite proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K [ ]. The aggregate market value of the voting stock (which consists solely of shares of common stock) held by non-affiliates of the registrant was $162,175,000 (computed by reference to the closing sale price as of May 13, 1997). The registrant had 8,108,768 outstanding shares of common stock, par value $.01 per share, as of May 13, 1997. DOCUMENTS INCORPORATED BY REFERENCE: Part III - Definitive Proxy Statement for the 1997 Annual Meeting of Shareholders. TABLE OF CONTENTS Page ITEM 1. Business ------------------------------------------------------ General 1 History 1 Description of Business 2 Aviation Fuel Services 2 Marine Fuel Services 3 Oil Recycling 4 Potential Liability and Insurance 4 Regulation 5 ITEM 2. Properties 8 ------------------------------------------------------ ITEM 3. Legal Proceedings 10 ------------------------------------------------------ ITEM 4. Submission of Matters to a Vote of Security Holders 10 ------------------------------------------------------ ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters 11 ------------------------------------------------------ ITEM 6. Selected Financial Data 12 ------------------------------------------------------ ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 ------------------------------------------------------ ITEM 8. Financial Statements and Supplementary Data 19 ------------------------------------------------------ ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ------------------------------------------------------ 19 ITEM 10. Directors and Executive Officers of the Registrant -------------------------------------------------- 20 ITEM 11. Executive Compensation ---------------------- 20 ITEM 12. Security Ownership of Certain Beneficial Owners and Management ----------------------------------------------- 20 ITEM 13. Certain Relationships and Related Transactions 20 ---------------------------------------------- ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K --------------------------------------------------- 21 i PART I ITEM 1. BUSINESS GENERAL World Fuel Services Corporation (the "Company") markets aviation and marine fuel and recycles used oil. In its aviation fuel services business, the Company extends credit and provides around-the-world single-supplier convenience, 24-hour service, and competitively-priced aviation fuel to passenger, cargo and charter airlines. In its marine fuel services business, the Company markets marine fuel to a broad base of international shipping companies and to the U.S. military. Services include credit terms, 24-hour around-the-world service and competitively priced fuel. In its oil recycling business, the Company collects and recycles non-hazardous petroleum products and petroleum contaminated liquids throughout the southern and mid-atlantic United States. The Company sells the recycled oil to industrial and commercial customers. Financial information with respect to the Company's business segments and foreign operations is provided in Note 7 to the accompanying financial statements. HISTORY The Company was incorporated in Florida in July 1984. Its executive offices are located at 700 South Royal Poinciana Boulevard, Suite 800, Miami Springs, Florida 33166 and its telephone number at this address is (305) 884-2001. The Company presently conducts its aviation fuel services business through seven subsidiaries and a joint venture, with principal offices in Florida, England, Singapore, Mexico, Ecuador and Costa Rica. The Company conducts its marine fuel services business through three subsidiaries with principal offices in New Jersey, California, England, South Korea and Singapore, and its oil recycling business is conducted through five subsidiaries with offices in Florida, Louisiana, Maryland and Delaware. See "Item 2 - Properties" for a list of principal offices by business and "Exhibit 21 - Subsidiaries of the Registrant". The Company began operations in 1984 as a used oil recycler in the southeast United States. The Company expanded this business through acquisitions, the development of new processing technology and the establishment of new offices. In 1986, the Company diversified its operations by entering, through an acquisition, the aviation fuel services business. This new segment expanded rapidly, from a business primarily concentrated in the state of Florida, to an international sales company covering the major airports throughout the world. This expansion resulted from acquisitions and the establishment of new offices. In 1995, the Company further diversified its fuel services operations through the acquisition of a group of companies which are considered leaders in the marine fuel services business. This new segment provided the Company with operational and supplier side synergies and entry into fast growing markets in the Far East and Eastern Europe. During fiscal year 1997, the Company opened its international headquarters in San Jose, Costa Rica by establishing the wholly-owned subsidiary World Fuel International, S.A. ("WFI"). WFI serves the Company's aviation customers in Canada, South and Central America and the Caribbean basin. Page 1 See "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 1 to the accompanying financial statements for additional information. DESCRIPTION OF BUSINESS AVIATION FUEL SERVICES The Company markets aviation fuel to passenger, cargo and charter airlines. The Company has developed an extensive network which enables it to fuel customers at airports throughout the world. In general, the aviation industry is capital intensive and highly leveraged. Recognizing the financial risks of the airline industry, fuel suppliers generally refrain from extending unsecured lines of credit to smaller airlines and avoid doing business with smaller airlines directly. Consequently, most carriers are required to post a cash collateralized letter of credit or prepay for fuel purchases. This impacts the airlines' working capital. The Company recognizes that the extension of credit is a risk but also a significant area of opportunity. Accordingly, the Company extends unsecured credit to many of its customers. The Company purchases its aviation fuel from suppliers worldwide. The Company's cost of fuel is generally tied to market-based formulas or is government controlled. The Company is usually extended unsecured trade credit for its fuel purchases. However, certain suppliers require a letter of credit. The Company may prepay its fuel purchases to take advantage of financial discounts, or as required to transact business in certain countries. Outside of the United States, the Company generally does not maintain fuel inventory and arranges to have the fuel delivered directly into the customer's aircraft. The Company maintains fuel inventory at various airports in Ecuador pursuant to a joint venture. In the United States, sales are made directly into a customer's aircraft or the customer's designated storage with fuel provided by the Company's suppliers or delivered from the Company's inventory. Inventory is held at multiple locations in the United States for competitive reasons and inventory levels are kept at an operating minimum. The Company has arrangements with its suppliers and other third parties for the delivery of fuel. The primary risk in the Company's aviation fueling business is the extension of unsecured trade credit. The Company's success in attracting business has been due, in large part, to its willingness to extend credit on an unsecured basis to customers which exhibit a higher credit risk profile and would otherwise be required to prepay or post cash collateralized letters of credit with their suppliers of fuel. The Company's management recognizes that extending credit and setting appropriate reserves for receivables is largely a subjective decision based on knowledge of the customer. Active management of this risk is essential to the Company's success. A strong capital position and liquidity provide the financial flexibility necessary to respond to customer needs. Diversification of risk is difficult since the Company sells primarily within the airline industry. The Company's management meets regularly to evaluate credit exposure in the aggregate, and by individual credit. This group is also responsible for setting and maintaining credit standards and ensuring the overall quality of the credit portfolio. The level of credit granted to a customer is largely influenced by its estimated fuel requirements for thirty to forty-five days. This period of time represents the average business cycle of the Company's Page 2 typical customer. The Company regularly monitors its credit portfolio by reviewing a customer's payment patterns and estimated overall exposure, including estimated unbilled fuel sales. During the fiscal years ended March 31, 1997, 1996 and 1995, none of the Company's aviation fuel customers accounted for more than 10% of the Company's consolidated revenue. The Company currently employs 60 persons in its aviation fuel services segment. MARINE FUEL SERVICES The Company, through its Trans-Tec subsidiaries, markets marine fuel to a broad base of customers, including international container and tanker fleets, time charter operators, as well as U.S. military vessels. Fueling services are provided throughout the world. Through strategic sales offices located in the United States, Singapore, England, South Africa, South Korea and Costa Rica, Trans-Tec Services provides its customers global market intelligence and rapid access to quality and competitively priced marine fuel, 24-hours a day, every day of the year. The cost of fuel is a major component of a vessel's operating overhead. Therefore, the need for cost effective and professional fueling services is essential. As an increasing number of ship owners, time charter operators, and suppliers look to outsource their marine fuel purchasing and/or marketing needs, Trans-Tec's value added service has become an integral part of the oil and transportation industries' push to shed non-core functions. Suppliers use Trans-Tec Services' global sales, marketing and financial infrastructure to sell a spot or ratable volume of product to a diverse, international purchasing community. End customers use Trans-Tec's real time analysis of the availability, quality, and price of marine fuels in ports worldwide to maximize their competitive position. In the majority of its transactions, Trans-Tec acts as a broker and as a source of market information for the user, negotiates the transaction by arranging the fuel purchase contract between the supplier and end user, and expedites the arrangements for the delivery of fuel. For this service, Trans-Tec is paid a commission from the supplier. Trans-Tec also acts as a reseller, when it purchases the fuel from a supplier, marks it up, and resells the fuel to a customer at a profit. The Company holds no inventory and assumes minimal price risk; however, in most resale transactions the Company extends unsecured trade credit. The Company's management meets regularly to evaluate credit exposure in the aggregate, and by individual credit. This group is also responsible for setting and maintaining credit standards and ensuring the overall quality of the credit portfolio. The level of credit is largely influenced by a customer's credit history with the Company, including claims experience and payment patterns. During the fiscal years ended March 31, 1997, 1996 and 1995, none of the Company's marine fuel customers accounted for more than 10% of the Company's consolidated revenue. The Company currently employs 67 persons in its marine fuel services segment. Page 3 OIL RECYCLING The Company, through its International Petroleum Corporation subsidiaries ("IPC"), collects, blends, and recycles petroleum products and petroleum contaminated water. The Company's recycled oil products are sold primarily to industrial and commercial customers. The Company generates revenue from the sale of its recycled oil products and from fees paid by customers for the collection of used oil, contaminated water and other non-hazardous liquids. IPC collects only non-hazardous waste oil, waste water, anti-freeze and petroleum contaminated liquids from generators such as service stations, quick lube shops, automobile dealerships, and industrial, governmental, marine, and utility generators. The Company uses its own fleet of trucks to collect approximately 60 percent of its needs from generators within close proximity to its facilities. The balance is sourced from independent collectors. Every shipment is analyzed on-site or at the Company's laboratories to determine its specifications and the treatment needed to convert the waste fluid into marketable fuel products. The Company has three recycling facilities. The facilities located in Plant City, Florida and Wilmington, Delaware utilize a closed-loop, two stage distillation process. The resulting recycled oil product is sold as is, or it may be blended to customer specification. The Company's products range from commercial diesel fuel to #6 grade residual oil. The Company's third recycling facility, located in New Orleans, Louisiana, utilizes a batch recycling process. The Company also has a collection and transfer facility in Baltimore, Maryland, which has limited processing and blending capabilities. The used oil industry is highly fragmented and consists primarily of small scale operators that collect and resell used oil, many of which lack the necessary facilities to adequately test and recycle the oil. However, the industry also includes a few large-scale operators that have the facilities to collect, re-refine, and market lubricating products. During the fiscal years ended March 31, 1997, 1996 and 1995, none of the Company's recycled fuel customers accounted for more than 10% of the Company's consolidated revenue. The Company currently employs 140 persons in the oil recycling segment. POTENTIAL LIABILITY AND INSURANCE The Company, through the use of subcontractors and its own operations, transports, stores or processes flammable aviation, marine and residual fuel subjecting it to possible claims by employees, customers, regulators and others who may be injured. In addition, the Company may be held liable for the clean-up costs of spills or releases of materials from its facilities or vehicles, or for damages to natural resources arising out of such events. The Company follows what it believes to be prudent procedures to protect its employees and customers and to prevent spills or releases of these materials. The Company's domestic and international fueling activities also subject it to the risks of significant potential liability under federal and state statutes, common law and contractual indemnification agreements. The Company has general and automobile liability insurance coverage, including the statutory Motor Carrier Act/MCS 90 endorsement for sudden and accidental pollution. In the aviation and marine fuel segments, the Company utilizes subcontractors which provide various services to customers, including intoplane fueling at airports, fueling of vessels in port and at sea, and Page 4 transportation and storage of fuel and fuel products. Although the Company generally requires its subcontractors to carry liability insurance, not all subcontractors carry adequate insurance. The Company's liability insurance policy does not cover the acts or omissions of its subcontractors. If the Company is held responsible for any liability caused by its subcontractors, and such liability is not adequately covered by the subcontractor's insurance and is of sufficient magnitude, the Company's financial position and results of operations will be adversely affected. The Company has exited several environmental businesses which handled hazardous waste. This waste was transported to various disposal facilities and/or treated by the Company. The Company may be held liable as a potentially responsible party for the clean-up of such disposal facilities in certain cases pursuant to current federal and state laws and regulations. The Company continuously reviews the adequacy of its insurance coverage. However, the Company lacks coverage for various risks. A claim arising out of the Company's activities, if successful and of sufficient magnitude, will have a material adverse effect on the Company's financial position and results of operations. REGULATION The Company's operations are subject to substantial regulation by federal, state and local government agencies, including, but not limited to, regulations which restrict the transportation, storage and disposal of hazardous waste and the collection, transportation, processing, storage, use and disposal of waste oil. The principal U.S. federal statutes affecting the business of the Company and the markets it serves are as follows: THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980 ("SUPERFUND" OR "CERCLA") establishes a program for federally directed response or remedial actions with respect to the uncontrolled discharge of hazardous substances, pollutants or contaminants, including waste oil, into the environment. The law authorizes the federal government either to seek a binding order directing responsible parties to undertake such actions or authorizes the federal government to undertake such actions and then to seek compensation for the cost of clean-up and other damages from potentially responsible parties. Congress established a federally-managed trust fund, commonly known as the Superfund, to fund response and remedial actions undertaken by the federal government. The trust fund is used to fund federally conducted actions when no financially able or willing responsible party has been found. THE SUPERFUND AMENDMENTS AND RE-AUTHORIZATION ACT OF 1986 ("SARA") adopted more detailed and stringent standards for remedial action at Superfund sites, and clarified provisions requiring damage assessments to determine the extent and monetary value of injury to natural resources. SARA also provides a separate funding mechanism for the clean-up of underground storage tanks. THE RESOURCE CONSERVATION AND RECOVERY ACT OF 1976 ("RCRA") established a comprehensive regulatory framework for the management of hazardous waste at active facilities, complementing the Superfund program which addresses inactive and abandoned waste sites. RCRA sets up a "cradle-to-grave" system for the management of hazardous waste, imposing upon all parties who generate, Page 5 transport, treat, store or dispose of waste, above certain minimum quantities, requirements for performance, testing and record keeping. RCRA also requires new and existing facilities to obtain permits for construction, operation and closure and requires 30 years of post-closure care and monitoring. RCRA was amended in 1984 to increase the scope of RCRA regulation of small quantity waste generators and waste oil handlers and recyclers; require corrective action at hazardous waste facilities (including remediation at certain previously closed solid waste management units); phase in restrictions on land disposal of hazardous waste; and require the identification and regulation of underground storage tanks containing petroleum and certain chemicals. On November 29, 1985, the Environmental Protection Agency ("EPA") issued final regulations under RCRA which restrict the burning of waste oil. These regulations prohibit burning waste oil in non-industrial boilers unless the oil meets certain standards for levels of lead, arsenic, chromium, chlorine, cadmium, and flashpoint. The regulations do not restrict the burning of waste oil in industrial boilers and furnaces. These regulations have not had a significant impact on the Company's business because the Company does not presently sell burner fuel to non-industrial burners. Industrial burners of recycled oil, however, must comply with certain notification and administrative procedures. THE CLEAN AIR ACT OF 1970, as amended in 1977, was the first major federal legislation enacted after NEPA became law. The Act authorized the EPA to establish National Ambient Air Quality Standards for certain pollutants, which are to be achieved by the individual states through State Implementation Plans ("SIPs"). SIPs typically attempt to meet ambient standards by regulating the quantity and quality of emissions from specific industrial sources. For toxic emissions, the Act authorizes the EPA to regulate emissions from industrial facilities directly. The EPA also directly establishes emissions limits for new sources of pollution, and is responsible for ensuring compliance with air quality standards. The Clean Air Act Amendments of 1990 place the primary responsibility for the prevention and control of air pollution upon state and local governments. The 1990 amendments require regulated emission sources to obtain operating permits, which could impose emission limitations, standards, and compliance schedules. THE CLEAN WATER ACT OF 1972, as amended in 1987, establishes water pollutant discharge standards applicable to many basic types of manufacturing plants and imposes standards on municipal sewage treatment plants. The Act requires states to set water quality standards for significant bodies of water within their boundaries and to ensure attainment and/or maintenance of those standards. Most industrial and government facilities must apply for and obtain discharge permits, monitor pollutant discharges, and under certain conditions reduce certain discharges. Page 6 THE SAFE DRINKING WATER ACT, as amended in 1986, regulates public water supplies by requiring the EPA to establish primary drinking water standards. These standards are likely to be further expanded under the EPA's evolving groundwater protection strategy which is intended to set levels of protection or clean-up of the nation's groundwater resources. These groundwater quality requirements will then be applied to RCRA facilities and CERCLA sites, and remedial action will be required for releases of contaminants into groundwater. THE INTERNATIONAL CONVENTION FOR THE PREVENTION OF POLLUTION FROM SHIPS ("MARPOL") places strict limitations on the discharge of oil at sea and in port and requires ships to transfer oily waste to certified reception facilities. The U.S. Coast Guard has issued regulations effective March 10, 1986 which implement the requirements of MARPOL. Under these regulations, each terminal and port of the United States that services oceangoing tankers or cargo ships over 400 gross tons must be capable of receiving an average amount of oily waste based on the type and number of ships it serves. The reception facilities may be fixed or mobile, and may include tank trucks and tank barges. THE NATIONAL POLLUTANT DISCHARGE ELIMINATION SYSTEM ("NPDES"), a program promulgated under the Clean Water Act, permits states to issue permits for the discharge of pollutants into the waters of the United States in lieu of federal EPA regulation. State programs must be consistent with minimum federal requirements, although they may be more stringent. NPDES permits are required for, among other things, certain industrial discharges of storm water. THE OIL POLLUTION ACT OF 1990 imposes liability for oil discharges, or threats of discharge, into the navigable waters of the United States on the owner or operator of the responsible vessel or facility. Oil is defined to include oil refuse and oil mixed with wastes other than dredged spoil, but does not include oil designated as a hazardous substance under CERCLA. The Act requires the responsible party to pay all removal costs, including the costs to prevent, minimize or mitigate oil pollution in any case in which there is a substantial threat or an actual discharge of oil. In addition, the responsible party may be held liable for damages for injury to natural resources, loss of use of natural resources and loss of revenues from the use of such resources. STATE AND LOCAL GOVERNMENT REGULATIONS. Many states have been authorized by the EPA to enforce regulations promulgated under RCRA and other federal programs. In addition, there are numerous state and local authorities that regulate the environment, some of which impose stricter environmental standards than federal laws and regulations. Some states, including Florida, have enacted legislation which generally provides for registration, recordkeeping, permitting, inspection, and reporting requirements for transporters, collectors and recyclers of hazardous waste and waste oil. The penalties for violations of state law include injunctive relief, recovery of damages for injury to air, water or property and fines for non-compliance. In addition, some local governments have established local pollution control programs, which include environmental permitting, monitoring and surveillance, data collection and local environmental studies. Page 7 EXCISE TAX ON DIESEL, AVIATION AND MARINE FUEL. The Company's aviation and marine fueling operations are affected by various federal and state taxes imposed on the purchase and sale of aviation and marine fuel products in the United States. Federal law imposes a manufacturer's excise tax on sales of aviation and marine fuel. Sales to aircraft and vessels engaged in foreign trade are exempt from this tax. These exemptions may be realized either through tax-free or tax-reduced sales, if the seller qualifies as a producer under applicable regulations, or, if the seller does not so qualify, through a tax-paid sale followed by a refund to the exempt user. Several states, where the Company sells aviation and marine fuel, impose excise and sales taxes on fuel sales; certain sales of the Company qualify for full or partial exemptions from these state taxes. ITEM 2. PROPERTIES The following pages set forth by segment and subsidiary the principal properties owned or leased by the Company as of May 9, 1997. The Company considers its properties and facilities to be suitable and adequate for its present needs. The Company generally enters into installment notes to finance the replacement, upgrade or expansion of its vehicles and equipment. For additional information with respect to obligations under the Company's installment notes, see Note 2 to the financial statements appearing elsewhere in this report. Page 8
WORLD FUEL SERVICES CORPORATION and SUBSIDIARIES PROPERTIES OWNER/LESSEE and LOCATION PRINCIPAL USE OWNED or LEASED - ------------------------- ------------- --------------- CORPORATE World Fuel Services Corporation Executive offices Leased to June 1998 700 S. Royal Poinciana Blvd., Suite 800 Miami Springs, FL 33166 AVIATION FUELING World Fuel Services of FL Administrative, operations Leased to June 1998 700 S. Royal Poinciana Blvd., and sales offices Suite 800 Miami Springs, FL 33166 World Fuel Services, Inc. 700 S. Royal Poinciana Blvd., Administrative, operations Leased to June 1998 Suite 800 and sales offices Miami Springs, FL 33166 2707 N. Loop West, Administrative, operations Leased month-to-month Suite 150 and sales offices Houston, Texas 77008 4995 East Anderson Avenue Administrative, operations Leased month-to-month Fresno, CA 93727 and sales offices World Fuel International S.A. Administrative, operations Leased to May 1998 Oficentro Ejecutivo La Sabana Sur and sales offices Edificio #5, Primer Piso San Jose, Costa Rica World Fuel Services LTD. Administrative, operations Leased month-to-month London Gatwick Hilton and sales offices Suite 1211, Gatwick Airport West Sussex, RH6 0LL United Kingdom World Fuel Services (Singapore) Administrative, operations Leased to June 2000 PTE., LTD and sales offices 101 Thomson Road #09-03A, United Square Singapore 307591 PetroServicios de Mexico S.A. de C.V. Administrative, operations Leased to March 1999 Av. Fuerza Aerea Mexicana No. 465 and sales offices Colonia Federal 15700 Mexico, D.F. MARINE FUELING Trans-Tec Services (Signapore) Administrative, operations Leased to June 2000 PTE., LTD. and sales offices 101 Thomson Road #09-03A, United Square Singapore 307591 Trans-Tec Services (UK) LTD. 65 Petty France Administrative, operations Leased to December 1997 London SW1H 9EU and sales offices Gammelbyved 2 Administrative, operations Leased month-to-month Karise, Denmark 4653 and sales offices
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WORLD FUEL SERVICES CORPORATION and SUBSIDIARIES PROPERTIES (Continued) OWNER/LESSEE and LOCATION PRINCIPAL USE OWNED or LEASED - ------------------------- ------------- --------------- MARINE FUELING (continued) Trans-Tec Services, Inc. Glenpointe Center West Administrative, operations Leased to May 2002 500 Frank W. Burr Blvd. and sales offices Teaneck, NJ 07666 60 East Sir Francis Drake, No.301 Administrative, operations Leased to December 1999 Larksur, CA 94939 and sales offices 2nd Floor Kipun Building Administrative, operations Leased to December 1997 200 Naeja-Dong and sales offices Chongru-Ku Seoul, Korea Oficentro Ejecutivo La Sabana Sur Administrative, operations Leased to May 1998 Edificio #5, Primer Piso and sales offices San Jose, Costa Rica Seagram House, 2nd Floor Administrative, operations Leased to September 1998 71 Dock Road, Waterfront and sales offices Capetown, South Africa 8001 OIL RECYCLING International Petroleum Corporation Storage tanks, recycling Leased to August 2001 105 South Alexander Street plant, laboratory and Plant City, FL 33566 administrative offices International Petroleum Corp. of Storage tanks, recycling Owned Delaware plant, laboratory and 505 South Market Street administrative offices Wilmington, DE 19801 International Petroleum Corp. of LA Storage tanks, recycling Leased to August 2001 14890 Intracostal Drive plant, laboratory and New Orleans, LA 70129 administrative offices International Petroleum Corp. of Storage tanks, recycling Owned Maryland plant, laboratory and 6305 East Lombard Street administrative offices Baltimore, MD 21224
ITEM 3. LEGAL PROCEEDINGS There are no material legal proceedings to which the Company or any of its subsidiaries is a party. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of stockholders, through the solicitation of proxies or otherwise, during the fourth quarter of fiscal year 1997. Page 10 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock is traded on the New York Stock Exchange and the Pacific Stock Exchange under the symbol INT. The following table sets forth, for each quarter within the fiscal years ended March 31, 1997 and 1996, the sale prices of the Company's common stock as reported by the New York Stock Exchange and the quarterly cash dividends per share of common stock declared during the periods indicated. The amounts shown have been restated to reflect a 3-for-2 stock split of the Company's common stock which was effective June 19, 1995. See Note 4 to the financial statements included as part of this report. PRICE CASH --------------- DIVIDENDS HIGH LOW PER SHARE ------- ------- --------- Year ended March 31, 1997 First quarter $19 5/8 $16 5/8 $.075 Second quarter 18 5/8 15 5/8 .075 Third quarter 22 1/2 16 .075 Fourth quarter 22 5/8 17 5/8 .075 Year ended March 31, 1996 $15 3/4 $11 1/8 $.050 First quarter 16 12 7/8 .050 Second quarter 15 7/8 13 1/4 .050 Third quarter 18 3/8 15 1/8 .050 Fourth quarter As of May 13, 1997, there were 321 shareholders of record of the Company's common stock. On May 13, 1997 the Company's Board of Directors approved the following cash dividend schedule for the 1998 fiscal year: DECLARATION DATE PER SHARE RECORD DATE PAYMENT DATE - ---------------- --------- ----------- ------------ June 4, 1997 $ 0.075 June 19, 1997 July 2, 1997 September 4, 1997 $ 0.075 September 19, 1997 October 2, 1997 December 4, 1997 $ 0.075 December 19, 1997 January 2, 1998 March 4, 1998 $ 0.075 March 19, 1998 April 2, 1998 The Company's loan agreement with NationsBank restricts the payment of cash dividends to a maximum of 25% of net income for the preceding four quarters. The Company's payment of the above dividends is in compliance with the NationsBank loan agreement. Page 11 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data has been summarized from the Company's consolidated financial statements set forth in Item 8 of this report. The selected financial data should be read in conjunction with the notes set forth at the end of these tables, the consolidated financial statements and the related notes thereto, and "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations."
SELECTED FINANCIAL DATA Fiscal Year Ended March 31, ------------------------------------------------------------- 1997 1996 1995 1994 1993 ----- ------- ------- ------- ------- (In thousands, except earnings per share data) CONSOLIDATED INCOME STATEMENT DATA Revenue $ 772,618 $ 642,299 $ 361,891 $ 250,527 $ 254,767 Cost of Sales 725,991 601,930 334,134 223,576 230,847 -------- -------- ------- ------- ------- Gross profit 46,627 40,369 27,757 26,951 23,920 Operating Expenses 31,001 25,423 16,508 17,181 15,854 -------- -------- ------- ------- ------- Income from operations 15,626 14,946 11,249 9,770 8,066 Other income (expense), net 2,243 1,875 1,774 (1,333) 180 -------- -------- ------- ------- ------- Income from continuing operations before income taxes 17,869 16,821 13,023 8,437 8,246 Provision for income taxes 4,604 5,876 4,935 3,242 2,984 -------- -------- ------- ------- ------- Net income from continuing operations 13,265 10,945 8,088 5,195 5,262 Loss from operations and disposal of discontinued operations (net of applicable income taxes) - - - - (3,715) ------- -------- ------- ------- ------- Net income $ 13,265 $ 10,945 $ 8,088 $ 5,195 $ 1,547 ======= ======== ======= ======= ======= Earnings (losses) per common and common equivalent share: Income from continuing operations $ 1.62 $ 1.35 $ 1.10 $ 0.73 $ 0.74 Loss from discontinued operations - - - - (0.52) ------- ------- ------- ------- ------- Net income $ 1.62 $ 1.35 $ 1.10 $ 0.73 $ 0.22 ======== ======= ======= ======= ======= Weighted average shares outstanding 8,197 8,100 7,359 7,101 7,124 ======== ======= ======= ======= =======
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SELECTED FINANCIAL DATA (Continued) AS OF MARCH 31, --------------------------------------------------- 1997 1996 1995 1994 1993 ------- -------- -------- -------- -------- (In thousands) CONSOLIDATED BALANCE SHEET DATA Current assets $ 93,436 $ 83,252 $ 58,006 $ 33,682 $ 39,263 Total assets 123,139 111,974 89,536 53,687 54,717 Current liabilities 44,851 43,706 30,486 13,141 15,587 Long-term liabilities 3,030 4,518 6,984 575 4,760 Stockholders' equity 75,258 63,750 52,066 39,971 34,370
- ------------------------ Notes to Selected Financial Data: During the first quarter of fiscal year 1996, the Company issued 117,825 shares of the Company's common stock in payment of its portion of the class action settlement made in February 1994. Accordingly, the Company reclassified $1,300,000 from current liabilities to accrued litigation settlement expense, a long-term liability, as of March 31, 1995. No cash dividends were declared or paid prior to fiscal year 1995. See Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters. Effective January 1, 1995, the Company acquired the Trans-Tec group of companies. The acquisition was accounted for under the purchase method. Accordingly, the selected financial information for the year ended March 31, 1995, includes the results of the Trans-Tec group since January 1, 1995. In June 1995, the Board of Directors approved a 3-for-2-stock split for all shares of common stock outstanding as of June 19, 1995. The shares were distributed on June 27, 1995. Accordingly, all share and per share data, as appropriate, have been retroactively adjusted to reflect the effects of this split. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with "Item 6 - Selected Financial Data," and with the consolidated financial statements and related notes thereto appearing elsewhere in this report. RESULTS OF OPERATIONS In January 1995, the Company entered the marine fuel business through the acquisition of the Trans-Tec group of companies. The acquisition of the Trans-Tec group of companies has been accounted for under the purchase method. Accordingly, the consolidated statement of income for the fiscal year ended March 31, 1995, includes the results of operations of the Trans-Tec group of companies from the acquisition date. Profit from the Company's aviation fuel business is directly related to the volume and the margins achieved on sales, as well as the extent to which the Company is required to provision for potential bad debts. Profit from the Company's marine fuel business is determined primarily by the volume of brokering business generated and by the volume and margins achieved on marine fuel sales, as well as the extent to which the Company is required to provision for potential bad debts. The Company's profit Page 13 from oil recycling is principally determined by the volume and margins of recycled oil sales and used oil collection revenue. FISCAL YEAR ENDED MARCH 31, 1997 COMPARED TO THE FISCAL YEAR ENDED MARCH 31, 1996 The Company's revenue for the fiscal year ended March 31, 1997 was $772,618,000, an increase of $130,319,000, or 20.3%, as compared to revenue of $642,299,000 for the prior fiscal year. The Company's revenue during these periods was attributable to the following segments: FISCAL YEAR ENDED MARCH 31, 1997 1996 ------------- ------------ Aviation Fueling $ 381,236,000 $ 302,101,000 Marine Fueling 368,470,000 321,216,000 Oil Recycling 22,912,000 18,993,000 Intersegment Eliminations -- (11,000) ------------- ------------- Total Revenue $ 772,618,000 $ 642,299,000 ============= ============= The aviation fueling segment contributed $381,236,000 in revenue for the fiscal year ended March 31, 1997. This represented an increase in revenue of $79,135,000, or 26.2%, as compared to the prior fiscal year. The increase in revenue was due to an increase in volume and the average price per gallon sold. The marine fueling segment contributed $368,470,000 in revenue for the fiscal year ended March 31, 1997, an increase of $47,254,000, or 14.7%, over the prior fiscal year. The increase in revenue was related to an increase in the average price per metric ton sold and brokered, partially offset by a decrease in the volume of metric tons brokered. The oil recycling segment contributed $22,912,000 in revenue for the fiscal year ended March 31, 1997, an increase of $3,919,000, or 20.6%, as compared to the prior fiscal year. The increase in revenue was due to an increase in volume and the average sales price per gallon of recycled oil sold, and higher used oil and waste water collection revenue. The Company's gross profit for the fiscal year ended March 31, 1997, was $46,627,000, an increase of $6,258,000, or 15.5%, as compared to the prior fiscal year. The Company's gross margin decreased from 6.3% for the fiscal year ended March 31, 1996 to 6.0% for the fiscal year ended March 31, 1997. The decrease resulted primarily from an overall increase in the average sales price per gallon sold in the Company's aviation segment, despite an increase in the average gross profit per gallon sold. The Company's aviation fueling business achieved a 6.0% gross margin for the fiscal year ended March 31, 1997, as compared to 6.7% achieved for the prior fiscal year. The Company's marine fueling segment achieved a 4.4% gross margin for the fiscal year ended March 31, 1997, as compared to a 4.3% gross margin for the prior fiscal year. The gross margin in the Company's oil recycling segment remained relatively constant at 33.4% for the fiscal year ended March 31, 1997, as compared to 33.5% for the prior fiscal year. Total operating expenses for the fiscal year ended March 31, 1997 were $31,001,000, an increase of $5,578,000, or 21.9%, as compared to the prior fiscal year. Operating expenses increased partly as a Page 14 result of the Company's international expansion. During this period, the Company devoted substantial resources to the expansion of its international infrastructure, adding professional staff, implementing telecommunications, sales, operational and accounting systems, and establishing an international headquarters office in Costa Rica. The increase in operating expenses also resulted from an increase of $2,398,000 in the provision for bad debts in the aviation fueling segment. The Company's income from operations for the fiscal year ended March 31, 1997 was $15,626,000, an increase of $680,000, or 4.5%, as compared to the prior fiscal year. Income from operations during these periods was attributable to the following segments: FISCAL YEAR ENDED MARCH 31, 1997 1996 ------------- ------------ Aviation Fueling $ 10,620,000 $ 12,858,000 Marine Fueling 5,013,000 3,425,000 Oil Recycling 5,020,000 3,976,000 Corporate Overhead (5,027,000) (5,313,000) ------------- ------------- Total Income from Operations $ 15,626,000 $ 14,946,000 ============= ============= The aviation fueling segment's income from operations was $10,620,000 for the fiscal year ended March 31, 1997, a decrease of $2,238,000, or 17.4%, as compared to the prior fiscal year. This resulted from an increase in operating expenses, due to expenses incurred in the Company's international expansion and a higher provision for bad debts. The increase in operating expenses was partially offset by an increase in the volume and gross profit of product sold. The Company's aviation fueling segment also earned $1,773,000 from its Ecuador joint venture during the fiscal year ended March 31, 1997, as compared to $1,748,000 during the prior fiscal year. The results of the joint venture are shown in Other income, net. The marine fueling segment earned $5,013,000 in income from operations for the fiscal year ended March 31, 1997, an increase of $1,588,000, or 46.4%, as compared to the prior fiscal year. The increase was related primarily to an increase in the average gross profit per metric ton sold, partially offset by a decrease in the volume of metric tons brokered and higher operating expenses. Income from operations of the oil recycling segment increased by $1,044,000, or 26.3%, for the fiscal year ended March 31, 1997, as compared to the prior fiscal year. This improvement resulted from an increase in the volume and average gross profit per gallon of recycled oil sold. Corporate overhead costs not charged to the business segments totaled $5,027,000 for the fiscal year ended March 31, 1997, a decrease of $286,000, or 5.4%, as compared to the prior fiscal year. The Company's effective income tax rate for the fiscal year ended March 31, 1997 was 25.8%, as compared to 34.9% for the prior fiscal year. The decrease resulted largely from an overall decline in foreign income taxes. Net income for the fiscal year ended March 31, 1997 was $13,265,000, an increase of $2,320,000, or 21.2%, as compared to net income of $10,945,000 for the fiscal year ended March 31, 1996. Earnings per share of $1.62 for the fiscal year ended March 31, 1997 exhibited a $0.27, or 20.0%, increase over the $1.35 achieved during the prior fiscal year. Page 15 FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO THE FISCAL YEAR ENDED MARCH 31, 1995 The Company's revenue for the fiscal year ended March 31, 1996 was $642,299,000, an increase of $280,408,000, or 77.5%, as compared to revenue of $361,891,000 for the prior fiscal year. The Company's revenue during these periods was attributable to the following segments: FISCAL YEAR ENDED MARCH 31, 1996 1995 ------------- ------------ Aviation Fueling $ 302,101,000 $ 288,728,000 Marine Fueling 321,216,000 54,578,000 Oil Recycling 18,993,000 18,591,000 Intersegment Eliminations (11,000) (6,000) ------------- ------------- Total Revenue $ 642,299,000 $ 361,891,000 ============= ============= The aviation fueling segment contributed $302,101,000 of revenue for the fiscal year ended March 31, 1996, an increase of $13,373,000, or 4.6%, as compared to the prior year. This increase was due to an increase in the average price per gallon sold, partially offset by an overall volume decrease and the termination of the fuel terminaling operations conducted at Miami International Airport, which contract was not renewed effective June 30, 1994. The marine fueling segment contributed $321,216,000 of revenue for the fiscal year ended March 31, 1996. The 1996 fiscal year included a full year of operations for the marine fuel segment, compared to only three months in the 1995 fiscal year. The oil recycling segment contributed $18,993,000 of revenue for the fiscal year ended March 31, 1996, an increase of $402,000, or 2.2%, as compared to the prior year. The revenue increase was due to higher used oil and waste water collection revenue. Partially offsetting was an overall volume decrease. The Company's gross profit of $40,369,000 increased by $12,612,000, or 45.4%, as compared to the prior year. The Company's gross margin decreased from 7.7% for the fiscal year ended March 31, 1995, to 6.3% for the fiscal year ended March 31, 1996. The decrease resulted principally from the effect of the narrower margin marine fuel services segment. The Company's aviation fueling business achieved a 6.7% gross margin for the fiscal year ended March 31, 1996, as compared to 6.9% achieved for the same period during the prior fiscal year. The Company's marine fueling segment achieved a 4.3% gross margin for the fiscal year ended March 31, 1996. The gross margin in the Company's oil recycling segment increased from 30.9% for the fiscal year ended March 31, 1995, to 33.5% for the fiscal year ended March 31, 1996. Total operating expenses for the fiscal year ended March 31, 1996 were $25,423,000, an increase of $8,915,000, or 54.0%, as compared to the prior fiscal year. This increase resulted primarily from the full year impact of operating expenses of the marine fueling segment. Page 16 The Company's income from operations for the fiscal year ended March 31, 1996 was $14,946,000, an increase of $3,697,000, or 32.9%, as compared to the prior fiscal year. Income from operations during these periods was attributable to the following segments: FISCAL YEAR ENDED MARCH 31, 1996 1995 ------------- ------------ Aviation Fueling $ 12,858,000 $ 12,304,000 Marine Fueling 3,425,000 220,000 Oil Recycling 3,976,000 2,973,000 Corporate Overhead (5,313,000) (4,248,000) ------------- ------------- Total Income from Operations $ 14,946,000 $ 11,249,000 ============= ============= Income from operations of the aviation fueling segment increased $554,000, or 4.5%, for the fiscal year ended March 31, 1996, as compared to the fiscal year ended March 31, 1995. This improvement resulted from an increase in the average gross profit per gallon sold and a decrease in operating expenses due to a lower provision for bad debts. Partially offsetting were an overall volume decrease and the termination of the Company's fuel terminaling activities. The marine fueling segment earned $3,425,000 in income from operations for the fiscal year ended March 31, 1996. The gross profit of this segment was $13,766,000, reduced by $10,341,000 in operating expenses. Income from operations of the oil recycling segment increased by $1,003,000, or 33.7%, for the fiscal year ended March 31, 1996, as compared to the prior fiscal year. This improvement resulted from lower operating expenses and higher used oil and waste water collection revenue. Partially offsetting was a volume decrease. Corporate overhead costs not charged to the business segments totaled $5,313,000 for the fiscal year ended March 31, 1996, an increase of $1,065,000, or 25.1%, as compared to the prior fiscal year. This increase was due largely to higher salaries and payroll related costs. For the fiscal year ended March 31, 1996, the Company had other income, net, of $1,875,000, an increase of $101,000 over the prior fiscal year. This increase was due to a $1,204,000 increase in equity earnings of the Company's aviation fueling joint venture in Ecuador. Partially offsetting was a $737,000 decline in foreign currency exchange gains realized in fiscal 1995 and $119,000 in foreign currency exchange losses during fiscal 1996. Net income for the fiscal year ended March 31, 1996 was $10,945,000, an increase of $2,857,000, as compared to net income for the fiscal year ended March 31, 1995. Earnings per share of $1.35 for the fiscal year ended March 31, 1996 exhibited a $0.25, or 22.7% increase over the $1.10 achieved during the prior fiscal year. LIQUIDITY AND CAPITAL RESOURCES In the Company's aviation and marine fuel businesses, the primary use of capital is to finance accounts receivable. The Company maintains aviation fuel inventories at certain locations in the United States for competitive reasons, but inventory levels are kept at an operating minimum. The Company's Page 17 aviation and marine fuel businesses historically have not required significant capital investment in fixed assets as the Company subcontracts fueling services and maintains inventory at third party storage facilities. In contrast to the Company's aviation and marine fueling segments, the oil recycling segment capital requirements are for the financing of property, plant and equipment, and accounts receivable. The Company normally utilizes internally generated cash to fund capital expenditures, and secondarily the Company will utilize its available line of credit or enter into leasing or installment note arrangements to match-fund the useful life of certain long-term assets with the related debt. The Company's oil recycling operations also require working capital to purchase and carry an inventory of used oil, as well as the costs of operating the plant until the proceeds from the re-refined oil sales are received. Cash and cash equivalents amounted to $11,035,000 at March 31, 1997, as compared to $12,856,000 at March 31, 1996. The principal uses of cash during the fiscal year ended March 31, 1997 were $1,872,000 of repayments on notes payable, $2,212,000 in dividends paid on common stock and $3,199,000 used for the purchase and construction of plant, equipment and other capital expenditures. Partially offsetting these cash uses were $3,678,000 in net cash provided by operating activities, $774,000 from collections on notes receivable and $661,000 from the issuance of common stock in connection with the exercise of options. Working capital as of March 31, 1997 was $48,585,000, exhibiting a $9,039,000 increase from working capital as of March 31, 1996. As of March 31, 1997, the Company's accounts receivable, excluding the allowance for bad debts, amounted to $75,179,000, an increase of $8,071,000 as compared to the March 31, 1996 balance. In the aggregate, accounts payable, accrued expenses and customer deposits increased $916,000. The net increase in trade credit of $7,155,000 was attributed to the marine and aviation segments. The allowance for doubtful accounts as of March 31, 1997 amounted to $4,360,000, relatively unchanged when compared to the balance at March 31, 1996. During the fiscal years ended March 31, 1997 and 1996, the Company charged $5,107,000 and $2,291,000, respectively, to the provision for bad debts and had charge-offs in excess of recoveries of $5,110,000 and $2,494,000, respectively. Inventories at March 31, 1997 were $1,857,000 higher as compared to March 31, 1996. This consisted of increases in the aviation fuel services and oil recycling segments. Prepaid and other current assets as of March 31, 1997 were $5,133,000, exhibiting an increase of $2,074,000 over the March 31, 1996 balance. This is partially related to an increase in prepaid fuel and the Company's reclassification related to its aviation joint venture investment, which had previously been classified as non-current, to other current assets. Capital expenditures, which amounted to $3,199,000 for the fiscal year ended March 31, 1997, consisted primarily of $763,000 in computer and office equipment and $2,166,000 in plant, machinery and equipment related primarily to the Company's oil recycling operations. During fiscal year 1998, the Company anticipates spending approximately $2,000,000 for the upgrade of plant, machinery and equipment. The Company also anticipates spending an additional estimated $1,000,000 over the next several years to clean up contamination which was present at one of the Company's sites when it was acquired by the Company. The clean up cost will be capitalized as part of the cost of the site, up to the fair market value of the site. Page 18 Long-term liabilities as of March 31, 1997 were $3,030,000, exhibiting a $1,488,000 decrease as compared to March 31, 1996. This decrease was primarily the result of the second installment payment of $1,888,000 on the promissory notes payable related to the acquisition of the Trans-Tec group of companies, which was partially off-set by a $594,000 increase in deferred compensation. Stockholders' equity amounted to $75,258,000, or $9.28 per share, at March 31, 1997, compared to $63,750,000, or $7.93 per share, at March 31, 1996. This increase of $11,508,000 was due to $13,265,000 in earnings for the period and $661,000 due to the issuance of common stock pursuant to the exercise of stock options. Partially offsetting was $2,418,000 in cash dividends declared. The Company expects to meet its capital investment and working capital requirements for fiscal year 1998 from existing cash, operations and additional borrowings, as necessary, under its existing line of credit. The Company's business has not been significantly affected by inflation during the periods discussed in this report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Attached hereto and filed as a part of this Form 10-K are the financial statements required by Regulation S-X and the supplementary data required by Regulation S-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE No disagreements with accountants on any matter of accounting principles or practices or financial statement disclosure have been reported on a Form 8-K within the twenty-four months prior to the date of the most recent financial statement. Page 19 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information concerning the directors and executive officers of the Company set forth under the captions "Election of Directors" and "Information Concerning Executive Officers", respectively, appearing in the definitive Proxy Statement of the Company for its 1997 Annual Meeting of Shareholders (the "1997 Proxy Statement"), is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information set forth in the 1997 Proxy Statement under the caption "Compensation of Officers" and "Board of Directors - Compensation of Directors" is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under the caption "Principal Stockholders and Security Ownership of Management" in the 1997 Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the caption "Transactions with Management and Others" in the 1997 Proxy Statement is incorporated herein by reference. Page 20 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) The following consolidated financial statements are filed as a part of this report: (i) Report of Independent Certified Public Accountants. 24 (ii) Consolidated Balance Sheets as of March 31, 1997 and 1996. 25 (iii) Consolidated Statements of Income for the Years Ended March 31, 1997, 1996 and 1995. 27 (iv) Consolidated Statements of Stockholders' Equity for the Years Ended March 31, 1997, 1996 and 1995. 28 (v) Consolidated Statements of Cash Flows for the Years Ended March 31, 1997, 1996 and 1995. 29 (vi) Notes to Consolidated Financial Statements. 31 (a)(2) The following consolidated financial statement schedule is filed as a part of this report: (I) Schedule II - Valuation and Qualifying Accounts. 45 Schedules not set forth herein have been omitted either because the required information is set forth in the Consolidated Financial Statements or Notes thereto, or the information called for is not required. (a)(3) The exhibits set forth in the following index of exhibits are filed as a part of this report: EXHIBIT NO. DESCRIPTION (3) Articles of Incorporation and By-laws: (a) Articles of Incorporation are incorporated by reference to the Company's Registration Statement on Form S-18 filed February 3, 1986. (b) By-laws are incorporated by reference to the Company's Registration Statement on Form S-18 filed February 3, 1986. (4) Instruments defining rights of security holders: (a) Employee Stock Option Plan is incorporated by reference to the Company's Registration Statement on Form S-18 filed February 3, 1986. Page 21 (b) 1993 Non-Employee Directors Stock Option Plan is incorporated by reference to the Company's Schedule 14A filed June 28, 1994. (10) Material Contracts: (a) Material contracts incorporated by reference to the Company's Report on Form 10-K filed May 28, 1996: (i) Amendment to Employment Agreement with Jerrold Blair, dated March 31, 1996. (ii) Amendment to Employment Agreement with Ralph Weiser, dated March 31, 1996. (b) Material contracts filed with this Form 10-K: (i) Amended and Restated Credit Agreement, dated February 21, 1997, by and among World Fuel Services Corporation and NationsBank, N.A. (South). (ii) Promissory note, dated February 21, 1997, executed by World Fuel Services Corporation and its subsidiaries in favor of NationsBank, N.A. (South). (21) Subsidiaries of the Registrant (23) Consent of Independent Certified Public Accountants (27) Financial Data Schedule (b) No reports on Form 8-K were filed during the fourth quarter of the Company's fiscal year ended March 31, 1997. Page 22 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WORLD FUEL SERVICES CORPORATION Dated: May 13, 1997 By: /s/ JERROLD BLAIR ----------------- Jerrold Blair, President Dated: May 13, 1997 By: /s/ CARLOS A. ABAUNZA --------------------- Carlos A. Abaunza, Chief Financial Officer Pursuant to the requirements of the Security Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Dated: May 13, 1997 By: /s/ RALPH R. WEISER -------------------- Ralph R. Weiser, Director Dated: May 13, 1997 By: /s/ JERROLD BLAIR ------------------ Jerrold Blair, Director Dated: May 13, 1997 By: /s/ PHILLIP S. BRADLEY ---------------------- Phillip S. Bradley, Director Dated: May 13, 1997 By: /s/ RALPH FEUERRING ------------------- Ralph Feuerring, Director Dated: May 13, 1997 By: /s/ JOHN R. BENBOW ------------------ John R. Benbow, Director Dated: May 13, 1997 By: /s/ CELESTIN DURAND III ----------------------- Celestin Durand III, Director Dated: May 13, 1997 By: /s/ MYLES KLEIN --------------- Myles Klein, Director Dated: May 13, 1997 By: /s/ MICHAEL J. KASBAR --------------------- Michael J. Kasbar, Director Dated: May 13, 1997 By: /s/ PAUL H. STEBBINS -------------------- Paul H. Stebbins, Director Page 23 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of World Fuel Services Corporation: We have audited the accompanying consolidated balance sheets of World Fuel Services Corporation (a Florida corporation) and subsidiaries as of March 31, 1997 and 1996, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended March 31, 1997. These consolidated financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and the schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of World Fuel Services Corporation and subsidiaries as of March 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1997 in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedule II is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s/ Arthur Andersen LLP - ----------------------- ARTHUR ANDERSEN LLP Miami, Florida, May 9, 1997. Page 24 WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS March 31, --------------------------- 1997 1996 ------------ ------------ CURRENT ASSETS: Cash and cash equivalents $ 11,035,000 $ 12,856,000 Accounts receivable, net of allowance for bad debts of $4,360,000 and $4,363,000 at March 31, 1997 and 1996, respectively 70,819,000 62,745,000 Inventories 6,449,000 4,592,000 Prepaid expenses and other current assets 5,133,000 3,059,000 ------------ ------------ Total current assets 93,436,000 83,252,000 ------------ ------------ PROPERTY, PLANT AND EQUIPMENT, at cost: Land 601,000 601,000 Buildings and improvements 2,998,000 2,890,000 Office equipment and furniture 3,331,000 2,645,000 Plant, machinery and equipment 16,310,000 14,171,000 Construction in progress 135,000 67,000 ------------ ------------ 23,375,000 20,374,000 Less accumulated depreciation and amortization 7,094,000 5,856,000 ------------ ------------ 16,281,000 14,518,000 ------------ ------------ OTHER ASSETS: Unamortized cost in excess of net assets of acquired companies, net of accumulated amortization 11,785,000 12,123,000 Other 1,637,000 2,081,000 ------------ ------------ $123,139,000 $111,974,000 ============ ============ (Continued) Page 25 WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) LIABILITIES AND STOCKHOLDERS' EQUITY MARCH 31, --------------------------- 1997 1996 ------------ ------------ CURRENT LIABILITIES: Current maturities of long-term debt $ 2,191,000 $ 1,944,000 Accounts payable and accrued expenses 37,950,000 37,808,000 Customer deposits 2,241,000 1,467,000 Accrued salaries and wages 2,187,000 2,055,000 Income taxes payable 282,000 432,000 ------------ ------------ Total current liabilities 44,851,000 43,706,000 ------------ ------------ LONG-TERM LIABILITIES: Long-term debt, net of current maturities 396,000 2,103,000 Deferred compensation 2,166,000 1,572,000 Deferred income taxes 468,000 843,000 ------------ ------------ 3,030,000 4,518,000 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $1.00 par value; 100,000 shares authorized, none issued -- -- Common stock, $0.01 par value; 10,000,000 shares authorized, 8,109,000 and 8,039,000 shares issued and outstanding at March 31, 1997 and 1996, respectively 81,000 80,000 Capital in excess of par value 23,275,000 22,615,000 Retained earnings 51,959,000 41,112,000 Less treasury stock, at cost 57,000 57,000 ------------ ------------ 75,258,000 63,750,000 ------------ ------------ $123,139,000 $111,974,000 ============ ============ The accompanying notes to the consolidated financial statements are an integral part of these consolidated balance sheets. Page 26 WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR ENDED MARCH 31, ------------------------------------------ 1997 1996 1995 ------------ ------------ ------------ Revenue $772,618,000 $642,299,000 $361,891,000 Cost of sales 725,991,000 601,930,000 334,134,000 ------------ ------------ ------------ Gross profit 46,627,000 40,369,000 27,757,000 ------------ ------------ ------------ Operating expenses: Salaries and wages 14,795,000 13,266,000 8,117,000 Provision for bad debts 5,107,000 2,291,000 2,062,000 Other 11,099,000 9,866,000 6,329,000 ------------ ------------ ------------ 31,001,000 25,423,000 16,508,000 ------------ ------------ ------------ Income from operations 15,626,000 14,946,000 11,249,000 ------------ ------------ ------------ Other income, net: Equity in earnings of aviation joint venture 1,773,000 1,748,000 544,000 Other, net 470,000 127,000 1,230,000 ------------ ------------ ------------ 2,243,000 1,875,000 1,774,000 ------------ ------------ ------------ Income before income taxes 17,869,000 16,821,000 13,023,000 Provision for income taxes 4,604,000 5,876,000 4,935,000 ------------ ------------ ------------ Net income $ 13,265,000 $ 10,945,000 $ 8,088,000 ============ ============ ============ Net income per share $ 1.62 $ 1.35 $ 1.10 ============ ============ ============ Weighted average shares outstanding 8,197,000 8,100,000 7,359,000 ============ ============ ============ The accompanying notes to the consolidated financial statements are an integral part of these consolidated financial statements. Page 27
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY COMMON STOCK CAPITAL IN ------------------------------ EXCESS OF RETAINED TREASURY SHARES AMOUNT PAR VALUE EARNINGS STOCK ---------- ------------ ------------- ------------- ------------ Balance at March 31, 1994 7,107,000 $ 71,000 $ 14,905,000 $ 25,052,000 $ (57,000) Exercise of warrants 57,000 - 463,000 - - Exercise of options 60,000 - 455,000 - - Issuance of shares for acquisition 581,000 7,000 4,577,000 - - Cash dividends declared - - - (1,509,000) - Net Income - - - 8,088,000 - Other - - 14,000 - - ---------- ------------ ------------- ------------- ------------ Balance at March 31, 1995 7,805,000 78,000 20,414,000 31,631,000 (57,000) Exercise of options 116,000 1,000 862,000 - - Issuance of shares for litigation settlement 118,000 1,000 1,299,000 - - Cash dividends declared - - - (1,464,000) - Net Income - - - 10,945,000 - Other - - 40,000 - - ---------- ------------ ------------- ------------- ------------ Balance at March 31, 1996 8,039,000 80,000 22,615,000 41,112,000 (57,000) Exercise of options 70,000 1,000 660,000 - - Cash dividends declared - - - (2,418,000) - Net Income - - - 13,265,000 - ---------- ------------ ------------- ------------- ------------ Balance at March 31, 1997 8,109,000 $ 81,000 $ 23,275,000 $ 51,959,000 $ (57,000) ========== ============ ============= ============= ============
The accompanying notes to the consolidated financial statements are an integral part of these consolidated financial statements. Page 28
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, ------------------------------------------- 1997 1996 1995 ------------ ------------ ----------- Cash flows from operating activities: Net income $ 13,265,000 $ 10,945,000 $ 8,088,000 ------------ ------------ ----------- Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization 1,938,000 1,656,000 1,373,000 Provision for bad debts 5,107,000 2,291,000 2,062,000 Deferred income tax (benefit) provision (369,000) 1,108,000 181,000 Equity in earnings of aviation joint venture, net (675,000) (354,000) (544,000) Other non-cash operating charges (credits) (19,000) (123,000) 35,000 Changes in assets and liabilities, net of acquisitions and dispositions: (Increase) decrease in - Accounts receivable (13,181,000) (26,286,000) 1,959,000 Inventories (1,857,000) (953,000) (933,000) Prepaid expenses and other current assets (2,067,000) 1,371,000 (72,000) Other assets 250,000 11,000 (15,000) Increase (decrease) in - Accounts payable and accrued expenses (64,000) 13,731,000 (4,290,000) Customer deposits 774,000 (92,000) 166,000 Accrued salaries and wages 132,000 1,308,000 461,000 Income taxes payable (150,000) (1,286,000) 852,000 Deferred compensation 594,000 335,000 (24,000) ------------ ------------ ----------- Total adjustments (9,587,000) (7,283,000) 1,211,000 Net cash provided by operating activities 3,678,000 3,662,000 9,299,000 ------------ ------------ ----------- Cash flows from investing activities: Additions to property, plant and equipment (3,199,000) (1,407,000) (2,194,000) Advances to aviation joint venture (588,000) -- (338,000) Repayments from aviation joint venture 482,000 338,000 -- Proceeds from disposition of assets 43,000 381,000 585,000 Proceeds from notes receivable 774,000 2,046,000 768,000 Payment for acquisition of business, net of cash acquired -- -- (3,184,000) ------------ ------------ ----------- Net cash (used in) provided by investing activities (2,488,000) 1,358,000 (4,363,000) ------------ ------------ -----------
(Continued) Page 29
WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED MARCH 31, ----------------------------------------- 1997 1996 1995 ----------- ----------- ----------- Cash flows from financing activities: Dividends paid on common stock (2,212,000) (1,854,000) (717,000) Repayment of notes payable (1,872,000) (1,817,000) (1,643,000) Repayment of long-term debt (74,000) (263,000) (286,000) Proceeds from issuance of long-term debt 486,000 -- -- Proceeds from issuance of common stock 661,000 863,000 918,000 ----------- ----------- ----------- Net cash used in financing activities (3,011,000) (3,071,000) (1,728,000) ----------- ----------- ----------- Net (decrease) increase in cash and cash equivalents (1,821,000) 1,949,000 3,208,000 Cash and cash equivalents, at beginning of period 12,856,000 10,907,000 7,699,000 ----------- ----------- ----------- Cash and cash equivalents, at end of period $11,035,000 $12,856,000 $10,907,000 =========== =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 423,000 $ 613,000 $ 129,000 =========== =========== =========== Income taxes $ 5,182,000 $ 6,368,000 $ 3,714,000 =========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES: In connection with the January 1995 acquisition of the Trans-Tec group of companies, the Company issued 581,000 shares of its common stock valued at $4,584,000 and $6,000,000 in notes payable. In April 1995, the Company paid $1,300,000, representing its share of a litigation settlement, by issuing 117,825 shares of the Company's common stock at an agreed upon price of $11.03 per share (restated to reflect the 3-for-2 stock split). As partial consideration for the sale of certain assets on June 1, 1995, the Company received a $979,000 note receivable, with an original maturity date of July 1, 2007. In October 1995, the entire outstanding principal balance was collected in cash, net of a $98,000 pre-payment discount. Cash dividends declared, but not yet paid, totaling $608,000, $402,000 and $792,000 are included in accounts payable and accrued expenses as of March 31, 1997, 1996 and 1995, respectively. The accompanying notes to the consolidated financial statements are an integral part of these consolidated financial statements. Page 30 WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AND NATURE OF ACQUISITIONS AND DIVESTITURES World Fuel Services Corporation (the "Company") began operations in 1984 as a used oil recycler in the southeast United States. The Company expanded this business through acquisitions, the development of new processing technology and the establishment of new offices. In 1986, the Company diversified its operations by entering, through an acquisition, the aviation fuel services business. This new segment expanded rapidly, from a business primarily concentrated in the state of Florida, to an international sales company covering the major airports throughout the world. This expansion resulted from acquisitions and the establishment of new offices. In 1995, the Company further diversified its fuel services operations through the acquisition of a group of companies which are considered leaders in the marine fuel services business. This new segment provided the Company with operational and supplier side synergies and entry into fast growing markets in the Far East and Eastern Europe. During fiscal year 1997, the Company opened its international headquarters in San Jose, Costa Rica by establishing the wholly-owned subsidiary, World Fuel International, S.A. ("WFI"). WFI serves the Company's aviation customers in Canada, South and Central America and the Caribbean basin. BASIS OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company uses the equity method of accounting to record its proportionate share of the earnings of its aviation joint venture. CASH AND CASH EQUIVALENTS The Company classifies as cash equivalents all highly liquid investments with a maturity of three months or less from the date of purchase. The Company's investments at March 31, 1997 and 1996 amounted to $8,461,000 and $11,395,000 respectively, consisting principally of bank repurchase agreements collateralized by United States Government Securities. Interest income, which is included in other, net in the accompanying statements of income, totaled $862,000, $1,029,000 and $765,000 for the years ended March 31, 1997, 1996 and 1995, respectively. INVENTORIES Inventories are stated at the lower of cost (principally, first-in, first-out) or market. Components of inventory cost include oil and fuel purchase costs, direct materials, direct and indirect labor and factory overhead. Page 31 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated on a straight-line basis over the estimated lives of the assets as follows: YEARS --------------- Buildings and improvements 10 - 40 Office equipment and furniture 3 - 8 Plant, machinery and equipment 3 - 40 Costs of major additions and improvements are capitalized and expenditures for maintenance and repairs which do not extend the lives of the assets are expensed. Upon sale or disposition of property, plant and equipment, the cost and related accumulated depreciation and amortization are eliminated from the accounts and any resultant gain or loss is credited or charged to income. LONG-LIVED ASSETS In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 establishes accounting standards for recognizing the impairment of long-lived assets, certain identifiable intangibles and goodwill. The Company adopted the provisions of SFAS 121 for the year ended March 31, 1997, as required. The implementation did not have an impact on the Company's financial position or results of operations. UNAMORTIZED COST IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES Unamortized cost in excess of net assets of acquired companies is being amortized over 35-40 years using the straight-line method. Accumulated amortization amounted to $1,138,000 and $775,000, as of March 31, 1997 and 1996, respectively. Subsequent to an acquisition, the Company continually evaluates whether events and circumstances have occurred that indicate the remaining useful life of this asset may warrant revision or that the remaining balance of this asset may not be recoverable. The Company's policy, in accordance with SFAS 121, is to assess any impairment in value by making a comparison of the current and projected undiscounted cash flows, associated with the acquired companies, to the carrying amount of the unamortized costs in excess of the net assets of the acquired companies. Such carrying amount would be adjusted, if necessary, to reflect any impairment in the value of the asset. REVENUE RECOGNITION Revenue is generally recorded in the period when the sale is made or as the services are performed. In the Company's aviation and marine fueling segments, the Company contracts third parties to provide the fuel and/or delivery services. This may cause delays in receiving the necessary information for invoicing. Accordingly, revenue may be recognized in a period subsequent to when the delivery of fuel took place. Costs not yet billed are classified as current assets and are included under Inventories. The Page 32 Company's revenue recognition policy with respect to the aviation and marine fueling segment does not result in amounts that are materially different than accounting under generally accepted accounting principles. INCOME TAXES The Company and its United States subsidiaries file consolidated income tax returns. In addition, the Company's foreign subsidiaries file income tax returns in their respective countries of incorporation. FOREIGN CURRENCY TRANSLATION The Company's primary functional currency is the U.S. Dollar which also serves as its reporting currency. Most foreign entities translate monetary assets and liabilities at fiscal year-end exchange rates while non-monetary assets and liabilities are translated at historical rates. Income and expense accounts are translated at the average rates in effect during the year, except for depreciation which is translated at historical rates. The Company's Ecuador joint venture uses the Company's reporting currency as the functional currency (as it operates in a highly inflationary economy) and translates net assets at fiscal year-end rates while income and expense accounts are translated at average exchange rates. Gains or losses from changes in exchange rates are recognized in consolidated income in the year of occurrence and are included in Other, net. The Company's purchases from certain aviation fuel suppliers are denominated in local currency. Foreign currency exchange gains and losses are included in Other, net, in the period incurred, and amounted to a net loss of $119,000 and a net gain of $737,000 for the fiscal years ended March 31, 1996 and 1995, respectively. There were no significant foreign currency gains or losses in fiscal year 1997. EARNINGS PER SHARE Earnings per common and common equivalent share have been computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding. Common stock equivalents include all potentially dilutive outstanding stock options and warrants applying the treasury stock method. Primary and fully diluted earnings per share are not materially different. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). The earnings per share computation under SFAS 128 differs from primary and fully diluted earnings per share computed under APB Opinion No. 15, primarily in the manner in which potential common stock is treated. SFAS 128 will apply to the Company for the fiscal year ending March 31, 1998, including interim periods; earlier application is not permitted. The implementation of SFAS 128 will not have a material effect on earnings per share. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial Page 33 statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair values of financial instruments which are presented herein have been determined by the Company's management using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of amounts the Company could realize in a current market exchange. Cash and cash equivalents, accounts receivable and accounts payable and accrued expenses are reflected in the accompanying balance sheets at amounts considered by management to reasonably approximate fair value due to their short-term nature. The Company estimates the fair value of its long-term debt generally using discounted cash flow analysis based on the Company's current borrowing rates for similar types of debt. At March 31, 1997, the carrying value of the long-term debt and the fair value of such instruments was not considered to be significantly different. (2) LONG-TERM DEBT Long-term debt consisted of the following at March 31: 1997 1996 ---- ---- Promissory notes issued in connection with the acquisition of the Trans-Tec group of companies, payable annually through January 1998, bearing interest at 9.0%, unsecured $ 2,058,000 $ 3,928,000 Equipment notes, payable monthly through January 2002, interest rates ranging from 6.76% to 8.52%, secured by equipment 529,000 101,000 Other -- 18,000 ----------- ------------ 2,587,000 4,047,000 Less current maturities 2,191,000 1,944,000 ----------- ------------ $ 396,000 $ 2,103,000 ============= ============= The Company has an unsecured credit facility providing a $25,000,000 revolving line of credit with sublimits of $10,000,000 for standby letters of credit and documentary letters of credit. Approximately $6,558,000 in standby letters of credit were outstanding as of March 31, 1997 under the credit facility. The Company also has $100,000 outstanding in standby letters of credit from other financing institutions and has pledged $100,000 of cash as collateral on these letters of credit. Page 34 The revolving line of credit bears interest, at the Company's option, at the NationsBank Prime rate, or LIBOR, as defined under the credit facility. Interest is payable quarterly in arrears. The credit facility, in addition to other restrictions, requires the maintenance of certain financial ratios. As of March 31, 1997 and 1996, there were no amounts outstanding under the revolving line of credit. Any outstanding principal and interest will mature on March 1, 2001. As of March 31, 1997, the Company was in compliance with the requirements under the credit facility. Aggregate annual maturities of long-term debt as of March 31, 1997, are as follows: 1998 $ 2,191,000 1999 90,000 2000 97,000 2001 105,000 2002 104,000 ---------- $ 2,587,000 =========== Interest expense, which is included in Other, net, in the accompanying consolidated statements of income, is as follows for the years ended March 31: 1997 1996 1995 ---------- --------- --------- Interest expense $ 395,000 $ 565,000 $ 263,000 ========== ========= ========= (3) INCOME TAXES The provision for income taxes consists of the following components for the years ended March 31: 1997 1996 1995 ---------- ---------- ---------- Current: Federal $3,061,000 $3,568,000 $3,540,000 State 417,000 567,000 614,000 Foreign 1,495,000 633,000 600,000 ---------- ---------- ---------- 4,973,000 4,768,000 4,754,000 ---------- ---------- ---------- Deferred: Federal (157,000) 998,000 217,000 State (22,000) 138,000 39,000 Foreign (190,000) (28,000) (75,000) ---------- ---------- ---------- (369,000) 1,108,000 181,000 ---------- ---------- ---------- Total $4,604,000 $5,876,000 $4,935,000 ========== ========== ========== Page 35 The difference between the reported tax provision and the provision computed by applying the statutory U.S. federal income tax rate currently in effect to income before income taxes for each of the three years ended March 31, 1997, is primarily due to state income taxes and the effect of foreign income tax rates. The Company's share of undistributed earnings of foreign subsidiaries not included in its consolidated U.S. federal income tax return that could be subject to additional U.S. federal income taxes if remitted, was approximately $13,065,000 and $6,007,000 at March 31, 1997 and 1996, respectively. The distribution of these earnings would result in additional U.S. federal income taxes to the extent they are not offset by foreign tax credits. No provision has been recorded for the U.S. taxes that could result from the remittance of such earnings since the Company intends to reinvest these earnings outside the U.S. indefinitely and it is not practicable to estimate the amount of such taxes. The temporary differences which comprise the Company's net deferred tax liability are as follows: MARCH 31, 1997 1996 ---------- ----------- Excess of provision for bad debts over charge-offs $ 1,522,000 $ 1,537,000 Excess of tax over financial reporting (2,006,000) (1,989,000) depreciation and amortization Accrued expenses recognized for financial 290,000 161,000 reporting purposes, not currently tax deductible Excess of tax over financial reporting (428,000) (365,000) amortization of identifiable intangibles Other, net 154,000 (187,000) ----------- ----------- $ (468,000) $ (843,000) =========== =========== (4) STOCKHOLDERS' EQUITY COMMON STOCK ACTIVITY On June 5, 1995, the Board of Directors approved a 3-for-2 stock split for all shares of common stock outstanding as of June 19, 1995. The shares were distributed on June 27, 1995. Accordingly, all share and per share data, as appropriate, have been retroactively adjusted to reflect the effects of this split. In April 1995, the Company paid $1,300,000, representing its share of the stockholders class action settlement, by issuing 117,825 shares of the Company's common stock at an agreed upon price of $11.03 per share (restated to reflect the 3-for-2 stock split). Page 36 DIVIDENDS The Company declared and paid cash dividends of $0.30 and $0.20 per share of common stock for fiscal years 1997 and 1996, respectively. EMPLOYEE STOCK OPTION ACTIVITY The Company has adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), which was effective for the Company's 1997 fiscal year, in accounting for stock-based transactions with non-employees. The Company has evaluated the proforma effects of SFAS 123 and determined the effects of SFAS 123 are not material to the Company's consolidated financial position or results of operations. Accordingly, the disclosure provisions of SFAS 123 have been omitted. The Company accounts for its stock-based transaction with employees under the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), as permitted by SFAS 123. The Company's 1986 employee stock option plan expired in January 1996. Options granted, but not yet exercised, survive the 1986 employee stock option plan until the options expire. The following summarizes the status of the 1986 employee stock option plan at, and for the year ended, March 31:
1997 1996 1995 -------------- -------------- --------------- Granted None 98,091 46,206 Per Share $10.33 - $12.58 $14.88 - $15.50 Adjustment for 3:2 stock split None 86,464 None Expired 5,250 None 20,000 Exercised 54,375 69,375 None Per Share $9.08 - $9.33 $2.00 - $9.33 None Proceeds received by the Company $499,000 $531,000 None Outstanding 228,482 288,107 172,927 Per Share $9.33 - $12.58 $9.08 - $12.58 $3.00 - $15.50 Available for future grant None 153,489 37,294 Exercisable 189,642 120,707 125,221 Per Share $9.33 - $10.33 $9.33 - $9.83 $3.00 - $14.75
During fiscal year 1997, non-qualified options to purchase 3,750 and 5,614 of the Company's common stock were exercised and expired, respectively. The proceeds received by the Company from the exercise of these options totaled $35,000. As of March 31, 1997, non-qualified options to purchase a total of 30,600 shares of the Company's common stock at an exercise price ranging from $10.33 to $12.58 per share were outstanding and exercisable. Page 37 In August 1996, the Company's Board of Directors authorized the establishment of the 1996 Employee Stock Option Plan (the "1996 Plan"), subject to stockholder approval at the Company's 1997 annual shareholders' meeting. Under the provisions of the 1996 Plan, the Company's Board of Directors is authorized to grant Incentive Stock Options ("ISO") to employees of the Company and its subsidiaries and non-qualified options to employees, independent contractors and agents. The plan permits the issuance of options to purchase up to an aggregate of 500,000 shares of the Company's common stock. The minimum price at which any option may be exercised will be the fair market value of the stock on the date of grant; provided, however, that with respect to ISOs granted to an individual owning more than 10% of the Company's outstanding common stock, the minimum exercise price will be 110% of the fair market value of the common stock on the date of grant. All options granted pursuant to the 1996 Plan must be exercised within ten years after the date of grant, except that ISOs granted to individuals owning more than 10% of the Company's outstanding common stock must be exercised within five years after the date of grant. Pursuant to the 1996 Plan, the Company's Board of Directors, on August 28, 1996, granted the Chairman and President of the Company each a qualified and non-qualified option to purchase 17,517 shares and 63,483 shares, respectively, of the Company's common stock at an exercise price of $17.13 per share. These options were granted subject to stockholder approval of the 1996 Plan. NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN In August, 1994, at the annual meeting of the stockholders of the Company, the 1993 Non-Employee Directors Stock Option Plan ("1993 Directors Plan") was adopted. An aggregate of 50,000 shares of the Company's common stock has been reserved for issuance under the 1993 Directors Plan. Under the 1993 Directors Plan, members of the Board of Directors who are not employees of the Company or any of its subsidiaries or affiliates will receive annual stock options to purchase common stock in the Company pursuant to the following formula. Each non-employee director will receive a non-qualified option to purchase 2,500 shares when such person is first elected to the Board of Directors and will receive a non-qualified option to purchase 2,500 shares each year, starting in August 1995, that the individual is re-elected. As of March 31, 1997, options to purchase 21,250 shares of the Company's common stock remain outstanding under the 1993 Directors Plan and 15,000 shares are available for future grant. The exercise price for options granted under the Plan may not be less than the fair market value of the common stock, which is defined as the closing bid quotation for the common stock at the end of the day preceding the grant. Options granted under the Plan become fully exercisable one year after the date of grant. All options expire five years after the date of grant. The exercise price must be paid in cash or in common stock, subject to certain restrictions. Page 38 (5) COMMITMENTS AND CONTINGENCIES LEASE COMMITMENTS The Company leases premises in New Orleans, Louisiana and Plant City, Florida from trusts co-managed by the President of the Company under two operating leases with rent aggregating $96,000 per year. The leases expire in August 2001. The Company has an option to purchase the properties at current market value at any time during the lease term. The Company intends to exercise the purchase options on both leases. The Company also leases office space and railroad tank cars from unrelated third parties. At March 31, 1997, the future minimum lease payments under operating leases with an initial non-cancellable term in excess of one year were as follows: OPERATING LEASES ---------- 1998 $ 834,000 1999 467,000 2000 357,000 2001 345,000 2002 288,000 ---------- Total minimum lease payments $2,291,000 ========== Rental expense under operating leases with an initial non-cancellable term in excess of one year was $843,000, $722,000, and $535,000 for the years ended March 31, 1997, 1996 and 1995, respectively. CAPITAL EXPENDITURES During fiscal year 1998, the Company anticipates spending approximately $2,000,000 for the upgrade of plant, machinery and equipment. The Company intends to spend an estimated $1,000,000 over the next several years to clean up contamination which was present at one of the Company's sites when it was acquired by the Company. The clean up costs will be capitalized as part of the cost of the site, up to the fair market value of the site. SURETY BONDS In the normal course of business, the Company is required to post bid, performance and garnishment bonds. The majority of the bonds issued relate to the Company's aviation fueling business. As of March 31, 1997, the Company had $3,774,000 in outstanding bonds. CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the Company to credit risk consist primarily of trade accounts receivable. The Company extends credit on an unsecured basis to many of its aviation and Page 39 marine customers, some of which have a line of credit in excess of $2,000,000. The Company's management recognizes that extending credit and setting appropriate reserves for accounts receivable is largely a subjective decision based on knowledge of the customer. Active management of this risk is essential to the Company's success. A strong capital position and liquidity provide the financial flexibility necessary to respond to customer needs. The Company's management meets regularly to evaluate credit exposure in the aggregate, and by individual credit. This group is also responsible for setting and maintaining credit standards and ensuring the overall quality of the credit portfolio. POTENTIAL LIABILITY AND INSURANCE The Company, through the use of subcontractors and its own operations, transports, stores or processes flammable aviation, marine and residual fuel subjecting it to possible claims by employees, customers, regulators and others who may be injured. In addition, the Company may be held liable for the clean-up costs of spills or releases of materials from its facilities or vehicles, or for damages to natural resources arising out of such events. The Company follows what it believes to be prudent procedures to protect its employees and customers and to prevent spills or releases of these materials. The Company's domestic and international fueling activities also subject it to the risks of significant potential liability under federal and state statutes, common law and contractual indemnification agreements. The Company has general and automobile liability insurance coverage, including the statutory Motor Carrier Act/MCS 90 endorsement for sudden and accidental pollution. In the aviation and marine fuel segments, the Company utilizes subcontractors which provide various services to customers, including intoplane fueling at airports, fueling of vessels in port and at sea, and transportation and storage of fuel and fuel products. Although the Company generally requires its subcontractors to carry liability insurance, not all subcontractors carry adequate insurance. The Company's liability insurance policy does not cover the acts or omissions of its subcontractors. If the Company is held responsible for any liability caused by its subcontractors, and such liability is not adequately covered by the subcontractor's insurance and is of sufficient magnitude, the Company's financial position and results of operations will be adversely affected. The Company has exited several environmental businesses which handled hazardous waste. This waste was transported to various disposal facilities and/or treated by the Company. The Company may be held liable as a potentially responsible party for the clean-up of such disposal facilities in certain cases pursuant to current federal and state laws and regulations. The Company continuously reviews the adequacy of its insurance coverage. However, the Company lacks coverage for various risks. A claim arising out of the Company's activities, if successful and of sufficient magnitude, will have a material adverse effect on the Company's financial position and results of operations. LEGAL MATTERS The Company is involved in litigation and administrative proceedings primarily arising in the normal course of its business. In the opinion of management, the Company's liability, if any, under any pending litigation or administrative proceedings, will not materially affect its financial condition or operations. Page 40 EMPLOYMENT AGREEMENTS The Company's amended and restated employment agreements with its Chairman of the Board and President expire on March 31, 2001. Each agreement provides for a fixed salary and an annual bonus equal to 5% of the Company's income before income taxes in excess of $2,000,000. In addition, the payment of any portion of the bonus causing the executive's compensation to exceed $1,000,000 during any fiscal year will be deferred and accrue interest at the Prime rate, until a fiscal year during the employment term in which the executive earns less than $1,000,000; provided, however, that in the event of the executive's death, the termination of the executive for any reason, or the expiration of the employment agreement, any excess amount, including any interest earned thereon, shall be paid to the executive within ten (10) days of such death, termination or expiration. As of March 31, 1997 and 1996, $473,000 and $171,000, respectively, including accrued interest, was deferred under the agreements. The agreements also provide that, if the Company terminates the employment of the executive for reasons other than death, disability, or cause, or, if the executive terminates employment with the Company for good reason, including under certain circumstances, a change in control of the Company, the Company will pay the executive compensation of up to three times his average salary and bonus during the five year period preceding his termination. The Company and its subsidiaries have also entered into employment, consulting and non-competition agreements with certain of their executive officers, and previous and current employees. The agreements provide for minimum salary levels, as well as bonuses which are payable if specified management goals are attained. During the years ended March 31, 1997, 1996 and 1995, approximately $9,136,000, $7,632,000 and $3,963,000, respectively, was expensed under the terms of the above described agreements. The future minimum commitments under employment agreements, excluding bonuses, as of March 31, 1997 are as follows: 1998 $ 5,085,000 1999 2,312,000 2000 1,208,000 2001 734,000 2002 107,000 Thereafter 561,000 ----------- $10,007,000 ============ DEFERRED COMPENSATION PLANS The Company has an incentive compensation plan which provides incentive compensation to certain key personnel whose performance contributes to the profitability and growth of the existing Trans-Tec group of companies. The plan is unfunded and is not a qualified plan under the Internal Revenue Code. Under the plan, participants are awarded units equal to 20% of the Trans-Tec group's annual net income, excluding the incentive compensation expense, and earn interest on their deferred amounts. The plan allows for distributions of vested amounts over a five year period, subject to certain requirements, during and after employment with the Company. Participants become fully vested over Page 41 a five year period. Fully vested participants must wait two years from the year of contribution to be eligible for the distribution of deferred account balances. The plan is administered by a plan committee appointed by the Board of Directors of Trans-Tec Services, Inc. The plan committee has the authority to suspend or terminate the plan, as well as the responsibility to allocate the amount of incentive compensation among participants, during each plan year. The plan's fiscal year corresponds to the Company's fiscal year. The Company maintains a 401(k) defined contribution plan which covers all employees who meet minimum requirements and elect to participate. Participants may contribute up to 15% of their compensation, subject to certain limitations. The Company makes matching contributions of 25% of the participants' contributions up to 4% of the participant's compensation contributed. The Company may make annual additional contributions at its sole discretion. During the fiscal years ended March 31, 1997, 1996 and 1995, approximately $82,000, $52,000 and $11,000, respectively, was expensed as Company contributions. (6) AVIATION JOINT VENTURE In August 1994, the Company began operation of a joint venture with Petrosur, an Ecuador corporation. The joint venture was organized to distribute jet fuel in Ecuador pursuant to a contract with the nationally owned oil company and the airport authority. The contract with the government entities may be terminated at any time. The joint venture arrangement has a term of five years and will automatically renew for a similar term unless one of the partners objects at least ninety days prior to the end of the term. The Company's current ownership interest in the joint venture is 50%. Accordingly, the Company uses the equity method of accounting to record its proportionate share of joint venture earnings. The Company's proportionate share of the net earnings of the joint venture amounted to $1,773,000, $1,748,000 and $544,000 for the fiscal years ended March 31, 1997, 1996 and 1995, respectively, and is included as part of Other income, net in the accompanying consolidated statements of income. The amount of the investment in and advances to the joint venture totaled $1,681,000 and $882,000 at March 31, 1997 and 1996, respectively, and is included in prepaid expenses and other current assets in the accompanying consolidated balance sheets. A summary of selected financial information for the aviation joint venture is as follows: AS OF MARCH 31, 1997 1996 ----------- ----------- BALANCE SHEET DATA: Current assets $ 6,680,000 $ 5,531,000 =========== =========== Non-current assets $ 33,000 $ 47,000 =========== =========== Current liabilities $ 3,889,000 $ 3,778,000 =========== =========== FOR THE YEAR ENDED MARCH 31, 1997 1996 ----------- ----------- INCOME STATEMENT DATA: Revenue $44,512,000 $39,406,000 =========== =========== Gross profit $ 3,969,000 $ 3,844,000 =========== =========== Income from operations $ 3,222,000 $ 3,565,000 =========== =========== Net income $ 3,546,000 $ 3,966,000 =========== =========== Page 42 (7) BUSINESS SEGMENTS, FOREIGN OPERATIONS AND MAJOR CUSTOMERS BUSINESS SEGMENTS THE COMPANY OPERATES IN THREE BUSINESS SEGMENTS: AVIATION FUELING, MARINE FUELING AND OIL RECYCLING. INFORMATION CONCERNING THE COMPANY'S OPERATIONS BY BUSINESS SEGMENT IS AS FOLLOWS:
FOR THE FISCAL YEAR ENDED MARCH 31, -------------------------------------------- 1997 1996 1995 ------------ ------------ ------------ REVENUE Aviation fueling $381,236,000 $302,101,000 $288,728,000 Marine fueling 368,470,000 321,216,000 54,578,0000 Oil recycling 22,912,000 18,993,000 18,591,0000 Intersegment eliminations -- (11,000) (6,000) ------------ ------------ ------------ Consolidated revenue $772,618,000 $642,299,000 $361,891,000 ============ ============ ============ INCOME FROM OPERATIONS Aviation fueling $ 10,620,000 $ 12,858,000 $ 12,304,000 Marine fueling 5,013,000 3,425,000 220,000 Oil recycling 5,020,000 3,976,000 2,973,000 Corporate (5,027,000) (5,313,000) (4,248,000) ------------ ------------ ------------ Consolidated income from operations $ 15,626,000 $ 14,946,000 $ 11,249,000 ============ ============ ============ IDENTIFIABLE ASSETS Aviation fueling $ 54,129,000 $ 42,345,000 27,920,000 Marine fueling 43,013,000 39,948,000 34,313,000 Oil recycling 17,574,000 15,567,000 17,557,000 Corporate 8,423,000 14,114,000 9,746,000 ------------ ------------ ------------ Consolidated identifiable assets $123,139,000 $111,974,000 $ 89,536,000 ============ ============ ============ CAPITAL EXPENDITURES Aviation fueling $ 369,000 $ 66,000 $ 27,000 Marine fueling 208,000 424,000 104,000 Oil recycling 2,426,000 623,000 1,901,000 Corporate 196,0000 294,000 162,000 ------------ ------------ ------------ Consolidated capital expenditures $ 3,199,000 $ 1,407,000 $ 2,194,000 ============ ============ ============ DEPRECIATION AND AMORTIZATION Aviation fueling $189,000 $ 116,000 $ 236,000 Marine fueling 599,000 535,000 140,000 Oil recycling 916,000 819,000 824,000 Corporate 234,000 186,000 173,000 ------------ ------------ ------------ Consolidated depreciation and amortization $ 1,938,000 $ 1,656,000 $ 1,373,000 ============ ============ ============
For the year ended March 31, 1995, the marine fueling segment reflects activity from January 1, 1995 to March 31, 1995. Page 43 FOREIGN OPERATIONS A summary of financial data for foreign operations is shown below as of, and for the fiscal years ended, March 31, 1997, 1996 and 1995. Non-U.S. operations of the Company and its subsidiaries are conducted primarily from offices in the United Kingdom, Singapore, Mexico, South Africa, South Korea and Costa Rica. Income from operations is before the allocation of corporate general and administrative expenses and income taxes. 1997 1996 1995 ------------- ------------- ------------ Revenue $ 287,589,000 $ 184,768,000 $ 47,045,000 ============= ============= ============ Income from operations $ 7,753,000 $ 2,555,000 $ 1,572,000 ============= ============= ============ Identifiable assets $ 37,313,000 $ 13,506,000 $ 11,770,000 ============= ============= ============ MAJOR CUSTOMERS No customer accounted for more than 10% of total consolidated revenue for the years ended March 31, 1997, 1996 and 1995. (8) QUARTERLY INFORMATION (UNAUDITED) FOR THE THREE MONTHS ENDED -------------------------------------------------------------- JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, 1996 1996 1996 1997 ------------ ------------- ------------ ------------ Revenue $170,694,000 $180,349,000 $207,665,000 $213,910,000 ============ ============ ============ ============ Gross Profit $ 11,632,000 $ 11,626,000 $ 11,716,000 $ 11,653,000 ============ ============ ============ ============ Net Income $ 3,104,000 $ 3,253,000 $ 3,395,000 $ 3,513,000 ============ ============ ============ ============ Earnings per share $ 0.38 $ 0.40 $ 0.41 $ 0.43 ============ ============ ============ ============ FOR THE THREE MONTHS ENDED -------------------------------------------------------------- JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, 1995 1995 1995 1996 ------------ ------------- ------------ ------------ Revenue $138,960,000 $145,658,000 $166,671,000 $191,010,000 ============ ============ ============ ============ Gross Profit $ 9,174,000 $ 9,911,000 $ 10,328,000 $ 10,956,000 ============ ============ ============ ============ Net Income $ 2,545,000 $ 2,655,000 $ 2,861,000 $ 2,884,000 ============ ============ ============ ============ Earnings per share $ 0.32 $ 0.33 $ 0.35 $ 0.35 ============ ============ ============ ============ Page 44 SCHEDULE II WORLD FUEL SERVICES CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS ------------------------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING ACQUISITION COSTS AND OTHER END OF PERIOD OF BUSINESS EXPENSES ACCOUNTS(1) DEDUCTIONS(2) OF PERIOD ============ =========== =========== =========== ============= =========== Year Ended March 31, 1997 - --------------------------- Allowance for bad debts $4,363,000 $ - $5,107,000 $ 415,000 $5,525,000 $4,360,000 =========== ========= =========== =========== =========== =========== Year Ended March 31, 1996 - --------------------------- Allowance for bad debts $4,566,000 $ - $2,291,000 $ 785,000 $3,279,000 $4,363,000 =========== ========= =========== =========== =========== =========== Year Ended March 31, 1995 - --------------------------- Allowance for bad debts $2,464,000 $ 250,000 $2,062,000 $2,408,000 $2,618,000 $4,566,000 =========== ========= =========== =========== =========== ===========
Notes: (1) Recoveries of bad debts and reclassifications. In fiscal year 1995, allowance for bad debts totaling $130,000 was transferred from the Company's discontinued operations to continued operations. (2) Accounts determined to be uncollectible. Page 45 EX-10.B(I) 2 EXHIBIT 10b(i) ================================================================================ AMENDED AND RESTATED CREDIT AGREEMENT by and among WORLD FUEL SERVICES CORPORATION as Borrower, NATIONSBANK, N.A. (SOUTH), as Lender February 21, 1997 ================================================================================ TABLE OF CONTENTS PAGE ARTICLE I Amendment and Restatement; Definitions 1.1. Amendment and Restatement...............................................2 1.2. Definitions.............................................................2 1.3. Rules of Interpretation................................................21 ARTICLE II The Revolving Credit Facility 2.1. Loans..................................................................24 2.2. Payment of Interest....................................................26 2.3. Payment of Principal...................................................26 2.4. Non-Conforming Payments................................................26 2.5. Notes..................................................................27 2.6. Reductions.............................................................27 2.7. Conversions and Elections of Subsequent Interest Periods...............27 2.8. Increase and Decrease in Amounts.......................................28 2.9. Fees...................................................................28 2.10. Use of Proceeds........................................................28 ARTICLE III Letters of Credit 3.1. Letters of Credit......................................................29 3.2. Reimbursement..........................................................29 3.3. Letter of Credit Facility Fees.........................................32 3.4. Administrative Fees....................................................32 ARTICLE IV Yield Protection and Illegality 4.1. Additional Costs.......................................................33 4.2. Suspension of Loans....................................................34 4.3. Illegality.............................................................35 4.4. Compensation...........................................................35 ARTICLE VConditions to Making Loans and Issuing Letters of Credit 5.1. Conditions of Initial Advance..........................................37 5.2. Conditions of Loans and Letter of Credit...............................38 ARTICLE VI Representations and Warranties 6.1. Organization and Authority.............................................40 6.2. Loan Documents.........................................................40 6.3. Solvency...............................................................41 6.4. Subsidiaries and Stockholders..........................................41 6.5. Ownership Interests....................................................41 6.6. Financial Condition....................................................42 6.7. Title to Properties....................................................42 6.8. Taxes..................................................................42 6.9. Other Agreements.......................................................43 6.10. Litigation.............................................................43 6.11. Margin Stock...........................................................43 6.12. Investment Company.....................................................43 6.13. Patents, Etc...........................................................44 6.14. No Untrue Statement....................................................44 6.15. No Consents, Etc.......................................................44 6.16. Employee Benefit Plans.................................................44 6.17. No Default.............................................................46 6.18. Hazardous Materials....................................................46 6.19. RICO...................................................................46 ARTICLE VII Affirmative Covenants 7.1. Financial Reports, Etc.................................................47 7.2. Maintain Properties....................................................48 7.3. Existence, Qualification, Etc..........................................49 7.4. Regulations and Taxes..................................................49 7.5. Insurance..............................................................49 7.6. True Books.............................................................49 7.7. Right of Inspection....................................................49 7.8. Observe all Laws.......................................................50 7.9. Governmental Licenses..................................................50 7.10. Covenants Extending to Other Persons...................................50 7.11. Officer's Knowledge of Default.........................................50 7.12. Suits or Other Proceedings.............................................50 7.13. Notice of Discharge of Hazardous Material or Environmental Complaint...50 7.14. Environmental Compliance...............................................50 7.15. Indemnification........................................................51 7.16. Further Assurances.....................................................51 7.17. Employee Benefit Plans.................................................51 7.18. Continued Operations...................................................52 7.19. New Subsidiaries.......................................................52 ARTICLE VIII Negative Covenants 8.1. Financial Covenants....................................................54 8.2. Acquisitions...........................................................54 8.3. Capital Expenditures...................................................55 8.4. Liens..................................................................55 8.5. Indebtedness...........................................................56 8.6. Transfer of Assets.....................................................57 8.7. Investments............................................................57 8.8. Merger or Consolidation................................................58 8.9. Restricted Payments....................................................58 8.10. Transactions with Affiliates...........................................59 8.11. Compliance with ERISA..................................................59 8.12. Fiscal Year............................................................60 8.13. Dissolution, etc.......................................................60 8.14. Negative Pledge Clauses................................................60 8.15. Partnerships...........................................................60 8.16. WFI Capitalization.....................................................60 ARTICLE IX Events of Default and Acceleration 9.1. Events of Default......................................................61 9.2. Lender to Act..........................................................64 9.3. Cumulative Rights......................................................64 9.4. No Waiver..............................................................64 9.5. Allocation of Proceeds.................................................65 ARTICLE X Miscellaneous 10.1. Participations.........................................................66 10.2. Notices................................................................66 10.3. Setoff ................................................................67 10.4. Survival...............................................................67 10.5. Expenses...............................................................67 10.6. Amendments.............................................................68 10.7. Counterparts...........................................................69 10.8. Termination............................................................69 10.9. Indemnification; Limitation of Liability...............................70 10.10. Severability...........................................................70 10.11. Entire Agreement.......................................................71 10.12. Agreement Controls.....................................................71 10.13. Usury Savings Clause...................................................71 10.14. Governing Law; Waiver of Jury Trial....................................71 EXHIBIT A Applicable Commitment Percentages..............................A-1 EXHIBIT B Notice of Appointment (or Revocation) of Authorized Representative.....................................B-1 EXHIBIT C Form of Borrowing Notice.......................................C-1 EXHIBIT D Form of Interest Rate Selection Notice.........................D-1 EXHIBIT E Form of Revolving Note.........................................E-1 EXHIBIT F Form of Opinion of Borrower's Counsel..........................F-1 EXHIBIT G Compliance Certificate.........................................G-1 EXHIBIT H FORM OF GUARANTY AGREEMENT.....................................H-1 Schedule 6.4 Subsidiaries and Investments in Other Persons..................S-1 Schedule 6.6 Indebtedness...................................................S-2 Schedule 6.7 Liens..........................................................S-3 Schedule 6.8 Tax Matters....................................................S-4 Schedule 6.10 Litigation.....................................................S-5 Schedule 6.18 Hazardous Materials............................................S-6 Schedule 7.6 Indebtedness...................................................S-7 AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of February 21, 1997 (the "Agreement"), is made by and between WORLD FUEL SERVICES CORPORATION (f/k/a International Recovery Corp.), a Florida corporation having its principal place of business in Miami Springs, Florida (the "Borrower"), NATIONSBANK, N.A. (SOUTH)(successor in interest by merger to the Citizens and Southern National Bank of Florida, N.A.), a national banking association organized and existing under the laws of the United States, as a Lender (the "Lender"); W I T N E S S E T H: WHEREAS, the Borrower and the Citizens and Southern National Bank of Florida, N.A. have entered into a Revolving Loan Agreement and Credit Facility dated as of March 1, 1991, as amended by the First Amendment to Revolving Loan Agreement and Credit Facility dated April 13, 1993, that certain Letter Agreement dated January 21, 1994, that certain Letter Agreement dated October 3, 1994, and as further amended by the Consolidated Amendment Agreement No. 3 dated May 5, 1995, the Amendment Agreement No. 4 dated September 25, 1995 and the Amendment Agreement No. 5 dated May 15, 1996 (as so amended, the "Prior Credit Agreement"), pursuant to the which the Citizens and Southern National bank of Florida, N.A. agreed to make available, and pursuant to which NationsBank, as successor in interest by merger to the Citizens and Southern National Bank of Florida, N.A. has continued to make available to the Borrower a revolving credit facility in the principal amount of up to $25,000,000; and WHEREAS, the Borrower has requested and the Lender has agreed, subject to terms and conditions of this Agreement, to amend and restate the Prior Credit Agreement in its entirety and pursuant to which the Lender shall make available to the Borrower a revolving credit facility of up to $25,000,000, the proceeds of which are to be used for working capital, capital expenditures and other general corporate purposes and which shall include a letter of credit facility of up to $10,000,000 for the issuance of documentary and standby letters of credit; and NOW, THEREFORE, the Borrower and the Lender hereby amend and restate the Prior Credit Agreement in its entirety and agree as follows: ARTICLE I AMENDMENT AND RESTATEMENT; DEFINITIONS AMENDMENT AND RESTATEMENT; DEFINITIONS I.1. AMENDMENT AND RESTATEMENT. The Borrower the Lender hereby agree that upon the effectiveness of this Agreement, the terms and provisions of the Prior Credit Agreement shall be and hereby are amended and restated in their entirety by the terms and conditions of this Agreement and the terms and provisions of the Prior Credit Agreement, except as otherwise provided herein, shall be superseded by this Agreement. Notwithstanding the amendment and restatement of the Prior Credit Agreement by this Agreement, the Borrower shall continue to be liable to NationsBank with respect to agreements on the part of the Borrower under the Prior Credit Agreement to indemnify and hold harmless NationsBank from and against all claims, demands, liabilities, damages, losses, costs, charges and expenses to which NationsBank may be subject arising in connection with the Prior Credit Agreement. This Agreement is given as a substitution of, and not as a payment of, the obligations of Borrower under the Prior Credit Agreement and is not intended to constitute a novation of the Prior Credit Agreement. Except as otherwise selected by the Borrower by delivery of a Borrowing Notice prior to the Closing Date in accordance with the terms hereof, upon the effectiveness of this Agreement all amounts outstanding and owing by Borrower under the Prior Credit Agreement as of the Closing Date, as determined by the Lender, shall constitute Advances hereunder accruing interest (a) with respect to LIBOR Loans under the Prior Credit Agreement, at the LIBOR Rate hereunder and (b) with respect to Base Rate Loans under the Prior Credit Agreement, at the Base Rate hereunder. The parties hereto agree that all LIBOR Rate Loans outstanding under the Prior Credit Agreement on the Closing Date shall continue as LIBOR Rate Loans hereunder without any compensation pursuant to SECTION 4.4 hereof being due to the Lender. Except as otherwise provided for by the Borrower by delivery to the Issuing Bank of an Application and Agreement for Letters of Credit prior to the Closing Date in accordance with the terms hereof, upon the effectiveness of this Agreement (x) all Documentary Letters of Credit issued for the account of the Borrower or any of its Subsidiaries under the Prior Credit Agreement as of the Closing Date shall constitute Documentary Letters of Credit hereunder, and (y) all Standby Letters of Credit issued for the account of the Borrower or any of its Subsidiaries under the Prior Credit Agreement as of the Closing Date shall constitute Standby Letters of Credit hereunder; PROVIDED, however, that as of the Closing Date the Letter of Credit Outstandings shall not exceed the Total Letter of Credit Commitment. I.2 DEFINITIONS. For the purposes of this Agreement, in addition to the definitions set forth above, the following terms 2 shall have the respective meanings set forth below: "Acquisition" means the acquisition of (i) a controlling equity interest in another Person (including the purchase of an option, warrant or convertible or similar type security to acquire such a controlling interest at the time it becomes exercisable by the holder thereof), whether by purchase of such equity interest or upon exercise of an option or warrant for, or conversion of securities into, such equity interest, or (ii) assets of another Person which constitute all or substantially all of the assets of such Person or of a line or lines of business conducted by such Person. "Advance" means a borrowing under the Revolving Credit Facility consisting of a Base Rate Loan or a LIBOR Rate Loan. "Affiliate" means any Person (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with the Borrower; or (ii) which beneficially owns or holds 20% or more of any class of the outstanding voting stock (or in the case of a Person which is not a corporation, 20% or more of the equity interest) of the Borrower; or 20% or more of any class of the outstanding voting stock (or in the case of a Person which is not a corporation, 20% or more of the equity interest) of which is beneficially owned or held by the Borrower. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting stock, by contract or otherwise. "Applicable Margin" means that percent per annum set forth below, which shall be based upon the Consolidated Fixed Charge Coverage Ratio for the Four-Quarter Period most recently ended as specified below: APPLICABLE MARGIN ---------- CONSOLIDATED FIXED LIBOR CHARGE COVERAGE RATIO RATE --------------------- ---------- (a) Greater than or equal to 5.00 to 1.0 .65% (b) Greater than or equal to 4.00 to 1.00 but less than 5.00 to 1.00 .75% (c) Greater than or equal 3 to 3.00 to 1.00 but less than 4.00 to 1.00 .875% (d) Greater than or equal to 1.35 to 1.00 but less than 3.00 to 1.00 1.00% The Applicable Margin shall be established at the end of each fiscal quarter of the Borrower (each, a "Determination Date"). Any change in the Applicable Margin following each Determination Date shall be determined based upon the computations set forth in the certificate furnished to the Lender pursuant to SECTION 7.1(A)(II) and SECTION 7.1(B)(II), subject to review and approval of such computations by the Lender, and shall be effective commencing on the date following the date such certificate is received (or, if earlier, the date such certificate was required to be delivered) until the date following the date on which a new certificate is delivered or is required to be delivered, whichever shall first occur. "Applicable Unused Fee" means that percent per annum set forth below, which shall be based upon the Consolidated Fixed Charge Coverage Ratio for the Four-Quarter Period most recently ended as specified below: APPLICABLE CONSOLIDATED FIXED UNUSED CHARGE COVERAGE RATIO FEE --------------------- ---------- (a) Greater than or equal to 5.00 to 1.0 .20% (b) Greater than or equal to 4.00 to 1.00 but less than 5.00 to 1.00 .25% (c) Greater than or equal to 3.00 to 1.00 but less than 4.00 to 1.00 .3125% (d) Greater than or equal to 1.35 to 1.00 but less than 3.00 to 1.00 .375% The Applicable Unused Fee shall be established at the end of each fiscal quarter of the Borrower (the "Determination Date"). Any change in the Applicable Unused Fee following each Determination Date shall be determined based upon the computations set forth in the certificate furnished to the Lender pursuant to SECTION 7.1(A)(II) and SECTION 7.1(B)(II), subject to review and approval of such 4 computations by the Lender and shall be effective commencing on the date following the date such certificate is received (or, if earlier, the date such certificate was required to be delivered) until the date following the date on which a new certificate is delivered or is required to be delivered, whichever shall first occur. "Applications and Agreements for Letters of Credit" means, collectively, the Applications and Agreements for Letters of Credit, or similar documentation, executed by the Borrower from time to time and delivered to the Issuing Bank to support the issuance of Letters of Credit. "Authorized Representative" means any of the President, Executive Vice President, Chief Financial Officer or Chairman of the Board of Directors of the Borrower, or any other Person expressly designated by the Board of Directors of the Borrower (or the appropriate committee thereof) as an Authorized Representative of the Borrower, as set forth from time to time in a certificate in the form of EXHIBIT B. "Base Rate" means the per annum rate of interest equal to the greater of (i) the Prime Rate or (ii) the Federal Funds Effective Rate plus one-half of one percent (1/2%). Any change in the Base Rate resulting from a change in the Prime Rate or the Federal Funds Effective Rate shall become effective as of 12:01 A.M. of the Business Day on which each such change occurs. The Base Rate is a reference rate used by the Lender in determining interest rates on certain loans and is not intended to be the lowest rate of interest charged on any extension of credit to any debtor. "Base Rate Loan" means a Loan for which the rate of interest is determined by reference to the Base Rate. "Base Rate Refunding Loan" means a Base Rate Loan made to satisfy Reimbursement Obligations arising from a drawing under a Letter of Credit. "Board" means the Board of Governors of the Federal Reserve System (or any successor body). "Borrower's Account" means a demand deposit account with the Lender, which may be maintained at one or more offices of the Lender. "Borrowing Notice" means the notice delivered by an Authorized Representative in connection with an Advance under the Revolving Credit Facility, in the form of EXHIBIT C. "Business Day" means, (i) with respect to any Base Rate Loan, any day which is not a Saturday, Sunday or a day on 5 which banks in the States of New York and North Carolina are authorized or obligated by law, executive order or governmental decree to be closed and, (ii) with respect to any LIBOR Rate Loan, any day which is a Business Day, as described above, and on which the relevant international financial markets are open for the transaction of business contemplated by this Agreement in London, England, New York, New York and Charlotte, North Carolina. "Capital Expenditures" means, with respect to the Borrower and its Subsidiaries, for any period the SUM of (without duplication) (i) all expenditures (whether paid in cash or accrued as liabilities) by the Borrower or any Subsidiary during such period for items that would be classified as "property, plant or equipment" or comparable items on the consolidated balance sheet of the Borrower and its Subsidiaries, including without limitation all transactional costs incurred in connection with such expenditures provided the same have been capitalized, excluding, however, the amount of any Capital Expenditures paid for with proceeds of casualty insurance as evidenced in writing and submitted to the Lender together with any compliance certificate delivered pursuant to SECTION 7.1(A) or (B), and (ii) with respect to any Capital Lease entered into by the Borrower or its Subsidiaries during such period, the present value of the lease payments due under such Capital Lease over the term of such Capital Lease applying a discount rate equal to the interest rate provided in such lease (or in the absence of a stated interest rate, that rate used in the preparation of the financial statements described in SECTION 7.1(A)), all the foregoing in accordance with GAAP applied on a Consistent Basis. "Capital Leases" means all leases which have been or should be capitalized in accordance with GAAP as in effect from time to time including Statement No. 13 of the Financial Accounting Standards Board and any successor thereof. "Change of Control" means, at any time any "person" or "group" (each as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) either (A) becomes the "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act ), directly or indirectly, of Voting Stock of the Borrower (or securities convertible into or exchangeable for such Voting Stock) representing 33-1/3% or more of the combined voting power of all Voting Stock of the Borrower (on a fully diluted basis) or (B) otherwise has the ability, directly or indirectly, to elect a majority of the board of directors of the Borrower. "Closing Date" means the date as of which this Agreement is executed by the Borrower and the Lender and on 6 which the conditions set forth in SECTION 5.1 have been satisfied. "Code" means the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder. "Consistent Basis" means, in reference to the application of GAAP, that the accounting principles observed in the period referred to are comparable in all material respects to those applied in the preparation of the audited financial statements of the Borrower referred to in SECTION 6.6(A). "Consolidated Capitalization" means, at any time at which the amount thereof is to be determined, the sum of Consolidated Funded Indebtedness plus Consolidated Shareholders' Equity. "Consolidated Current Liabilities" means, the aggregate amount carried as current liabilities on the books of the Borrower and its Subsidiaries, on a consolidated basis and after eliminating all intercompany items, determined in accordance with GAAP applied on a Consistent Basis, LESS any such amount constituting Obligations of the Borrower incurred pursuant to this Agreement. "Consolidated EBITDA" means, with respect to the Borrower and its Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the SUM of, without duplication, (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) provisions for income taxes, (iv) depreciation, and (v) amortization, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "Consolidated Fixed Charge Coverage Ratio" means, with respect to the Borrower and its Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the ratio of (i) the sum, for such period, of Consolidated EBITDA, MINUS capital expenditures to(ii) Consolidated Fixed Charges for such period. "Consolidated Fixed Charges" means, with respect to Borrower and its Subsidiaries for any Four-Quarter Period ending on the date of computation thereof, the SUM of, without duplication, (i) Consolidated Interest Expense,(ii) Current Maturities of Long-Term Debt (including all Capital Lease obligations), and (iii) all cash dividends and distributions paid during such period (regardless of when declared) on any shares of capital stock of the Borrower then outstanding, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. 7 "Consolidated Funded Indebtedness" means, at any time as of which the amount thereof is to be determined, (i) all Indebtedness for Money Borrowed (excluding from the computation thereof Consolidated Current Liabilities other than Current Maturities of Long-Term Debt), PLUS (ii) the face amount of all outstanding Standby Letters of Credit issued for the account of the Borrower or any of its Subsidiaries and all obligations (to the extent not duplicative) arising under such Letters of Credit, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "Consolidated Interest Expense" means, with respect to any period of computation thereof, the gross interest expense of the Borrower and its Subsidiaries, including without limitation (i) the amortization of debt discounts, (ii) the amortization of all fees (including fees payable in respect of any Swap Agreement) payable in connection with the incurrence of Indebtedness to the extent included in interest expense, and (iii) the portion of any payments made in connection with Capital Leases allocable to interest expense, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "Consolidated Net Income" means, for the Borrower and its Subsidiaries, for any period of computation thereof, the amount which, in conformity with GAAP, would be set forth opposite the caption "Net Income" (or any like caption) on a consolidated statement of earnings of the Borrower and its Subsidiaries. "Consolidated Shareholders' Equity" means, as of any date on which the amount thereof is to be determined, the sum of the following in respect of the Borrower and its Subsidiaries (determined on a consolidated basis and excluding intercompany items among the Borrower and its Subsidiaries and any upward adjustment after the Closing Date due to revaluation of assets): (i) the amount of issued and outstanding share capital, PLUS (ii) the amount of additional paid-in capital and retained income (or, in the case of a deficit, minus the amount of such deficit), PLUS (iii) the amount of any foreign currency translation adjustment (if positive, or, if negative, minus the amount of such translation adjustment) MINUS (iv) the book value of any treasury stock and the book value of any stock subscription receivables, all as determined in accordance with GAAP applied on a Consistent Basis. "Consolidated Tangible Net Worth" means, as of any date on which the amount thereof is to be determined, Consolidated Shareholders' Equity MINUS the net book value of all assets which would be treated as intangible assets, all as determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. 8 "Consolidated Working Assets" means, at any time as of which the amount thereof is to be determined, the sum of cash PLUS the book value of cash equivalents, accounts receivable net of allowance for doubtful accounts, inventory, prepaid fuel, and the current portion of notes receivable, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "Contingent Obligation" means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the Indebtedness of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any person's obligation under any Contingent Obligation shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness guaranteed thereby. "Credit Party" means, collectively, the Borrower and each Guarantor. "Current Maturities of Long-Term Debt" means, with respect to Indebtedness for Money Borrowed that matures more than one year from the date of its creation or matures within one year of the date of its creation but is renewable or extendable, at the option of the Borrower or any Subsidiary, to a date more than one year from the date of its creation, all payments in respect thereof that are required to be made within one year from the date of any determination thereof. "Default" means any of the occurrences set forth as such in SECTION 9.1 which, upon the expiration of any applicable grace period, would constitute an Event of Default hereunder. "Default Rate" means (i) with respect to each LIBOR Rate Loan, until the end of the Interest Period applicable thereto, a rate of two percent (2%) above the LIBOR Rate applicable to such Loan, and thereafter at a rate of interest per annum which shall be two percent (2%) above the Base Rate, (ii) with respect to Base Rate Loans, at a rate of interest per annum which shall be two percent (2%) above the Base Rate and (iii) in any case, the maximum rate permitted by applicable law, if lower. "Documentary Letters of Credit" means the documentary 9 letters of credit issued by the Issuing Bank for the account of the Borrower or any of its Subsidiaries upon the terms and conditions of this Agreement. "Dollars" and the symbol "$" means dollars constituting legal tender for the payment of public and private debts in the United States of America. "Eligible Securities" means the following obligations and any other obligations previously approved in writing by the Lender: (a) Government Securities; (b) obligations of any corporation organized under the laws of any state of the United States of America or under the laws of any other nation, payable in the United States of America, expressed to mature not later than 92 days following the date of issuance thereof and rated in an investment grade rating category by S&P and Moody's; (c) interest bearing demand or time deposits issued by the Lender or certificates of deposit maturing within one year days from the date of issuance thereof and issued by a bank or trust company organized under the laws of the United States or of any state thereof having capital surplus and undivided profits aggregating at least $400,000,000 and being rated "A-3" or better by S&P or "A" or better by Moody's; (d) Repurchase Agreements; (e) Municipal Obligations; (f) Pre-Refunded Municipal Obligations; (g) shares of mutual funds which invest in obligations described in paragraphs (a) through (f) above, the shares of which mutual funds are at all times rated "AAA" by S&P; (h) tax-exempt or taxable adjustable rate preferred stock issued by a Person having a rating of its long term unsecured debt of "A" or better by S&P or "A-3" or better by Moody's; and (i) asset-backed remarketed certificates of participation representing a fractional undivided interest in the assets of a trust, which certificates are rated at least "A-1" by S&P and "P-1" by Moody's. "Employee Benefit Plan" means any employee benefit plan 10 within the meaning of Section 3(3) of ERISA which (i) is maintained for employees of the Borrower or any of its ERISA Affiliates or is assumed by the Borrower or any of its ERISA Affiliates in connection with any Acquisition or (ii) has at any time been maintained for the employees of the Borrower or any current or former ERISA Affiliate. "Environmental Laws" means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other "Superfund" or "Superlien" law or any other federal, or applicable state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any Hazardous Material. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder. "ERISA Affiliate", as applied to the Borrower, means any Person or trade or business which is a member of a group which is under common control with the Borrower, who together with the Borrower, is treated as a single employer within the meaning of Section 414(b) and (c) of the Code. "Event of Default" means any of the occurrences set forth as such in SECTION 9.1, for which the applicable grace period, if any, has expired. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder. "Facility Guaranty" means the Amended and Restated Guaranty and Suretyship Agreement between the Guarantors and the Lender, delivered as of the Closing Date and thereafter each Guaranty and Suretyship Agreement between one or more Guarantors and the Lender delivered pursuant to SECTION 7.19, as the same may be amended, modified or supplemented. "Facility Termination Date" means the date on which the Revolving Credit Termination Date shall have occurred, no Letters of Credit shall remain outstanding and the Borrower shall have fully, finally and irrevocably paid and satisfied all Obligations. "Federal Funds Effective Rate" means, for any day, the rate per annum (rounded upward to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight 11 Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, PROVIDED that (a) if such day is not a Business Day, the Federal Funds Effective Rate for such day shall be such rate on such transactions on the next preceding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Effective Rate for such day shall be the average rate quoted to the Lender on such day on such transaction as determined by the Lender. "Fiscal Year" means the twelve month fiscal period of the Borrower and its Subsidiaries commencing on April 1 of each calendar year and ending on March 31 of the next following calendar year. "Foreign Benefit Law" means any applicable statute, law, ordinance, code, rule, regulation, order or decree of any foreign nation or any province, state, territory, protectorate or other political subdivision thereof regulating, relating to, or imposing liability or standards of conduct concerning, any Employee Benefit Plan. "Four-Quarter Period" means a period of four full consecutive fiscal quarters of the Borrower and its Subsidiaries, taken together as one accounting period. "GAAP" or "Generally Accepted Accounting Principles" means generally accepted accounting principles, being those principles of accounting set forth in pronouncements of the Financial Accounting Standards Board, the American Institute of Certified Public Accountants or which have other substantial authoritative support and are applicable in the circumstances as of the date of a report. "Government Securities" means direct obligations of, or obligations the timely payment of principal and interest on which are fully and unconditionally guaranteed by, the United States of America. "Governmental Authority" shall mean any Federal, state, municipal, national or other governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government. "Guaranties" means all obligations of the Borrower or any Subsidiary directly or indirectly guaranteeing, or in effect guaranteeing, any Indebtedness or other obligation of 12 any other Person. "Guarantors" means, at any date, the Subsidiaries who are required to be parties to a Facility Guaranty at such date provided, however, WFI shall not be a Guarantor for any purpose unless and until WFI shall be required to deliver its Facility Guaranty in accordance with the last paragraph of SECTION 7.19 hereof. "Hazardous Material" means and includes any hazardous, toxic or dangerous waste, substance or material, the generation, handling, storage, disposal, treatment or emission of which is subject to any Environmental Law. "Indebtedness" means with respect to any Person, without duplication, all Indebtedness for Money Borrowed, all indebtedness of such Person for the acquisition of property or arising under Rate Hedging Obligations, all indebtedness secured by any Lien on the property of such Person whether or not such indebtedness is assumed, all liability of such Person by way of endorsements (other than for collection or deposit in the ordinary course of business), all Contingent Obligations, that portion of obligations with respect to Capital Leases and other items which in accordance with GAAP is required to be classified as a liability on a balance sheet; but excluding all accounts payable in the ordinary course of business so long as payment therefor is due within one year; provided that in no event shall the term Indebtedness include surplus and retained earnings, lease obligations (other than pursuant to Capital Leases), reserves for deferred income taxes and investment credits, other deferred credits or reserves, or deferred compensation obligations. "Indebtedness for Money Borrowed" means with respect to the Borrower and its Subsidiaries on a consolidated basis, all indebtedness of the Borrower or any of its Subsidiaries in respect of money borrowed, including without limitation all Capital Leases and the deferred purchase price of any property or asset, evidenced by a promissory note, bond, debenture or similar written obligation for the payment of money (including without limitation conditional sales contracts or similar title retention agreements). "Interbank Offered Rate" means, with respect to any LIBOR Rate Loan for the Interest Period applicable thereto, the average (rounded upward to the nearest one-sixteenth (1/16) of one percent) per annum rate of interest determined by the office of the Lender (each such determination to be conclusive and binding) as of two Business Days prior to the first day of such Interest Period, as the effective rate at which deposits in immediately available funds in Dollars are being, have been, or would be offered or quoted by the 13 Lender to major banks in the applicable interbank market for Eurodollar deposits at any time during the Business Day which is the second Business Day immediately preceding the first day of such Interest Period, for a term comparable to such Interest Period and in the amount of the LIBOR Rate Loan. If no such offers or quotes are generally available for such amount, then the Lender shall be entitled to determine the LIBOR Rate by estimating in its reasonable judgment the per annum rate (as described above) that would be applicable if such quote or offers were generally available. "Interest Period" means, for each LIBOR Rate Loan, a period commencing on the date such LIBOR Rate Loan is made or converted and ending, at the Borrower's option, on the date one, two, three or six months thereafter as notified to the Lender by the Authorized Representative three (3) Business Days prior to the beginning of such Interest Period; PROVIDED, that, (i) if the Authorized Representative fails to notify the Lender of the length of an Interest Period three (3) Business Days prior to the first day of such Interest Period, the Loan for which such Interest Period was to be determined shall be deemed to be a Base Rate Loan as of the first day thereof; (ii) if an Interest Period for a LIBOR Rate Loan would end on a day which is not a Business Day, such Interest Period shall be extended to the next Business Day (unless such extension would cause the applicable Interest Period to end in the succeeding calendar month, in which case such Interest Period shall end on the next preceding Business Day); (iii) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (iv) no Interest Period with respect to any Loans shall extend past the Stated Termination Date; and (v) there shall not be more than five (5) Interest Periods in effect on any day. "Interest Rate Selection Notice" means the written notice delivered by an Authorized Representative in connection with the election of a subsequent Interest Period for any LIBOR Rate Loan or the conversion of any LIBOR Rate Loan into a Base Rate Loan or the conversion of any Base Rate Loan into a LIBOR Rate Loan, in the form of EXHIBIT D. 14 "Issuing Bank" means NationsBank as issuer of Letters of Credit under ARTICLE III. "LC Account Agreement" means the LC Account Agreement dated as of the date hereof between the Borrower and the Issuing Bank, as amended, modified or supplemented from time to time. "Lending Office" means the Lending Office of the Lender designated on the signature pages hereof or such other office of the Lender (or of an affiliate of the Lender) as the Lender may from time to time specify to the Authorized Representative as the office by which its Loans are to be made and maintained. "Letters of Credit" means, collectively, all Documentary Letters of Credit, and all Standby Letters of Credit, advancing credit or securing an obligation on behalf of the Borrower or any of its Subsidiaries. "Letter of Credit Commitment" means an amount not to exceed $10,000,000. "Letter of Credit Facility" means the facility described in ARTICLE III hereof providing for the issuance by the Issuing Bank for the account of the Borrower or any of its Subsidiaries of Letters of Credit in an aggregate stated amount at any time outstanding not exceeding the Total Letter of Credit Commitment. "Letter of Credit Outstandings" means, as of any date of determination, the aggregate amount remaining undrawn under all Letters of Credit plus Reimbursement Obligations then outstanding. "LIBOR Rate Loan" means a Loan for which the rate of interest is determined by reference to the LIBOR Rate. "LIBOR Rate" means the interest rate per annum calculated according to the following formula: LIBOR = INTERBANK OFFERED RATE + Applicable ------------------------------ Rate 1- LIBOR Reserve Percentage Margin "LIBOR Reserve Percentage" means, for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D or any successor regulation, as the maximum reserve requirement (including any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of LIBOR Rate Loans is 15 determined), whether or not the Lender has any Eurocurrency liabilities subject to such requirements, without benefits of credits or proration, exceptions or offsets that may be available from time to time to the Lender. The LIBOR Rate shall be adjusted automatically on and as of the effective date of any change in the LIBOR Reserve Percentage. "Lien" means any interest in property securing any obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. For the purposes of this Agreement, the Borrower and any Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, financing lease, or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes. "Loan" or "Loans" means any borrowing pursuant to an Advance under the Revolving Credit Facility. "Loan Documents" means this Agreement, the Note, the Facility Guaranties, the LC Account Agreement, the Applications and Agreements for Letter of Credit, and all other instruments and documents heretofore or hereafter executed or delivered to or in favor of the Lender in connection with the Loans made and transactions contemplated under this Agreement, as the same may be amended, supplemented or replaced from the time to time. "Material Adverse Effect" means a material adverse effect on (i) the business, properties, operations or condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole, (ii) the ability of the Borrower or any of its Subsidiaries to pay or perform its respective obligations, liabilities and indebtedness under the Loan Documents as such payment or performance becomes due in accordance with the terms thereof, or (iii) the rights, powers and remedies of the Lender under any Loan Document or the validity, legality or enforceability thereof (including for purposes of clauses (ii) and (iii) the imposition of burdensome conditions thereon); provided, however, that the termination of the aviation joint venture in Equador shall not be deemed to have a Material Adverse Effect. "Material Contracts" means, collectively, any contract, lease, agreement or commitment of the Borrower or any Subsidiary, including, without limitation, any fuel purchase 16 agreements, the expiration or termination of which could result in a Material Adverse Effect. "Moody's" means Moody's Investors Service, Inc. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) Fiscal Years. "Municipal Obligations" means general obligations issued by, and supported by the full taxing authority of, any state of the United States of America or of any municipal corporation or other public body organized under the laws of any such state which are rated in the highest investment rating category by both S&P and Moody's. "Note" means the promissory note of the Borrower evidencing Loans executed and delivered to the Lender substantially in the form of EXHIBIT E. "Obligations" means the obligations, liabilities and Indebtedness of the Borrower with respect to (i) the principal and interest on the Loans as evidenced by the Note, (ii) the Reimbursement Obligations and otherwise in respect of the Letters of Credit, (iii) all liabilities of Borrower to the Lender which arise under a Swap Agreement, and (iv) the payment and performance of all other obligations, liabilities and Indebtedness of the Borrower to the Lender hereunder, under any one or more of the other Loan Documents or with respect to the Loans. "Outstandings" means, collectively, at any date, the Letter of Credit Outstandings and Revolving Credit Outstandings on such date. "PBGC" means the Pension Benefit Guaranty Corporation and any successor thereto. "Pension Plan" means any employee pension benefit plan within the meaning of Section 3(2) of ERISA, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which (i) is maintained for employees of the Borrower or any of its ERISA Affiliates or is assumed by the Borrower or any of its ERISA Affiliates in connection with any Acquisition or (ii) has at any time been maintained for the employees of the Borrower or any current or former ERISA Affiliate. "Person" means an individual, partnership, corporation, trust, unincorporated organization, association, joint 17 venture or a government or agency or political subdivision thereof. "Pre-Refunded Municipal Obligations" means obligations of any state of the United States of America or of any municipal corporation or other public body organized under the laws of any such state which are rated, based on the escrow, in the highest investment rating category by both S&P and Moody's and which have been irrevocably called for redemption and advance refunded through the deposit in escrow of Government Securities or other debt securities which are (i) not callable at the option of the issuer thereof prior to maturity, (ii) irrevocably pledged solely to the payment of all principal and interest on such obligations as the same becomes due and (iii) in a principal amount and bear such rate or rates of interest as shall be sufficient to pay in full all principal of, interest, and premium, if any, on such obligations as the same becomes due as verified by a nationally recognized firm of certified public accountants. "Prime Rate" means the rate of interest per annum announced publicly by the Lender as its prime rate from time to time. The Prime Rate is not necessarily the best or the lowest rate of interest offered by the Lender. "Principal Office" means the office of the Lender at NationsBank, N.A. (South), Independence Center, 15th Floor, NC1 001-15-04, Charlotte, North Carolina 28255, Attention: Agency Services, or such other office and address as the Lender may from time to time designate. "Rate Hedging Obligations" means any and all obligations of the Borrower or any Subsidiary, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, but not limited to, Dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts, warrants and those commonly known as interest rate "swap" agreements; and (ii) any and all cancellations, buybacks, reversals, terminations or assignments of any of the foregoing. "Regulation D" means Regulation D of the Board as the same may be amended or supplemented from time to time. 18 "Regulatory Change" means any change effective after the Closing Date in United States federal or state laws or regulations (including Regulation D and capital adequacy regulations) or foreign laws or regulations or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks, which includes the Lender, under any United States federal or state or foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof or compliance by the Lender with any request or directive regarding capital adequacy, including those relating to "highly leveraged transactions," whether or not having the force of law, and whether or not failure to comply therewith would be unlawful and whether or not published or proposed prior to the date hereof. "Reimbursement Obligation" shall mean at any time, the obligation of the Borrower with respect to any Letter of Credit to reimburse the Issuing Bank (including by the receipt by the Issuing Bank of proceeds of Loans pursuant to SECTION 3.2) for amounts theretofore paid by the Issuing Bank pursuant to a drawing under such Letter of Credit. "Repurchase Agreement" means a repurchase agreement entered into with any financial institution whose debt obligations or commercial paper are rated "A" by either of S&P or Moody's or "A-1" by S&P or "P-1" by Moody's. "Restricted Payment" means (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Borrower or any of its Subsidiaries (other than those payable or distributable solely to the Borrower) now or hereafter outstanding, except a dividend payable solely in shares of a class of stock to the holders of that class; (b) any redemption, conversion, exchange, retirement or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Borrower or any of its Subsidiaries (other than those payable or distributable solely to the Borrower) now or hereafter outstanding; (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Borrower or any of its Subsidiaries now or hereafter outstanding; and (d) any issuance and sale of capital stock of any Subsidiary of the Borrower (or any option, warrant or right to acquire such stock) other than to the Borrower. "Revolving Credit Commitment" means the obligation of the Lender to make Loans to the Borrower up to an aggregate principal amount at any one time outstanding equal to 19 $25,000,000. "Revolving Credit Facility" means the facility described in ARTICLE II hereof providing for Loans to the Borrower by the Lender in the aggregate principal amount of the Revolving Credit Commitment. "Revolving Credit Outstandings" means, as of any date of determination, the aggregate principal amount of all Loans then outstanding and all interest accrued thereon. "Revolving Credit Termination Date" means (i) the Stated Termination Date or (ii) such earlier date of termination of Lender's obligations pursuant to SECTION 9.1 upon the occurrence of an Event of Default, or (iii) such date as the Borrower may voluntarily and permanently terminate the Revolving Credit Facility by payment in full of all Revolving Credit Outstandings and Letter of Credit Outstandings and cancellation of all Letters of Credit. "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill. "Single Employer Plan" means any employee pension benefit plan covered by Title IV of ERISA in respect of which the Borrower or any Subsidiary is an "employer" as described in Section 4001(b) of ERISA and which is not a Multiemployer Plan. "Solvent" means, when used with respect to any Person, that at the time of determination: (i) the fair value of its assets (both at fair valuation and at present fair saleable value on an orderly basis) is in excess of the total amount of its liabilities, including Contingent Obligations; and (ii) it is then able and expects to be able to pay its debts as they mature; and (iii) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. "Standby Letters of Credit" means the standby letters of credit issued by the Issuing Bank for the account of the Borrower or any of its Subsidiaries upon the terms and conditions of this Agreement. "Stated Termination Date" means March 1, 2001 or such later date as the parties may agree pursuant to SECTION 2.13. "Subsidiary" means any corporation or other entity in which more than 50% of its outstanding voting stock or more than 50% of all equity interests is owned directly or indirectly by the Borrower and/or by one or more of the 20 Borrower's Subsidiaries. "Swap Agreement" means one or more agreements between the Borrower and any Person with respect to Indebtedness evidenced by any or all of the Note, on terms mutually acceptable to Borrower and such Person and approved by the Lender, which agreements create Rate Hedging Obligations; PROVIDED, HOWEVER, that no such approval of the Lender shall be required to the extent such agreements are entered into between the Borrower and the Lender. "Termination Event" means: (i) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder (unless the notice requirement has been waived by applicable regulation); or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or was deemed such under Section 4068(f) of ERISA; or (iii) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA; or (iv) the institution of proceedings to terminate a Pension Plan by the PBGC; or (v) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; or (vi) the partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan; or (vii) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA; or (viii) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Section 4241 or Section 4245 of ERISA, respectively; or (ix) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA. "Voting Stock" means shares of capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. "WFI" means World Fuel International, S.A., a corporation organized under the laws of Costa Rica and a wholly-owned Subsidiary of the Borrower; WFI also operates under the name 'Petromundo Internacional, S.A.' "WFI Capitalization" means, at any time at which the amount thereof is to be determined, (A) the sum of (i) all Indebtedness for Money Borrowed of WFI (excluding current liabilities of WFI other than Current Maturities of Long-Term Debt of WFI) plus (ii) the face 21 amount of all outstanding Standby Letters of Credit issued for the account of WFI and all obligations of WFI arising in connection with such letters of credit, PLUS (B) the sum of (i) the amount of issued and outstanding share capital of WFI, PLUS (ii) the amount of additional paid-in capital and retained income of WFI (or, in the case of a deficit, minus the amount of such deficit), PLUS (iii) the amount of any foreign currency translation adjustment (if positive, or, if negative, minus the amount of such translation adjustment) MINUS (iv) the book value of any treasury stock and the book value of any stock subscription receivables of WFI, all as determined in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis. RULES OF INTERPRETATION. (a) All accounting terms not specifically defined herein shall have the meanings assigned to such terms and shall be interpreted in accordance with GAAP applied on a Consistent Basis. (b) Each term defined in Article 1 or 9 of the Florida Uniform Commercial Code shall have the meaning given therein unless otherwise defined herein, except to the extent that the Uniform Commercial Code of another jurisdiction is controlling, in which case such terms shall have the meaning given in the Uniform Commercial Code of the applicable jurisdiction. (c) The headings, subheadings and table of contents used herein or in any other Loan Document are solely for convenience of reference and shall not constitute a part of any such document or affect the meaning, construction or effect of any provision thereof. (d) Except as otherwise expressly provided, references herein to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules are references to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules in or to this Agreement. (e) All definitions set forth herein or in any other Loan Document shall apply to the singular as well as the plural form of such defined term, and all references to the masculine gender shall include reference to the feminine or neuter gender, and VICE VERSA, as the context may require. (f) When used herein or in any other Loan Document, words such as "hereunder", "hereto", "hereof" and "herein" and other words of like import shall, unless the context clearly indicates to the contrary, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof. 22 (g) References to "including" means including without limiting the generality of any description preceding such term, and for purposes hereof the rule of EJUSDEM GENERIS shall not be applicable to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned. (h) All dates and times of day specified herein shall refer to such dates and times at Charlotte, North Carolina. (i) Each of the parties to the Loan Documents and their counsel have reviewed and revised, or requested (or had the opportunity to request) revisions to, the Loan Documents, and any rule of construction that ambiguities are to be resolved against the drafting party shall be inapplicable in the construing and interpretation of the Loan Documents and all exhibits, schedules and appendices thereto. (j) Any reference to an officer of the Borrower or any other Person by reference to the title of such officer shall be deemed to refer to each other officer of such Person, however titled, exercising the same or substantially similar functions. (k) All references to any agreement or document as amended, modified or supplemented, or words of similar effect, shall mean such document or agreement, as the case may be, as amended, modified or supplemented from time to time only as and to the extent permitted therein and in the Loan Documents. 23 ARTICLE II THE REVOLVING CREDIT FACILITY II.1. LOANS. (a) COMMITMENT. Subject to the terms and conditions of this Agreement, the Lender agrees to make Advances to the Borrower under the Revolving Credit Facility from time to time from the Closing Date until the Revolving Credit Termination Date up to but not exceeding the Revolving Credit Commitment, PROVIDED, however, that the Lender will not be required and shall have no obligation to make any such Advance (i) so long as a Default or an Event of Default has occurred and is continuing or (ii) if the Lender has accelerated the maturity of the Note as a result of an Event of Default; PROVIDED further, however, that immediately after giving effect to each such Advance, the principal amount of Revolving Credit Outstandings plus Letter of Credit Outstandings shall not exceed the Revolving Credit Commitment. Within such limits, the Borrower may borrow, repay and reborrow under the Revolving Credit Facility on a Business Day from the Closing Date until, but (as to borrowings and reborrowings) not including, the Revolving Credit Termination Date; PROVIDED, however, that (y) no Loan that is a LIBOR Rate Loan shall be made which has an Interest Period that extends beyond the Stated Termination Date and (z) each Loan that is a LIBOR Rate Loan may, subject to the provisions of SECTION 2.6, be repaid only on the last day of the Interest Period with respect thereto unless such payment is accompanied by the additional payment, if any, required by SECTION 4.4. (b) AMOUNTS. Except as otherwise permitted by the Lender from time to time, the aggregate unpaid principal amount of the Revolving Credit Outstandings plus Letter of Credit Outstandings shall not exceed at any time the Revolving Credit Commitment, and, in the event there shall be outstanding any such excess, the Borrower shall immediately make such payments and prepayments as shall be necessary to comply with this restriction. Each Loan hereunder, other than Base Rate Refunding Loans, and each conversion under SECTION 2.7, shall be in an amount of at least $100,000, and, if greater than $100,000, an integral multiple of $100,000. (c) ADVANCES. (i) An Authorized Representative shall give the Lender (1) at least three (3) Business Days' irrevocable written notice by telefacsimile transmission of a Borrowing Notice or Interest Rate Selection Notice (as applicable) with appropriate insertions, effective upon receipt, of each Loan that is a LIBOR Rate Loan (whether representing an additional borrowing hereunder or the conversion of a borrowing hereunder from Base Rate Loans to LIBOR Rate Loans) prior to 10:30 A.M. and (2) irrevocable written notice by telefacsimile transmission of a Borrowing Notice or Interest Rate Selection Notice (as 24 applicable) with appropriate insertions, effective upon receipt, of each Loan (other than Base Rate Refunding Loans to the extent the same are effected without notice pursuant to SECTION 2.1(C)(IV)) that is a Base Rate Loan (whether representing an additional borrowing hereunder or the conversion of borrowing hereunder from LIBOR Rate Loans to Base Rate Loans) prior to 10:30 A.M. on the day of such proposed Loan. Each such notice shall specify the amount of the borrowing, the type of Loan (Base Rate or LIBOR Rate), the date of borrowing and, if a LIBOR Rate Loan, the Interest Period to be used in the computation of interest. (ii) Not later than 2:00 P.M. on the date specified for each borrowing under this SECTION 2.1, the Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make the amount of the Advance or Advances available to the Borrower by delivery of the proceeds thereof to the Borrower's Account or otherwise as shall be directed in the applicable Borrowing Notice by the Authorized Representative and reasonably acceptable to the Lender. (iii) The Borrower shall have the option to elect the duration of the initial and any subsequent Interest Periods and to convert the Loans in accordance with SECTION 2.8. LIBOR Rate Loans and Base Rate Loans may be outstanding at the same time, PROVIDED, HOWEVER, there shall not be outstanding at any one time LIBOR Rate Loans having more than five (5) different Interest Periods. If the Lender does not receive a Borrowing Notice or an Interest Rate Selection Notice giving notice of election of the duration of an Interest Period or of conversion of any Loan to or continuation of a Loan as a LIBOR Rate Loan by the time prescribed by SECTION 2.1(C) OR 2.7, the Borrower shall be deemed to have elected to convert such Loan to (or continue such Loan as) a Base Rate Loan until the Borrower notifies the Lender in accordance with SECTION 2.7. (iv) Notwithstanding the foregoing, if a drawing is made under any Letter of Credit, such drawing is honored by the Issuing Bank prior to the Stated Termination Date, and the Borrower shall not immediately fully reimburse the Issuing Bank in respect of such drawing, (A) provided that the conditions to making a Loan as herein provided shall then be satisfied, the Reimbursement Obligation arising from such drawing shall be paid to the Issuing Bank by the Lender without the requirement of notice to or from the Borrower from immediately available funds which shall be advanced as a Base Rate Refunding Loan by the Lender under the Revolving Credit Facility, and (B) if the conditions to making a Loan as herein provided shall not then be satisfied, the Lender shall fund by payment to the Issuing Bank in immediately available funds the purchase price from the Issuing Bank of the Reimbursement Obligation. Any such Base Rate Refunding Loan shall be advanced as, and shall continue as, a Base Rate Loan unless and until the Borrower converts such Base 25 Rate Loan in accordance with the terms of SECTION 2.7. PAYMENT OF INTEREST. (a) The Borrower shall pay interest to the Lender on the outstanding and unpaid principal amount of each Loan for the period commencing on the date of such Loan until such Loan shall be due at the then applicable Base Rate for Base Rate Loans or applicable LIBOR Rate for LIBOR Rate Loans, as designated by the Authorized Representative pursuant to SECTION 2.1; PROVIDED, however, that if any amount shall not be paid when due (at maturity, by acceleration or otherwise), all amounts outstanding hereunder shall bear interest thereafter at the Default Rate. (b) Interest on each Loan shall be computed on the basis of a year of 360 days and calculated in each case for the actual number of days elapsed. Interest on each Loan shall be paid (i) quarterly in arrears not later than three (3) Business Days following the last Business Day of each March, June, September and December, commencing March 31, 1997 for each Base Rate Loan, (ii) on the last day of the applicable Interest Period for each LIBOR Rate Loan and, if such Interest Period extends for more than three (3) months, at intervals of three (3) months after the first day of such Interest Period, and (iii) upon payment in full of the principal amount of such Loan. II.3. PAYMENT OF PRINCIPAL. The principal amount of each Loan shall be due and payable to the Lender in full on the Revolving Credit Termination Date, or earlier as specifically provided herein. The principal amount of any Base Rate Loan may be prepaid in whole or in part at any time. The principal amount of any LIBOR Rate Loan may be prepaid only at the end of the applicable Interest Period unless the Borrower shall pay to the Lender the additional amount, if any, required under SECTION 4.4. All prepayments of Loans made by the Borrower shall be in the amount of $100,000 or such greater amount which is an integral multiple of $100,000, or the amount equal to all Revolving Credit Outstandings, or such other amount as necessary to comply with SECTION 2.1(b) or SECTION 2.7. II.4. NON-CONFORMING PAYMENTS. (a)NTS Each payment of principal (including any prepayment) and payment of interest and fees, and any other amount required to be paid to the Lender with respect to the Loans, shall be made to the Lender at the Principal Office in Dollars and in immediately available funds before 12:30 P.M. on the date such payment is due. The Lender may, but shall not be obligated to, debit the amount of any such payment which is not made by such time to any ordinary deposit account, if any, of the Borrower with the Lender. (b) The Lender shall deem any payment made by or on behalf of the Borrower hereunder that is not made both in Dollars and in immediately available funds and prior to 12:30 P.M. to be a non-conforming payment. Any such payment shall not be deemed to be 26 received by the Lender until the later of (i) the time such funds become available funds and (ii) the next Business Day. Any non-conforming payment may constitute or become a Default or Event of Default. Interest shall continue to accrue on any principal as to which a non-conforming payment is made until the later of (x) the date such funds become available funds or (y) the next Business Day at the Default Rate from the date such amount was due and payable. (c) In the event that any payment hereunder or under the Note becomes due and payable on a day other than a Business Day, then such due date shall be extended to the next succeeding Business Day unless provided otherwise under clause (ii) of the definition of "Interest Period"; PROVIDED that interest shall continue to accrue during the period of any such extension and PROVIDED further, that in no event shall any such due date be extended beyond the Revolving Credit Termination Date. II.5. NOTES. Loans made or continued by each Lender pursuant to the terms and conditions of this Agreement shall be evidenced by the Note payable to the order of the Lender in the Revolving Credit Commitment, which Note shall be dated the Closing Date and shall be duly completed, executed and delivered by the Borrower. II.6. REDUCTIONS. The Borrower shall, by notice from an Authorized Representative, have the right from time to time but not more frequently than once each calendar month, upon not less than three (3) Business Days' written notice to the Lender, effective upon receipt, to reduce the Revolving Credit Commitment. Each such reduction shall be in the aggregate amount of $500,000 or such greater amount which is in an integral multiple of $100,000, or the entire remaining Revolving Credit Commitment, and shall permanently reduce the Revolving Credit Commitment. Each reduction of the Revolving Credit Commitment shall be accompanied by payment of the Loans to the extent that the principal amount of Revolving Credit Outstandings plus Letter of Credit Outstandings exceeds the Revolving Credit Commitment after giving effect to such reduction, together with accrued and unpaid interest on the amounts prepaid. No such reduction shall result in the payment of any LIBOR Rate Loan other than on the last day of the Interest Period of such LIBOR Rate Loan unless such prepayment is accompanied by amounts due, if any, under SECTION 4.4. II.7. CONVERSIONS AND ELECTIONS OF SUBSEQUENT INTEREST PERIODS. Provided that no Default or Event of Default shall have occurred and be continuing and subject to the limitations set forth below and in ARTICLE IV, the Borrower may: (a) upon delivery, effective upon receipt, of a properly completed Interest Rate Selection Notice to the Lender on or before 10:30 A.M. on any Business Day, convert all or a 27 part of LIBOR Rate Loans to Base Rate Loans on the last day of the Interest Period for such LIBOR Rate Loans; and (b) upon delivery, effective upon receipt, of a properly completed Interest Rate Selection Notice to the Lender on or before 10:30 A.M. three (3) Business Days' prior to the date of such election or conversion: (i) elect a subsequent Interest Period for all or a portion of LIBOR Rate Loans to begin on the last day of the then current Interest Period for such LIBOR Rate Loans; and (ii) convert Base Rate Loans to LIBOR Rate Loans on any Business Day. Each election and conversion pursuant to this SECTION 2.7 shall be subject to the limitations on LIBOR Rate Loans set forth in the definition of "Interest Period" herein and in SECTIONS 2.1, 2.3 and ARTICLE IV. II.8. INCREASE AND DECREASE IN AMOUNTS. The amount of the Revolving Credit Commitment which shall be available to the Borrower as Advances shall be reduced by the aggregate amount of Outstanding Letters of Credit. II.9. FEES. FEES (a) UNUSED FEE. For the period beginning on the Closing Date and ending on the Revolving Credit Termination Date, the Borrower agrees to pay to the Lender an unused fee equal to the Applicable Unused Fee multiplied by the average daily amount by which the Revolving Credit Commitment exceeds the sum of (i) Revolving Credit Outstandings plus (ii) Letter of Credit Outstandings. Such fees shall be due in arrears not later than three (3) Business Days following the last Business Day of each March, June, September and December commencing March 31, 1997 to and on the Revolving Credit Termination Date (or such earlier date as the Lenders refuse to fund hereunder). (b) FACILITY FEE. The Borrower agrees to pay to the Lender, for its own account a one time fee upon terms and conditions as provided in that certain Fee Letter dated December 9, 1996 for agreeing to amend and extend the terms of this Agreement. II.10. USE OF PROCEEDS. The proceeds of the Loans made pursuant to the Revolving Credit Facility hereunder shall be used by the Borrower for general working capital needs and other corporate purposes, including the making of Acquisitions and Capital Expenditures permitted hereunder. 28 ARTICLE III LETTERS OF CREDIT III.1. LETTERS OF CREDIT. The Issuing Bank agrees, subject to the terms and conditions of this Agreement, upon request of the Borrower to issue from time to time for the account or benefit of the Borrower or any of its Subsidiaries Letters of Credit upon delivery to the Issuing Bank of an Application and Agreement for Letter of Credit relating thereto in form and content acceptable to the Issuing Bank; PROVIDED, that if a Letter of Credit is to be issued for the account or benefit of a Subsidiary of the Borrower, both the Borrower and such Subsidiary jointly and severally as co-applicants shall deliver to the Issuing Bank an Application and Agreement for Letter of Credit, and PROVIDED FURTHER, that (i) the Letter of Credit Outstandings shall not exceed the Letter of Credit Commitment and (ii) no Letter of Credit shall be issued if, after giving effect thereto, Letter of Credit Outstandings plus Revolving Credit Outstandings shall exceed the Revolving Credit Commitment. No Letter of Credit shall have an expiry date (including all rights of the Borrower or any Subsidiary named in such Letter of Credit to require renewal) or payment date occurring later than the earlier to occur of (A) one year after the date of its issuance with respect to Standby Letters of Credit or one hundred eighty days after the date of its issuance with respect to Documentary Letters of Credit; or (B) the fifth Business Day prior to the Stated Termination Date. Borrower agrees that it is jointly and severally liable for all Reimbursement Obligations and other obligations with respect to Letters of Credit previously issued or to be issued for the account or benefit of any Subsidiary as if and to the same extent as if Borrower were the sole applicant therefor, and that any Letters of Credit issued on application of a Subsidiary or the joint application of the Borrower and a Subsidiary shall be subject to all the terms of this Agreement, including applicable sublimits. III.2. REIMBURSEMENT.URSEMENT (a) The Borrower hereby unconditionally agrees to pay to the Issuing Bank immediately on demand at the Principal Office all amounts required to pay all drafts drawn or purporting to be drawn under the Letters of Credit and all reasonable expenses incurred by the Issuing Bank in connection with the Letters of Credit, and in any event and without demand to place in possession of the Issuing Bank (which shall include Advances under the Revolving Credit Facility if permitted by SECTION 2.1) sufficient funds to pay all debts and liabilities arising under any Letter of Credit. The Issuing Bank agrees to give the Borrower prompt notice of any request for a draw under a Letter of Credit. The Issuing Bank may charge any account the Borrower may have with it for any and all amounts the Issuing Bank pays 29 under a Letter of Credit, plus charges and reasonable expenses as from time to time agreed to by the Issuing Bank and the Borrower; provided that to the extent permitted by SECTION 2.1(C)(IV) , amounts shall be paid pursuant to Advances under the Revolving Credit Facility. The Borrower agrees to pay the Issuing Bank interest on any Reimbursement Obligations not paid when due hereunder at the Base Rate, or the maximum rate permitted by applicable law, if lower, such rate to be calculated on the basis of a year of 360 days for actual days elapsed. (b) In accordance with the provisions of SECTION 2.1(C), the Issuing Bank shall notify the Lender of any drawing under any Letter of Credit promptly following the receipt by the Issuing Bank of such drawing. (c) The issuance by the Issuing Bank of each Letter of Credit shall, in addition to the conditions precedent set forth in ARTICLE V, be subject to the conditions that such Letter of Credit be in such form and contain such terms as shall be reasonably satisfactory to the Issuing Bank consistent with the then current practices and procedures of the Issuing Bank with respect to similar letters of credit, and the Borrower shall have executed and delivered such other instruments and agreements relating to such Letters of Credit as the Issuing Bank shall have reasonably requested consistent with such practices and procedures. All Letters of Credit shall be issued pursuant to and subject to the Uniform Customs and Practice for Documentary Credits, 1993 revision, International Chamber of Commerce Publication No. 500 and all subsequent amendments and revisions thereto. (d) The Borrower agrees that Issuing Bank may, in its sole discretion, accept or pay, as complying with the terms of any Letter of Credit, any drafts or other documents otherwise in order which may be signed or issued by an administrator, executor, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, attorney in fact or other legal representative of a party who is authorized under such Letter of Credit to draw or issue any drafts or other documents. (e) Without limiting the generality of the provisions of SECTION 11.9, the Borrower hereby agrees to indemnify and hold harmless the Issuing Bank from and against any and all claims and damages, losses, liabilities, reasonable costs and expenses which the Issuing Bank may incur (or which may be claimed against the Issuing Bank) by any Person by reason of or in connection with the issuance or transfer of or payment or failure to pay under any Letter of Credit; PROVIDED that the Borrower shall not be required to indemnify the Issuing Bank for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, (i) caused by the willful misconduct or gross negligence of the party to be indemnified or (ii) caused by the 30 failure of the Issuing Bank to pay under any Letter of Credit after the presentation to it of a request for payment strictly complying with the terms and conditions of such Letter of Credit, unless such payment is prohibited by any law, regulation, court order or decree. The indemnification and hold harmless provisions of this SECTION 3.2(E) shall survive repayment of the Obligations, occurrence of the Revolving Credit Termination Date and expiration or termination of this Agreement. (f) Without limiting Borrower's rights as set forth in SECTION 3.2(E), the obligation of the Borrower to immediately reimburse the Issuing Bank for drawings made under Letters of Credit and the Issuing Bank's right to receive such payment shall be absolute, unconditional and irrevocable, and that such obligations of the Borrower shall be performed strictly in accordance with the terms of this Agreement and such Letters of Credit and the related Applications and Agreement for any Letter of Credit, under all circumstances whatsoever, including the following circumstances: (i) any lack of validity or enforceability of the Letters of Credit, the obligation supported by the Letters of Credit or any other agreement or instrument relating thereto (collectively, the "Related LC Documents"); (ii) any amendment or waiver of or any consent to or departure from all or any of the Related LC Documents; (iii) the existence of any claim, setoff, defense (other than the defense of payment in accordance with the terms of this Agreement) or other rights which the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any persons or entities for whom any such beneficiary or any such transferee may be acting), the Lender or any other Person, whether in connection with the Loan Documents, the Related LC Documents or any unrelated transaction; (iv) any breach of contract or other dispute between the Borrower and any beneficiary or any transferee of a Letter of Credit (or any persons or entities for whom such beneficiary or any such transferee may be acting), the Lender or any other Person; (v) any draft, statement or any other document presented under the Letters of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; (vi) any delay, extension of time, renewal, compromise or other indulgence or modification granted or agreed to by the Lender, with or without notice to or 31 approval by the Borrower in respect of any of Borrower's Obligations under this Agreement; or (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. Nothing contained in this subsection (f) shall relieve the Issuing Bank of its obligations under the Uniform Customs and Practices for Documentary Credits, 1993 revision, International Chamber of Commerce Publication No. 500. III.3. LETTER OF CREDIT FACILITY FEES. The Borrower shall pay to the Lender a fee on the aggregate amount available to be drawn on each outstanding Letter of Credit at a rate equal to (a) .65% per annum for each outstanding Standby Letter of Credit, and (b) .125% per annum for each outstanding Documentary Letter of Credit. Such fees shall be due with respect to each Letter of Credit quarterly in advance on the first day of each January, April, July and October, the first such payment to be made (x) on the Closing Date with respect to Letters of Credit outstanding and to the extent such fees have not yet been paid for such Letters of Credit with respect to the then current calendar quarter, or (y) on the date of issuance of a Letter of Credit, and thereafter on the first day of the calendar quarter occurring after either the Closing Date or the date of issuance of a Letter of Credit as applicable. The fees described in this SECTION 3.3 shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. III.4. ADMINISTRATIVE FEES. The Borrower shall pay to the Issuing Bank such administrative fee and other fees, if any, in connection with the Letters of Credit in such amounts and at such times as the Issuing Bank and the Borrower shall agree from time to time. 32 ARTICLE IV YIELD PROTECTION AND ILLEGALITY IV.1. ADDITIONAL COSTS. (a) The Borrower shall promptly pay to the Lender from time to time, without duplication, such amounts as the Lender may reasonably determine to be necessary to compensate it for any costs incurred by the Lender which it determines are attributable to its making or maintaining any Loan or its obligation to make any Loans, or the issuance or maintenance by the Issuing Bank of any Letter of Credit issued hereunder, or any reduction in any amount receivable by the Lender under this Agreement or the Notes in respect of any of such Loans or the Letters of Credit, including reductions in the rate of return on the Lender's capital (such increases in costs and reductions in amounts receivable and returns being herein called "Additional Costs"), resulting from any Regulatory Change which: (i) changes the basis of taxation of any amounts payable to the Lender under this Agreement or the Notes in respect of any of such Loans or the Letters of Credit (other than taxes imposed on or measured by the income, revenues or assets); or (ii) imposes or modifies any reserve, special deposit, or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, the Lender (other than any such reserve, deposit or requirement reflected in the Prime Rate, Federal Funds Effective Rate or the Interbank Offered Rate, in each case computed in accordance with the respective definitions of such terms set forth in SECTION 1.2); or (iii) has or would have the effect of reducing the rate of return on capital of the Lender to a level below that which the Lender could have achieved but for such Regulatory Change (taking into consideration the Lender's policies with respect to capital adequacy); or (iv) imposes any other condition adversely affecting the Lender under this Agreement, the Notes or the issuance or maintenance of, or the Lender's Participation in, the Letters of Credit (or any of such extensions of credit or liabilities). The Lender will notify the Authorized Representative of any event occurring after the Closing Date which would entitle it to compensation pursuant to this SECTION 4.1(A) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation. (b) Without limiting the effect of the foregoing provisions of this SECTION 4.1, in the event that, by reason of any Regulatory Change, the Lender either (i) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of the Lender which includes deposits by reference to which the interest rate on LIBOR Rate Loans is determined as provided in this Agreement or a category of extensions of credit or other assets of the Lender which includes LIBOR Rate Loans or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets which it may hold, then, if the 33 Lender so elects the obligation hereunder of the Lender to make, and to convert Base Rate Loans into, LIBOR Rate Loans that are the subject of such restrictions shall be suspended until the date such Regulatory Change ceases to be in effect and the Borrower shall, on the last day(s) of the then current Interest Period(s) for outstanding LIBOR Rate Loans convert such LIBOR Rate Loans into Base Rate Loans. (c) Determinations by the Lender for purposes of this SECTION 4.1 of the effect of any Regulatory Change on its costs of making or maintaining, or being committed to make Loans, or by NationsBank as issuer of any Letter of Credit of the effect of any Regulatory Change on its costs in connection with the issuance or maintenance of any Letter of Credit issued hereunder, or the effect of any Regulatory Change on amounts receivable by the Lender in respect of Loans or Letters of Credit, and of the additional amounts required to compensate the Lender in respect of any Additional Costs, shall be made taking into account the Lender's policies, or the policies of the parent corporation of the Lender, as to the allocation of capital, costs and other items and shall be conclusive absent manifest error. The Lender shall furnish to the Authorized Representative within one hundred eighty (180) days of the incurrence of any Additional Costs for which compensation is sought an explanation of the Regulatory Change and calculations, in reasonable detail, setting forth the Lender's determination of any such Additional Costs. IV.2. SUSPENSION OF LOANS. Anything herein to the contrary notwithstanding, if, on or prior to the determination of any interest rate for any LIBOR Rate Loan for any Interest Period, the Lender determines (which determination made on a reasonable basis shall be conclusive absent manifest error) that: (a) quotations of interest rates for the relevant deposits referred to in the definition of "LIBOR Rate" in SECTION 1.2 are not being provided in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for such LIBOR Rate Loan as provided in this Agreement; or (b) the relevant rates of interest referred to in the definition of "Interbank Offered Rate" in SECTION 1.2 upon the basis of which the LIBOR Rate for such Interest Period is to be determined do not adequately reflect the cost to the Lender of making or maintaining such LIBOR Rate Loan for such Interest Period; then the Lender shall give the Authorized Representative prompt notice thereof, and so long as such condition remains in effect, the Lender shall be under no obligation to make LIBOR Rate Loans that are subject to such condition, or to convert Base Rate Loans into LIBOR Rate Loans, and the Borrower shall on the last day(s) of the then current Interest Period(s) for outstanding LIBOR Rate Loans, as applicable, convert such LIBOR Rate Loans into another LIBOR Rate 34 Loan if such LIBOR Rate Loan is not subject to the same or similar condition, or Base Rate Loans, if available hereunder. The Lender shall give the Authorized Representative notice describing in reasonable detail any event or condition described in this SECTION 4.2 promptly following the determination by the Lender that the availability of LIBOR Rate Loans is, or is to be, suspended as a result thereof. IV.3. ILLEGALITY. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for the Lender to honor its obligation to make or maintain LIBOR Rate Loans hereunder, then the Lender shall promptly notify the Borrower thereof and the Lender's obligation to make or continue LIBOR Rate Loans, or to convert Base Rate Loans into LIBOR Rate Loans, shall be suspended until such time as the Lender may again make and maintain LIBOR Rate Loans, and the Lender's outstanding LIBOR Rate Loans shall be converted into Base Rate Loans in accordance with SECTION 2.7 or earlier if required by applicable law. IV.4. COMPENSATION. The Borrower shall promptly pay to the Lender, upon the request of the Lender, such amount or amounts as shall be sufficient (in the reasonable determination of the Lender) to compensate it for any loss, cost or expense incurred by it as a result of: (a) any payment, prepayment or conversion of a LIBOR Rate Loan on a date other than the last day of the Interest Period for such LIBOR Rate Loan, including without limitation any conversion required pursuant to SECTIONS 4.1, 4.2 OR 4.3; or (b) any failure by the Borrower to borrow or convert a LIBOR Rate Loan on the date for such borrowing or conversion specified in the relevant Borrowing Notice or Interest Rate Selection Notice under Article II hereof; such compensation to include, without limitation, an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the principal amount so paid, prepaid or converted or not borrowed for the period from the date of such payment, prepayment or conversion or failure to borrow or convert to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow or convert, the Interest Period for such Loan which would have commenced on the date scheduled for such borrowing or conversion) at the applicable rate of interest for such LIBOR Rate Loan provided for herein over (ii) the Interbank Offered Rate (as reasonably determined by the Lender) for Dollar deposits of amounts comparable to such principal amount and maturities comparable to such period. A determination of the Lender as to the amounts payable pursuant to this SECTION 4.4 shall be conclusive, provided that such 35 determinations are made on a reasonable basis. If the Lender requests compensation under this SECTION 4.4 it shall promptly furnish to the Authorized Representative calculations in reasonable detail setting forth the Lender's determination of the amount of such compensation. 36 ARTICLE V CONDITIONS TO MAKING LOANS AND ISSUING LETTERS OF CREDIT V.1. CONDITIONS OF INITIAL ADVANCE. The obligation of the Lender to make the initial Advance under the Revolving Credit Facility, and of the Issuing Bank to issue any additional Letter of Credit, is subject to the conditions precedent that: (a) the Lender shall have received on the Closing Date, in form and substance satisfactory to the Lender, the following: (i) executed originals of each of this Agreement, the Note, the initial Facility Guaranties, the LC Account Agreement and the other Loan Documents, together with all schedules and exhibits thereto; (ii) the favorable written opinion or opinions with respect to the Loan Documents and the transactions contemplated thereby of counsel to the Credit Parties dated the Closing Date, addressed to the Lender and satisfactory to Smith Helms Mulliss & Moore, L.L.P., special counsel to the Lender, substantially in the form of EXHIBIT F; (iii) resolutions of the boards of directors or other appropriate governing body (or of the appropriate committee thereof) of each Credit Party certified by its secretary or assistant secretary as of the Closing Date, approving and adopting the Loan Documents to be executed by such Person, and authorizing the execution and delivery thereof; (iv) specimen signatures of officers of each Credit Party executing the Loan Documents on behalf of such Credit Party, certified by the secretary or assistant secretary of such Credit Party; (v) the charter documents of each Credit Party certified as of a recent date by the Secretary or Assistant Secretary of the Borrower; (vi) the bylaws of each Credit Party certified as of the Closing Date as true and correct by its secretary or assistant secretary; (vii) certificates issued as of a recent date by the Secretaries of State of the respective jurisdictions of formation of each Credit Party as to the due existence and good standing of each Credit Party; 37 (viii) notice of appointment of the initial Authorized Representative(s); (ix) certificate of an Authorized Representative dated the Closing Date demonstrating compliance with the financial covenants contained in SECTIONS 8.1(A) through 8.1(D) as of the most recently ended fiscal quarter period, substantially in the form of EXHIBIT G; (x) an initial Borrowing Notice, if any, and, if elected by the Borrower, Interest Rate Selection Notice; (xi) evidence that all fees payable by the Borrower on the Closing Date to the Lender have been paid in full; (xii) such other documents, instruments, certificates and opinions as the Lender may reasonably request on or prior to the Closing Date in connection with the consummation of the transactions contemplated hereby; and (b) In the good faith judgment of the Lender: (i) 19 14 there shall not have occurred or become known to the Lender any event, condition, situation or status since the date of the information contained in the financial and business projections, budgets, pro forma data and forecasts concerning the Borrower and its Subsidiaries delivered to the Lender prior to the Closing Date that has had or could reasonably be expected to result in a Material Adverse Effect; (ii) no litigation, action, suit, investigation or other arbitral, administrative or judicial proceeding shall be pending or threatened which could reasonably be likely to result in a Material Adverse Effect; and (iii) the Borrower and its Subsidiaries shall have received all approvals, consents and waivers, and shall have made or given all necessary filings and notices as shall be required to consummate the transactions contemplated hereby without the occurrence of any default under, conflict with or violation of (A) any applicable law, rule, regulation, order or decree of any Governmental Authority or arbitral authority or (B) any agreement, document or instrument to which any of the Borrower or any Subsidiary is a party or by which any of them or their properties is bound. V.2. CONDITIONS OF LOANS AND LETTER OF CREDIT. The obligations of the Lender to make any Loans, and the Issuing Bank 38 to issue Letters of Credit, hereunder on or subsequent to the Closing Date are subject to the satisfaction of the following conditions: (a) the Lender shall have received a Borrowing Notice if required by ARTICLE II; (b) the representations and warranties of the Borrower and the Subsidiaries set forth in ARTICLE VI and in each of the other Loan Documents shall be true and correct in all material respects on and as of the date of such Advance, with the same effect as though such representations and warranties had been made on and as of such date, except to the extent that such representations and warranties expressly relate to an earlier date and except that the financial statements referred to in SECTION 6.6(A) shall be deemed to be those financial statements most recently delivered to the Lender pursuant to SECTION 7.1 from the date financial statements are delivered to the Lender in accordance with such Section; (a) in the case of the issuance of a Letter of Credit, the Borrower with any of its Subsidiaries as co-applicant, as applicable, shall have executed and delivered to the Issuing Bank an Application and Agreement for Letter of Credit in form and content acceptable to the Issuing Bank together with such other instruments and documents as it shall request; (b) at the time of (and after giving effect to) each Advance or the issuance of a Letter of Credit, no Default or Event of Default specified in ARTICLE IX shall have occurred and be continuing; and (c) immediately after giving effect to: i) a Loan, the aggregate principal balance of all outstanding Loans shall not exceed the Revolving Credit Commitment; (ii) a Letter of Credit or renewal thereof, the aggregate principal balance of all outstanding Letters of Credit and Reimbursement Obligations for the Lender shall not exceed the Letter of Credit Commitment; (iii) a Loan or a Letter of Credit or renewal thereof, the sum of Letter of Credit Outstandings plus Revolving Credit Outstandings shall not exceed the Revolving Credit Commitment. 39 ARTICLE VI REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants with respect to itself and to its Subsidiaries (which representations and warranties shall survive the delivery of the documents mentioned herein and the making of Loans), that: V.I. ORGANIZATION AND AUTHORITY.UTHORITY (a) The Borrower and each Subsidiary is a corporation or partnership duly organized and validly existing under the laws of the jurisdiction of its formation; (b) The Borrower and each Subsidiary (x) has the requisite power and authority to own its properties and assets and to carry on its business as now being conducted and as contemplated in the Loan Documents, and (y) is qualified to do business in every jurisdiction in which failure so to qualify would have a Material Adverse Effect; (c) The Borrower has the power and authority to execute, deliver and perform this Agreement and the Notes, and to borrow hereunder, and to execute, deliver and perform each of the other Loan Documents to which it is a party; (d) Each Subsidiary has the power and authority to execute, deliver and perform the Facility Guaranty and each of the other Loan Documents to which it is a party; and (e) When executed and delivered, each of the Loan Documents to which the Borrower or any Subsidiary is a party will be the legal, valid and binding obligation or agreement, as the case may be, of the Borrower or such Subsidiary, enforceable against the Borrower or such Subsidiary in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity (whether considered in a proceeding at law or in equity). VI.2. LOAN DOCUMENTS. The execution, delivery and performance by the Borrower and each Subsidiary of each of the Loan Documents to which it is a party: (a) have been duly authorized by all requisite corporate action (including any required shareholder or partner approval) of the Borrower and each Subsidiary required for the lawful execution, delivery and performance thereof; 40 (b) do not violate any provisions of (i) applicable law, rule or regulation, (ii) any judgment, writ, order, determination, decree or arbitral award of any Governmental Authority or arbitral authority binding on the Borrower or any Subsidiary or its properties, or (iii) the charter documents, partnership agreement or bylaws of the Borrower or any Subsidiary; (c) does not and will not be in conflict with, result in a breach of or constitute an event of default, or an event which, with notice or lapse of time or both, would constitute an event of default, under any contract (including without limitation any Material Contract), indenture, agreement or other instrument or document to which Borrower or any Subsidiary is a party, or by which the properties or assets of Borrower or any Subsidiary are bound; and (d) does not and will not result in the creation or imposition of any Lien upon any of the properties or assets of Borrower or any Subsidiary. VI.3. SOLVENCY. The Borrower and each Subsidiary is Solvent after giving effect to the transactions contemplated by the Loan Documents. VI.4. SUBSIDIARIES AND STOCKHOLDERS. The Borrower has no Subsidiaries other than those Persons listed as Subsidiaries in SCHEDULE 6.4 and additional Subsidiaries created or acquired after the Closing Date in compliance with SECTION 7.19; SCHEDULE 6.4 states as of the date hereof the organizational form of each entity, the authorized and issued capitalization of each Subsidiary listed thereon, the number of shares or other equity interests of each class of capital stock or interest issued and outstanding of each such Subsidiary and the number and/or percentage of outstanding shares or other equity interest (including options, warrants and other rights to acquire any interest) of each such class of capital stock or other equity interest owned by Borrower or by any such Subsidiary; the outstanding shares or other equity interests of each such Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable; and Borrower and each such Subsidiary owns beneficially and of record all the shares and other interests it is listed as owning in SCHEDULE 6.4, free and clear of any Lien. VI.5. OWNERSHIP INTERESTS. Borrower owns no interest in any Person other than the Persons listed in SCHEDULE 6.4, equity investments in Persons not constituting Subsidiaries permitted under SECTION 8.7 and additional Subsidiaries created or acquired after the Closing Date in compliance with SECTION 7.19. VI.6.FINANCIAL CONDITION. 41 (a) The Borrower has heretofore furnished to the Lender an audited consolidated balance sheet of the Borrower and its Subsidiaries as of March 31, 1996 and the notes thereto and the related consolidated statements of income, stockholders' equity and cash flows for the Fiscal Year then ended as examined and certified by Arthur Andersen LLP and unaudited consolidated interim financial statements of the Borrower and its Subsidiaries consisting of consolidated balance sheets and related consolidated statements of income, stockholders' equity and cash flows, in each case without notes, for and as of the end of the nine (9) month period ending December 31, 1996. Except as set forth therein, such financial statements (including the notes thereto) present fairly the financial condition of the Borrower and its Subsidiaries as of the end of such Fiscal Year and nine (9) month period and results of their operations and the changes in its stockholders' equity for the Fiscal Year and interim period then ended, all in conformity with GAAP applied on a Consistent Basis, subject however, in the case of unaudited interim statements to year end audit adjustments; (b) since December 31, 1996 there has been no material adverse change in the condition, financial or otherwise, of the Borrower and its Subsidiaries taken as a whole or in the businesses, properties, performance, prospects or operations of the Borrower and its Subsidiaries taken as a whole, nor have such businesses or properties been materially adversely affected as a result of any fire, explosion, earthquake, accident, strike, lockout, combination of workers, flood, embargo or act of God; and (c) except as set forth in the financial statements referred to in SECTION 6.6(A) or in SCHEDULE 6.6 or permitted by SECTION 8.5, neither Borrower nor any Subsidiary has incurred, other than in the ordinary course of business, any material Indebtedness, Contingent Obligation or other commitment or liability which remains outstanding or unsatisfied. VI.7. TITLE TO PROPERTIES. The Borrower and each of its Subsidiaries has good and marketable title to all its real and personal properties, subject to no transfer restrictions or Liens of any kind, except for the transfer restrictions and Liens described in SCHEDULE 6.7 and Liens permitted by SECTION 8.4. VI.8. TAXES. Except as set forth in SCHEDULE 6.8, the Borrower and each of its Subsidiaries has filed or caused to be filed all federal, state and local tax returns which are required to be filed by it and, except for taxes and assessments being contested in good faith by appropriate proceedings diligently conducted and against which reserves reflected in the financial 42 statements described in SECTION 6.6(A) and satisfactory to the Borrower's independent certified public accountants have been established, have paid or caused to be paid all taxes as shown on said returns or on any assessment received by it, to the extent that such taxes have become due. VI.9. OTHER AGREEMENTS. Neither the Borrower nor any Subsidiary is (a) a party to or subject to any judgment, order, decree, agreement, lease or instrument, or subject to other restrictions, which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect; or (b) in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument, including without limitation any Material Contract, to which the Borrower or any Subsidiary is a party, which default has, or if not remedied within any applicable grace period could reasonably be likely to have, a Material Adverse Effect. VI.10 LITIGATION. Except as set forth in SCHEDULE 6.10, there is no action, suit, investigation or proceeding at law or in equity or by or before any governmental instrumentality or agency or arbitral body pending, or, to the knowledge of the Borrower, threatened by or against the Borrower or any Subsidiary or affecting the Borrower or any Subsidiary or any properties or rights of the Borrower or any Subsidiary or other Credit Party, which could reasonably be likely to have a Material Adverse Effect. VI.11 MARGIN STOCK. The proceeds of the borrowings made hereunder will be used by the Borrower only for the purposes expressly authorized herein. None of such proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry margin stock or for any other purpose which might constitute any of the Loans under this Agreement a "purpose credit" within the meaning of said Regulation U or Regulation X (12 C.F.R. Part 224) of the Board. Neither the Borrower nor any agent acting in its behalf has taken or will take any action which might cause this Agreement or any of the documents or instruments delivered pursuant hereto to violate any regulation of the Board or to violate the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or any state securities laws, in each case as in effect on the date hereof. VI.12. INVESTMENT COMPANY. Neither the Borrower nor any of its Subsidiaries is an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an 43 "investment company", as such terms are defined in the Investment Company Act of 1940, as amended (15 U.S.C. ss. 80a-1, et seq.). The application of the proceeds of the Loans and repayment thereof by the Borrower and the performance by the Borrower and its Subsidiaries of the transactions contemplated by the Loan Documents will not violate any provision of said Act, or any rule, regulation or order issued by the Securities and Exchange Commission thereunder, in each case as in effect on the date hereof. VI.13. PATENTS, ETC. The Borrower and each of its Subsidiaries owns or has the right to use, under valid license agreements or otherwise, all material patents, licenses, franchises, trademarks, trademark rights, trade names, trade name rights, trade secrets and copyrights necessary to or used in the conduct of its businesses as now conducted and as contemplated by the Loan Documents, without known conflict with any patent, license, franchise, trademark, trade secret, trade name, copyright, other proprietary right of any other Person. VI.14. NO UNTRUE STATEMENT. Neither (a) this Agreement nor any other Loan Document or certificate or document executed and delivered by or on behalf of the Borrower or any Subsidiary in accordance with or pursuant to any Loan Document nor (b) any statement, representation, or warranty provided to the Lender in connection with the negotiation or preparation of the Loan Documents contains any misrepresentation or untrue statement of material fact or omits to state a material fact necessary, in light of the circumstance under which it was made, in order to make any such warranty, representation or statement contained therein not misleading. VI.15. NO CONSENTS, ETC. Neither the respective businesses or properties of the Borrower or any Subsidiary, nor any relationship between the Borrower or any Subsidiary and any other Person, nor any circumstance in connection with the execution, delivery and performance of the Loan Documents and the transactions contemplated thereby, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person on the part of the Borrower or any Subsidiary as a condition to the execution, delivery and performance of, or consummation of the transactions contemplated by the Loan Documents, which, if not obtained or effected, would be reasonably likely to have a Material Adverse Effect, or if so, such consent, approval, authorization, filing, registration or qualification has been duly obtained or effected, as the case may be. VI.16 EMPLOYEE BENEFIT PLANS.T PLANS (a) The Borrower and each ERISA Affiliate is in compliance with all applicable provisions of ERISA and the 44 regulations and published interpretations thereunder and in compliance with all Foreign Benefit Laws with respect to all Employee Benefit Plans except for any required amendments for which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, and each trust related to such plan has been determined to be exempt under Section 501(a) of the Code. No material liability has been incurred by the Borrower or any ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan; (b) Neither the Borrower nor any ERISA Affiliate has (i) engaged in a nonexempt prohibited transaction described in Section 4975 of the Code or Section 406 of ERISA affecting any of the Employee Benefit Plans or the trusts created thereunder which could subject any such Employee Benefit Plan or trust to a material tax or penalty on prohibited transactions imposed under Internal Revenue Code Section 4975 or ERISA, (ii) incurred any accumulated funding deficiency with respect to any Employee Benefit Plan, whether or not waived, or any other liability to the PBGC which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid, (iii) failed to make a required contribution or payment to a Multiemployer Plan, or (iv) failed to make a required installment or other required payment under Section 412 of the Code, Section 302 of ERISA or the terms of such Employee Benefit Plan; (c) No Termination Event has occurred or is reasonably expected to occur with respect to any Pension Plan or Multiemployer Plan, and neither the Borrower nor any ERISA Affiliate has incurred any unpaid withdrawal liability with respect to any Multiemployer Plan; (d) The present value of all vested accrued benefits under each Employee Benefit Plan which is subject to Title IV of ERISA, did not, as of the most recent valuation date for each such plan, exceed the then current value of the assets of such Employee Benefit Plan allocable to such benefits; (e) To the best of the Borrower's knowledge, each Employee Benefit Plan subject to Title IV of ERISA, maintained by the Borrower or any ERISA Affiliate, has been administered in accordance with its terms in all material respects and is in compliance in all material respects with all applicable requirements of ERISA and other applicable laws, regulations and rules; 45 (f) The consummation of the Loans and the issuance of the Letters of Credit provided for herein will not involve any prohibited transaction under ERISA which is not subject to a statutory or administrative exemption; and (g) No material proceeding, claim, lawsuit and/or investigation exists or, to the best knowledge of the Borrower after due inquiry, is threatened concerning or involving any Employee Benefit Plan. VI.17. NO DEFAULT. As of the date hereof, there does not exist any Default or Event of Default hereunder. VI.18. HAZARDOUS MATERIALS. Except as set forth on SCHEDULE 6.18, the Borrower and each Subsidiary is in compliance with all applicable Environmental Laws in all material respects. Neither the Borrower nor any Subsidiary has been notified of any action, suit, proceeding or investigation which, and neither the Borrower nor any Subsidiary is aware of any facts which, (i) calls into question, or could reasonably be expected to call into question, compliance by the Borrower or any Subsidiary with any Environmental Laws, (ii) which seeks, or could reasonably be expected to form the basis of a meritorious proceeding, to suspend, revoke or terminate any license, permit or approval necessary for the generation, handling, storage, treatment or disposal of any Hazardous Material, or (iii) seeks to cause, or could reasonably be expected to form the basis of a meritorious proceeding to cause, any property of the Borrower or any Subsidiary to be subject to any restrictions on ownership, use, occupancy or transferability under any Environmental Law. VI.19. RICO. Neither the Borrower nor any Subsidiary is engaged in or has engaged in any course of conduct that could subject any of their respective properties to any Lien, seizure or other forfeiture under any criminal law, racketeer influenced and corrupt organizations law, civil or criminal, or other similar laws. 46 ARTICLE VII AFFIRMATIVE COVENANTS Until the Facility Termination Date, unless the Lender shall otherwise consent in writing, the Borrower will, and where applicable will cause each Subsidiary to: VII.1 FINANCIAL REPORTS, ETC. (a) As soon as practical and in any event within 90 days after the end of each Fiscal Year of the Borrower, deliver or cause to be delivered to the Lender (i) a consolidated balance sheet of the Borrower and its Subsidiaries of at the end of such Fiscal Year, and the notes thereto, and the related consolidated statements of income, stockholders' equity and cash flows, and the respective notes thereto, for such Fiscal Year, setting forth comparative financial statements for the preceding Fiscal Year, all prepared in accordance with GAAP applied on a Consistent Basis and containing, with respect to the consolidated financial statements, opinions of Arthur Andersen LLP, or other such independent certified public accountants selected by the Borrower and approved by the Lender, which are unqualified as to the scope of the audit performed and as to the "going concern" status of the Borrower and without any exception not acceptable to the Lender, and (ii) a certificate of an Authorized Representative demonstrating compliance with SECTIONS 8.1(A) through 8.1(D) and 8.3, which certificate shall be in the form of EXHIBIT G and which shall include a certification by an Authorized Representative that the Borrower and the Subsidiaries are (x) current with all trade payables, except trade payables contested in good faith in the ordinary course of business, and (y) in full compliance with the established sublimits and terms of the Letters of Credit issued pursuant this Agreement; (b) as soon as practical and in any event within 45 days after the end of each fiscal quarter (except the last fiscal quarter of the Fiscal Year), deliver to the Lender (i) a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal quarter, and the related consolidated statements of income, stockholders' equity and cash flows for such fiscal quarter and for the period from the beginning of the then current Fiscal Year through the end of such reporting period, and accompanied by a certificate of an Authorized Representative to the effect that such financial statements present fairly the financial position of the Borrower and its Subsidiaries as of the end of such fiscal period and the results of their operations and the changes in their financial position for such fiscal period, in conformity with the standards set forth in SECTION 6.6(A) with respect to interim financial statements, and (ii) a certificate of an Authorized Representative containing computations for such quarter comparable to that required pursuant to SECTION 7.1(A)(II); 47 (c) together with each delivery of the financial statements required by SECTION 7.1(A)(I), deliver to the Lender a letter from the Borrower's accountants specified in SECTION 7.1(A)(I) stating that in performing the audit necessary to render an opinion on the financial statements delivered under SECTION 7.1(A)(I), they obtained no knowledge of any Default or Event of Default by the Borrower in the fulfillment of the terms and provisions of this Agreement insofar as they relate to financial matters (which at the date of such statement remains uncured); or if the accountants have obtained knowledge of such Default or Event of Default, a statement specifying the nature and period of existence thereof; (d) promptly upon their becoming available to the Borrower, the Borrower shall deliver to the Lender a copy of (i) all regular or special reports or effective registration statements which Borrower or any Subsidiary shall file with the Securities and Exchange Commission (or any successor thereto) or any securities exchange, (ii) any proxy statement distributed by the Borrower or any Subsidiary to its shareholders, bondholders or the financial community in general, and (iii) any management letter or other report submitted to the Borrower or any Subsidiary by independent accountants in connection with any annual, interim or special audit of the Borrower or any Subsidiary; (e) as soon as practicable and in any event within 45 days following the end of each of the first three fiscal quarters and within ninety (90) days following each fiscal year end, deliver to the Lender an accounts receivable aging report in form and detail substantially similar to that furnished to the Lender prior to the Closing Date; and (f) promptly, from time to time, deliver or cause to be delivered to the Lender such other information regarding Borrower's and any Subsidiary's operations, business affairs and financial condition as the Lender may reasonably request; The Lender is hereby authorized to deliver a copy of any such financial or other information delivered hereunder to the Lender (or any affiliate of the Lender), to any Governmental Authority having jurisdiction over the Lender pursuant to any written request therefor or in the ordinary course of examination of loan files, or to any other Person who shall acquire or consider the assignment of, or acquisition of any participation interest in, any Obligation permitted by this Agreement. VII.2. MAINTAIN PROPERTIES. Maintain all properties necessary to its operations in good working order and condition, make all needed repairs, replacements and renewals to such properties, and maintain free from Liens all Material Contracts, trademarks, trade names, patents, copyrights, trade secrets, know-how, and other intellectual property and proprietary 48 information (or adequate licenses thereto), in each case as are reasonably necessary to conduct its business as currently conducted or as contemplated hereby, all in accordance with customary and prudent business practices. VII.3. EXISTENCE, QUALIFICATION, ETC. Except as otherwise expressly permitted under SECTION 8.8, do or cause to be done all things necessary to preserve and keep in full force and effect its existence and all material rights and franchises, and maintain its license or qualification to do business as a foreign corporation and good standing in each jurisdiction in which its ownership or lease of property or the nature of its business makes such license or qualification necessary. VII.4. REGULATIONS AND TAXES. Comply in all material respects with or contest in good faith all statutes and governmental regulations and pay all taxes, assessments, governmental charges, claims for labor, supplies, rent and any other obligation which, if unpaid, would become a Lien against any of its properties except liabilities being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves acceptable to the Borrower's independent certified public accountants have been established unless and until any Lien resulting therefrom attaches to any of its property and becomes enforceable against its creditors. VII.5. INSURANCE. (a) Keep all of its insurable properties adequately insured at all times with responsible insurance carriers against loss or damage by fire and other hazards to the extent and in the manner as are customarily insured against by similar businesses owning such properties similarly situated, (b) maintain general public liability insurance at all times with responsible insurance carriers against liability on account of damage to persons and property and (c) maintain insurance under all applicable workers' compensation laws (or in the alternative, maintain required reserves if self-insured for workers' compensation purposes) and against loss by reason by business interruption such policies of insurance to have such limits, deductibles, exclusions, co-insurance and other provisions providing no less coverages than are maintained by similar businesses that are similarly situated, such insurance policies to be in form reasonably satisfactory to the Lender. VII.6. TRUE BOOKS. Keep true books of record and account in which full, true and correct entries will be made of all of its dealings and transactions, and set up on its books such reserves as may be required by GAAP with respect to doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business in general, and include such reserves in interim as well as year-end financial statements. VII.7. RIGHT OF INSPECTION. Permit any Person designated by the Lender to visit and inspect any of the properties, 49 corporate books and financial reports of the Borrower or any Subsidiary and to discuss its affairs, finances and accounts with its principal officers and independent certified public accountants, all at reasonable times, at reasonable intervals and with reasonable prior notice. VII.8. OBSERVE ALL LAWS. Conform to and duly observe in all material respects all laws, rules and regulations and all other valid requirements of any Governmental Authority with respect to the conduct of its business. VII.9. GOVERNMENTAL LICENSES.LICENObtain and maintain all licenses, permits, certifications and approvals of all applicable Governmental Authorities as are required for the conduct of its business as currently conducted and as contemplated by the Loan Documents. VII.10. COVENANTS EXTENDING TO OTHER PERSONS. Cause each of its Subsidiaries to do with respect to itself, its business and its assets, each of the things required of the Borrower in SECTIONS 7.2 through 7.9, and 7.18 inclusive. VII.11 OFFICER'S KNOWLEDGE OF DEFAULT. Upon any officer of the Borrower obtaining knowledge of any Default or Event of Default hereunder or under any other obligation of the Borrower or any Subsidiary cause such officer or an Authorized Representative to promptly notify the Lender of the nature thereof, the period of existence thereof, and what action the Borrower or such Subsidiary proposes to take with respect thereto. VII.12 SUITS OR OTHER PROCEEDINGS. Upon any officer of the Borrower obtaining knowledge of any litigation or other proceedings being instituted against the Borrower or any Subsidiary, or any attachment, levy, execution or other process being instituted against any assets of the Borrower or any Subsidiary, making a claim or claims in an aggregate amount greater than $1,000,000 not otherwise covered by insurance, promptly deliver to the Lender written notice thereof stating the nature and status of such litigation, dispute, proceeding, levy, execution or other process. VII.13. NOTICE OF DISCHARGE OF HAZARDOUS MATERIAL OR ENVIRONMENTAL COMPLAINT. Promptly provide to the Lender true, accurate and complete copies of any and all notices, complaints, orders, directives, claims, or citations received by the Borrower or any Subsidiary relating to any (a) violation or alleged violation by the Borrower or any Subsidiary of any applicable Environmental Law; (b) release or threatened release by the Borrower or any Subsidiary, or at any facility or property owned or leased or operated by the Borrower or any Subsidiary, of any Hazardous Material, except where occurring legally; or (c) liability or alleged liability of the Borrower or any Subsidiary for the costs of cleaning up, removing, remediating or responding 50 to a release of Hazardous Materials where, in any of the foregoing events, the aggregate amount at any time involved exceeds $500,000. VII.14. ENVIRONMENTAL COMPLIANCE. If the Borrower or any Subsidiary shall receive any letter, notice, complaint, order, directive, claim or citation alleging that the Borrower or any Subsidiary has violated any Environmental Law or is liable for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials, the Borrower shall, within the time period permitted by the applicable Environmental Law or the Governmental Authority responsible for enforcing such Environmental Law, remove or remedy, or cause the applicable Subsidiary to remove or remedy, such violation or release or satisfy such liability unless and only during the period that the applicability of the Environmental Law, the fact of such violation or liability or what is required to remove or remedy such violation is being contested by the Borrower or the applicable Subsidiary by appropriate proceedings diligently conducted and all reserves with respect thereto as may be required under Generally Accepted Accounting Principles, if any, have been made, and no Lien in connection therewith shall have attached to any property of the Borrower or the applicable Subsidiary which shall have become enforceable against creditors of such Person. VII.15. INDEMNIFICATION. Without limiting the generality of SECTION 11.9, the Borrower hereby agrees to indemnify and hold the Lender and its officers, directors, employees and agents, harmless from and against any and all claims, losses, penalties, liabilities, damages and expenses (including assessment and cleanup costs and reasonable attorneys' fees and disbursements) arising directly or indirectly from, out of or by reason of (a) the violation of any Environmental Law by the Borrower or any Subsidiary or with respect to any property owned, operated or leased by the Borrower or any Subsidiary or (b) the handling, storage, treatment, emission or disposal of any Hazardous Materials by or on behalf of the Borrower or any Subsidiary or on or with respect to property owned or leased or operated by the Borrower or any Subsidiary. The provisions of this SECTION 7.15 shall survive the Facility Termination Date and expiration or termination of this Agreement. VII.16. FURTHER ASSURANCES. At the Borrower's cost and expense, upon request of the Lender, duly execute and deliver or cause to be duly executed and delivered, to the Lender such further instruments, documents, certificates, financing and continuation statements, and do and cause to be done such further acts that may be reasonably necessary or advisable in the reasonable opinion of the Lender to carry out more effectively the provisions and purposes of this Agreement and the other Loan Documents. 51 VII.17. EMPLOYEE BENEFIT PLANS. (a) With reasonable promptness, and in any event within thirty (30) days thereof, give notice to the Lender of (a) the establishment of any new Pension Plan (which notice shall include a copy of such plan), (b) the commencement of contributions to any Employee Benefit Plan to which the Borrower or any of its ERISA Affiliates was not previously contributing, (c) any material increase in the benefits of any existing Employee Benefit Plan, (d) each funding waiver request filed with respect to any Employee Benefit Plan and all communications received or sent by the Borrower or any ERISA Affiliate with respect to such request and (e) the failure of the Borrower or any ERISA Affiliate to make a required installment or payment under Section 302 of ERISA or Section 412 of the Code by the due date; and (b) Promptly and in any event within thirty (30) days of becoming aware of the occurrence or forthcoming occurrence of any (a) Termination Event or (b) nonexempt "prohibited transaction," as such term is defined in Section 406 of ERISA or Section 4975 of the Code, in connection with any Pension Plan or any trust created thereunder, deliver to the Lender a notice specifying the nature thereof, what action the Borrower or any ERISA Affiliate has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto. VII.18 CONTINUED OPERATIONS. Continue at all times to conduct its business and engage principally in the same line or lines of business substantially as heretofore conducted. VII.19 NEW SUBSIDIARIES. In the event of the acquisition or creation of any Subsidiary, cause to be delivered to the Lender each of the following within thirty (30) days of the acquisition or creation of such Subsidiary. (a) a Facility Guaranty executed by such Subsidiary substantially in the form of EXHIBIT H; (b) an opinion of counsel to the Subsidiary dated as of the date of delivery of the Facility Guaranty provided for in this SECTION 7.19 and addressed to the Lender, in form and substance reasonably acceptable to the Lender (which opinion may include assumptions and qualifications of similar effect to those contained in the opinions of counsel delivered pursuant to SECTION 5.1(A)), to the effect that: (A) such Subsidiary is duly organized, validly existing and in good standing in the jurisdiction of its formation, has the requisite power and authority to own its properties and conduct its business as then 52 owned and then conducted and proposed to be conducted, and is duly qualified to transact business and is in good standing as a foreign corporation or partnership in each other jurisdiction in which the character of the properties owned or leased, or the business carried on by it, requires such qualification and the failure to be so qualified would reasonably be likely to result in a Material Adverse Effect; and (B) the execution, delivery and performance of the Facility Guaranty described in this SECTION 7.19 to which such Subsidiary is a signatory have been duly authorized by all requisite corporate or partnership action (including any required shareholder or partner approval), such agreement has been duly executed and delivered and constitutes the valid and binding agreement of such Subsidiary, enforceable against such Subsidiary in accordance with its terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity (whether considered in a proceeding at law or in equity); (c) current copies of the charter documents, including partnership agreements and certificate of limited partnership, if applicable, and bylaws of such Subsidiary, minutes of duly called and conducted meetings (or duly effected consent actions) of the Board of Directors, partners, or appropriate committees thereof (and, if required by such charter documents, bylaws or by applicable law, of the shareholders) of such Subsidiary authorizing the actions and the execution and delivery of documents described in this SECTION 7.19. Notwithstanding the foregoing provisions of this SECTION 7.19, the Borrower shall not be required to cause the Facility Guaranty and related documents of or pertaining to WFI to be executed and delivered by or on behalf of WFI until the earlier to occur of the following: (i) the date upon which the amount of shareholders equity of WFI (calculated in the manner described in clause (B) of the definition of "WFI Capitalization" contained in SECTION 1.2 hereof) equals or exceeds 25% of Consolidated Shareholders' Equity, or (ii) the date upon which the sum of the aggregate Advances (cumulative from January 1, 1996) plus the aggregate face amount of all outstanding Letters of Credit in each case made or issued to fund contributions, loans or advances to, investments in, or operations at, WFI, shall exceed $10,000,000. 53 ARTICLE VIII NEGATIVE COVENANTS Until the Obligations have been paid and satisfied in full, no Letters of Credit remain outstanding and this Agreement has been terminated in accordance with the terms hereof, unless the Lender shall otherwise consent in writing, the Borrower will not, nor will it permit any Subsidiary to: VIII.1. FINANCIAL COVENANTS.OVENANTS (a) CONSOLIDATED TANGIBLE NET WORTH. Permit at any time its Consolidated Tangible Net Worth to be less than $55,000,000; (b) CONSOLIDATED FUNDED INDEBTEDNESS TO CONSOLIDATED CAPITALIZATION. Permit at any time the ratio of Consolidated Funded Indebtedness to Consolidated Capitalization to be equal to or greater than .55 to 1.00; (c) CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Permit the Consolidated Fixed Charge Coverage Ratio to be at any time less than 1.35 to 1.00; (d) WORKING ASSET COVERAGE RATIO. Permit at any time the ratio of (i) Consolidated Working Assets to (ii) the SUM of (A) Obligations of the Borrower under this Agreement PLUS (B) trade accounts payable to be less than 1.125 to 1.00. VIII.2. ACQUISITIONS. Enter into any agreement, contract, binding commitment or other arrangement providing for any Acquisition, or take any action to solicit the tender of securities or proxies in respect thereof in order to effect any Acquisition, unless (i) the Person to be (or whose assets are to be) acquired does not oppose such Acquisition and the line or lines of business of the Person to be acquired are substantially the same as one or more line or lines of business conducted by the Borrower and its Subsidiaries, (ii) no Default or Event of Default shall have occurred and be continuing either immediately prior to or immediately after giving effect to such Acquisition and the Borrower shall have furnished to the Lender (A) pro forma historical financial statements as of the end of the most recently completed Fiscal Year of the Borrower giving effect to such Acquisition and (B) a certificate in the form of EXHIBIT G prepared on a historical pro forma basis giving effect to such Acquisition, which certificate shall demonstrate that no Default or Event of Default would exist immediately after giving effect thereto, (iii) the Person acquired shall be a wholly-owned Subsidiary, or be merged into the Borrower or a wholly-owned Subsidiary, immediately upon consummation of the Acquisition (or if assets are being acquired, the acquiror shall be the Borrower or a wholly-owned Subsidiary), and (iv) the cost of acquisition 54 shall not exceed $10,000,000. VIII.3. CAPITAL EXPENDITURES. Make or become committed to make Capital Expenditures, excluding Costs of Acquisitions, which exceed in the aggregate in any Fiscal Year of the Borrower $4,000,000 (on a noncumulative basis, with the effect that amounts not expended in any Fiscal Year may not be carried forward to a subsequent period). VIII.4. LIENS. Incur, create or permit to exist any Lien, charge or other encumbrance of any nature whatsoever with respect to any property or assets now owned or hereafter acquired by the Borrower or any Subsidiary, other than (a) Liens existing as of the date hereof and as set forth in SCHEDULE 6.7; (b) Liens imposed by law for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP and which Liens are not yet enforceable against other creditors; (c) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law or created in the ordinary course of business and in existence less than 90 days from the date of creation thereof for amounts not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP and which Liens are not yet enforceable against other creditors; (d) Liens incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations or arising as a result of progress payments under government contracts; (e) easements (including reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and zoning and other restrictions, charges or encumbrances (whether or not recorded), which do not interfere materially with the ordinary conduct of the business of the Borrower or any Subsidiary and which do not materially detract from the value of the 55 property to which they attach or materially impair the use thereof to the Borrower or any Subsidiary; (f) purchase money Liens to secure Indebtedness permitted under SECTION 8.5(D) and incurred to purchase fixed assets, provided such Indebtedness represents not less than 75% of the purchase price of such assets as of the date of purchase thereof and no property other than the assets so purchased secures such Indebtedness; and (g) Liens arising in connection with Capital Leases permitted under SECTION 8.5(D); provided that no such Lien shall extend to any Collateral or to any other property other than the assets subject to such Capital Leases. VIII.5. INDEBTEDNESS. Incur, create, assume or permit to exist any Indebtedness of the Borrower, howsoever evidenced, except: (a) Indebtedness existing as of the Closing Date as set forth in SCHEDULE 7.6; PROVIDED, none of the instruments and agreements evidencing or governing such Indebtedness shall be amended, modified or supplemented after the Closing Date to change any terms of subordination, repayment or rights of conversion, put, exchange or other rights from such terms and rights as in effect on the Closing Date; (b) Indebtedness owing to the Lender in connection with this Agreement, the Note or other Loan Document; (c) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (d) purchase money Indebtedness described in SECTION 8.4(F) and Indebtedness arising from Capital Leases described in SECTION 8.4(G), collectively not to exceed an aggregate outstanding amount at any time of $2,000,000; (e) unsecured intercompany Indebtedness for loans and advances made by the Borrower or any Guarantor to the Borrower or any Guarantor, provided that such intercompany Indebtedness is evidenced by a promissory note or similar written instrument acceptable to the Lender which provides that such Indebtedness is subordinated to obligations, liabilities and undertakings of the holder or owner thereof under the Loan Documents on terms acceptable to the Lender; (f) trade credit from vendors incurred in the ordinary course of business; (g) loans made by the Borrower to the Petro Sur-World Fuel joint-venture in Ecuador in an amount not to exceed in 56 the aggregate $2,000,000; (h) insurance notes payable; (i) any installment note or capitalized leases assumed through a permitted Acquisition which by virtue of its terms contains a prepayment fee; (j) Indebtedness arising from Rate Hedging Obligations permitted under SECTION 8.15; and (k) Indebtedness extending the maturity of, or renewing, refunding or refinancing, in whole or in part, Indebtedness incurred under clauses (a) and (j) of this SECTION 8.5, provided that the terms of any such extension, renewal, refunding or refinancing Indebtedness (and of any agreement or instrument entered into in connection therewith) are no less favorable to the Lender than the terms of the Indebtedness as in effect prior to such action, and provided further that (1) the aggregate principal amount of such extended, renewed, refunded or refinanced Indebtedness shall not be increased by such action, (2) the group of direct or contingent obligors on such Indebtedness shall not be expanded as a result of any such action, and (3) immediately before and immediately after giving effect to any such extension, renewal, refunding or refinancing, no Default or Event of Default shall have occurred and be continuing; PROVIDED, the Borrower shall not permit WFI to incur, create, assume or permit to exist any Indebtedness, howsoever evidenced, other than (i) to the Lender, (ii) to the Borrower in connection with intercompany loans upon terms and conditions provided for in SECTION 8.5(E), (iii) trade credit to customers incurred in the ordinary course of business, and (iv) additional unsecured Indebtedness in connection with its operations in the ordinary course of business not to exceed $5,000,000 outstanding in the aggregate at any time, and PROVIDED, further that the incurring of any such Indebtedness does not cause, create or result in the occurrence or continuation of a Default or Event of Default hereunder. VIII.6. TRANSFER OF ASSETS. Sell, lease, transfer or otherwise dispose of any assets of Borrower or any Subsidiary other than (a) dispositions of assets in the ordinary course of business, (b) dispositions of property that is substantially worn, damaged, obsolete or, in the judgment of the Borrower, no longer best used or useful in its business or that of any Subsidiary, and (c) transfers of assets necessary to give effect to merger or consolidation transactions permitted by SECTION 8.8, and (d) the disposition of Eligible Securities in the ordinary course of management of the investment portfolio of the Borrower and its Subsidiaries. VIII.7. INVESTMENTS. Purchase, own, invest in or 57 otherwise acquire, directly or indirectly, any stock or other securities, or make or permit to exist any interest whatsoever in any other Person or permit to exist any loans or advances to any Person, except that Borrower may maintain investments or invest in: (a) securities of any Person acquired in an Acquisition permitted hereunder; (b) Eligible Securities; (c) investments existing as of the date hereof and as set forth in SCHEDULE 6.4; (d) accounts receivable arising and trade credit granted in the ordinary course of business and any securities received in satisfaction or partial satisfaction thereof in connection with accounts of financially troubled Persons to the extent reasonably necessary in order to prevent or limit loss; (e) investments in Subsidiaries which are Guarantors; (f) loans made by the Borrower to the Petro Sur-World Fuel joint-venture described in SECTION 8.5(G); (g) loans between the Borrower and the Guarantors described in SECTION 8.5(E); and (h) loans or investments in or to a joint venture of which the Borrower or a Subsidiary is a party, so long as the aggregate amount of such loans or investments do not exceed 5% of Consolidated Tangible Net Worth. VIII.8. MERGER OR CONSOLIDATION. (a) Consolidate with or merge into any other Person, or (b) permit any other Person to merge into it, or (c) liquidate, wind-up or dissolve or sell, transfer or lease or otherwise dispose of all or a substantial part of its assets (other than sales permitted under SECTION 8.6(A), (B) AND (D)); PROVIDED, HOWEVER, (i) any Subsidiary of the Borrower may merge or transfer all or substantially all of its assets into or consolidate with the Borrower or any wholly-owned Subsidiary of the Borrower, and (ii) any other Person may merge into or consolidate with the Borrower or any wholly-owned Subsidiary and any Subsidiary may merge into or consolidate with any other Person in order to consummate an Acquisition permitted by SECTION 8.2, PROVIDED further, that any resulting or surviving entity shall execute and deliver such agreements and other documents, including a Facility Guaranty, and take such other action as the Lender may require to evidence or confirm its express assumption of the obligations and liabilities of its predecessor entities under the Loan Documents. 58 VII.9. RESTRICTED PAYMENTS. Make any Restricted Payment or apply or set apart any of their assets therefor or agree to do any of the foregoing; PROVIDED HOWEVER, the Borrower may (a) issue stock as a dividend up to 10% of total outstanding shares immediately prior to such; and (b) declare and pay cash dividends on outstanding shares of any class of its capital stock provided that the aggregate amount of such dividends declared or paid during any Four-Quarter Period shall not exceed 25% of Consolidated Net Income for such Four-Quarter Period so long as prior to such actions in (a) or (b), above and after giving effect thereto, the Borrower is in compliance with all terms, conditions, covenants, and representations and warranties in the Agreement, and prior to such actions defined in (a) and (b) above and after giving effect thereto, no Default or Event of Default has or will occur. VIII.1. TRANSACTIONS WITH AFFILIATES. Other than transactions permitted under SECTIONS 8.7 and 8.8, enter into any transaction after the Closing Date, including, without limitation, the purchase, sale, lease or exchange of property, real or personal, or the rendering of any service, with any Affiliate of the Borrower, except (a) that such Persons may render services to the Borrower or its Subsidiaries for compensation at the same rates generally paid by Persons engaged in the same or similar businesses for the same or similar services, (b) that the Borrower or any Subsidiary may render services to such Persons for compensation at the same rates generally charged by the Borrower or such Subsidiary and (c) in either case in the ordinary course of business and pursuant to the reasonable requirements of the Borrower's (or any Subsidiary's) business consistent with past practice of the Borrower and its Subsidiaries and upon fair and reasonable terms no less favorable to the Borrower (or any Subsidiary) than would be obtained in a comparable arm's-length transaction with a Person not an Affiliate. VIII.11. COMPLIANCE WITH ERISA. With respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan: (a) permit the occurrence of any Termination Event which would result in a liability on the part of the Borrower or any ERISA Affiliate to the PBGC; or (b) permit the present value of all benefit liabilities under all Pension Plans to exceed the current value of the assets of such Pension Plans allocable to such benefit liabilities; or (c) permit any accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code) with respect to any Pension Plan, whether or not waived; or (d) fail to make any contribution or payment to any 59 Multiemployer Plan which the Borrower or any ERISA Affiliate may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto; or (e) engage, or permit any Borrower or any ERISA Affiliate to engage, in any prohibited transaction under Section 406 of ERISA or Sections 4975 of the Code for which a civil penalty pursuant to Section 502(I) of ERISA or a tax pursuant to Section 4975 of the Code may be imposed; or (f) permit the establishment of any Employee Benefit Plan providing post-retirement welfare benefits or establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to the Borrower or any ERISA Affiliate or increase the obligation of the Borrower or any ERISA Affiliate to a Multiemployer Plan; or (g) fail, or permit the Borrower or any ERISA Affiliate to fail, to establish, maintain and operate each Employee Benefit Plan in compliance in all material respects with the provisions of ERISA, the Code, all applicable Foreign Benefit Laws and all other applicable laws and the regulations and interpretations thereof. VIII.12. FISCAL YEAR. Change its Fiscal Year. VIII.13. DISSOLUTION, ETC. Wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any proceedings seeking any such winding up, liquidation or dissolution, except in connection with a merger or consolidation permitted pursuant to SECTION 8.8. VIII.14. NEGATIVE PLEDGE CLAUSES. Enter into or cause, suffer or permit to exist any agreement with any Person other than the Lender pursuant to this Agreement or any other Loan Documents which prohibits or limits the ability of any of the Borrower or any Subsidiary to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, PROVIDED that the Borrower and any Subsidiary may enter into such an agreement in connection with property subject to any Lien permitted by this Agreement and not released after the date hereof, when such prohibition or limitation is by its terms effective only against the assets subject to such Lien. VIII.15. PARTNERSHIPS. Become a general partner in any general or limited partnership except a partnership which complies with the provisions of SECTION 8.07(H). VIII.16. WFI CAPITALIZATION. Permit the WFI Capitalization to exceed $14,000,000. 60 ARTICLE IX EVENTS OF DEFAULT AND ACCELERATION IX.1 EVENTS OF DEFAULT. (A) If any one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority), that is to say: (a) if default shall be made in the due and punctual payment of the principal of any Loan, Reimbursement Obligation or other Obligation, when and as the same shall be due and payable whether pursuant to any provision of ARTICLE II or ARTICLE III, at maturity, by acceleration or otherwise; or (b) if default shall be made in the due and punctual payment of any amount of interest on any Loan, Reimbursement Obligation or other Obligation or of any fees or other amounts payable to the Lender on the date on which the same shall be due and payable; or (c) if default shall be made in the performance or observance of any covenant set forth in SECTION 7.7, 7.11, 7.12, 7.19 or ARTICLE VIII; (d) if a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in this Agreement or the Note (other than as described in clauses (a), (b) or (c) above) and such default shall continue for 30 or more days after the earlier of receipt of notice of such default by the Authorized Representative from the Lender or an Authorized Representative of the Borrower has actual knowledge of such default, or if a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in any of the other Loan Documents (beyond any applicable grace period, if any, contained therein) or in any instrument or document evidencing or creating any obligation, guaranty, or Lien in favor of the Lender or delivered to the Lender in connection with or pursuant to this Agreement or any of the Obligations, or if any Loan Document ceases to be in full force and effect (other than by reason of any action by the Lender), or if without the written consent of the Lender, this Agreement or any other Loan Document shall be disaffirmed or shall terminate, be terminable or be terminated or become void or unenforceable for any reason whatsoever (other than in accordance with its terms in the absence of default or by reason of any action by the Lender); or 61 (e) if there shall occur (i) a default, which is not waived, in the payment of any principal, interest, premium or other amount with respect to any Indebtedness or Rate Hedging Obligations (other than the Loans and other Obligations) of the Borrower or any Subsidiary in an amount not less than $1,000,000 in the aggregate outstanding, or (ii) a default, which is not waived, in the performance, observance or fulfillment of any term or covenant contained in any agreement or instrument under or pursuant to which any such Indebtedness or Rate Hedging Obligation may have been issued, created, assumed, guaranteed or secured by the Borrower or any Subsidiary, or (iii) any other event of default as specified in any agreement or instrument under or pursuant to which any such Indebtedness or Rate Hedging Obligation may have been issued, created, assumed, guaranteed or secured by the Borrower or any Subsidiary, and such default or event of default shall continue for more than the period of grace, if any, therein specified, or such default or event of default shall permit the holder of any such Indebtedness (or any agent or trustee acting on behalf of one or more holders) to accelerate the maturity thereof; or (f) if any representation, warranty or other statement of fact contained in any Loan Document or in any writing, certificate, report or statement at any time furnished to the Lender by or on behalf of the Borrower or any other Credit Party pursuant to or in connection with any Loan Document, or otherwise, shall be false or misleading in any material respect when given; or (g) if the Borrower or any Subsidiary or other Credit Party shall be unable to pay its debts generally as they become due; file a petition to take advantage of any insolvency statute; make an assignment for the benefit of its creditors; commence a proceeding for the appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property; file a petition or answer seeking liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute; or (h) if a court of competent jurisdiction shall enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of the Borrower or any Subsidiary or of the whole or any substantial part of its properties and such order, judgment or decree continues unstayed and in effect for a period of sixty (60) days, or approve a petition filed against the Borrower or any Subsidiary seeking liquidation, reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United 62 States of America or any state, which petition is not dismissed within sixty (60) days; or if, under the provisions of any other law for the relief or aid of debtors, a court of competent jurisdiction shall assume custody or control of the Borrower or any Subsidiary or of the whole or any substantial part of its properties, which control is not relinquished within sixty (60) days; or if there is commenced against the Borrower or any Subsidiary any proceeding or petition seeking reorganization, arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state which proceeding or petition remains undismissed for a period of sixty (60) days; or if the Borrower or any Subsidiary takes any action to indicate its consent to or approval of any such proceeding or petition; or (i) if (i) one or more final judgments or orders where the amount not covered by insurance (or the amount as to which the insurer denies liability) is in excess of $1,000,000 is rendered against the Borrower or any Subsidiary, or (ii) there is any attachment, injunction or execution against any of the Borrower's or Subsidiaries' properties for any amount in excess of $1,000,000 in the aggregate; and such judgment, attachment, injunction or execution remains unpaid, unstayed, undischarged, unbonded or undismissed for a period of thirty (30) days; or (j) if the Borrower or any Subsidiary shall, other than in the ordinary course of business (as determined by past practices), or, except as specifically permitted by this Agreement, suspend all or any part of its operations material to the conduct of the business of the Borrower or such Subsidiary for a period of more than 60 days; (k) if there shall occur a Change in Control in the Borrower; or (l) if there shall occur and not be waived an Event of Default as defined in any of the other Loan Documents; (B) then, and in any such event and at any time thereafter, if such Event of Default or any other Event of Default shall have not been waived, (a) either or both of the following actions may be taken: (i) the Lender may declare any obligation of the Lender and the Issuing Bank to make further Loans or to issue additional Letters of Credit terminated, whereupon the obligation of the Lender to make further Loans and of the Issuing Bank to issue additional Letters of Credit, hereunder shall terminate immediately, and (ii) the Lender, at its option, 63 declare by notice to the Borrower any or all of the Obligations to be immediately due and payable, and the same, including all interest accrued thereon and all other obligations of the Borrower to the Lender, shall forthwith become immediately due and payable without presentment, demand, protest, notice or other formality of any kind, all of which are hereby expressly waived, anything contained herein or in any instrument evidencing the Obligations to the contrary notwithstanding; PROVIDED, however, that notwithstanding the above, if there shall occur an Event of Default under clause (g) or (h) above, then the obligation of the Lender to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall automatically terminate and any and all of the Obligations shall be immediately due and payable without the necessity of any action by the Lender or notice to the Lender; (b) the Borrower shall, upon demand of the Lender, deposit cash with the Issuing Bank in an amount equal to the amount of any Letter of Credit Outstandings, as collateral security for the repayment of any future drawings or payments under such Letters of Credit, and such amounts shall be held by the Issuing Bank pursuant to the terms of the LC Account Agreement; and (c) the Lender shall have all of the rights and remedies available under the Loan Documents or under any applicable law. Notwithstanding the foregoing provisions of this SECTION 9.1 the rights and remedies provided with respect to the Subsidiaries and their assets (including without limitation bank accounts, certificates of deposit and other instruments), shall be applicable to and available against WFI only from the date WFI shall be required to become a Guarantor in accordance with the last paragraph of SECTION 7.19. IX.2. LENDER TO ACT. In case any one or more Events of Default shall occur and not have been waived, the Lender may proceed to protect and enforce its rights or remedies either by suit in equity or by action at law, or both, whether for the specific performance of any covenant, agreement or other provision contained herein or in any other Loan Document, or to enforce the payment of the Obligations or any other legal or equitable right or remedy. IX.3. CUMULATIVE RIGHTS. No right or remedy herein conferred upon the Lender is intended to be exclusive of any other rights or remedies contained herein or in any other Loan Document, and every such right or remedy shall be cumulative and shall be in addition to every other such right or remedy contained herein and therein or now or hereafter existing at law 64 or in equity or by statute, or otherwise. IX.4. NO WAIVER. No course of dealing between the Borrower and the Lender or any failure or delay on the part of the Lender in exercising any rights or remedies under any Loan Document or otherwise available to it shall operate as a waiver of any rights or remedies and no single or partial exercise of any rights or remedies shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or of the same right or remedy on a future occasion. IX.5. ALLOCATION OF PROCEEDS. If an Event of Default has occurred and not been waived, and the maturity of the Note has been accelerated pursuant to ARTICLE IX hereof, all payments received by the Lender hereunder, in respect of any principal of or interest on the Obligations or any other amounts payable by the Borrower hereunder, shall be applied by the Lender in the following order: (a) amounts due to the Lender pursuant to SECTIONS 2.10, 3.3, 3.4 AND 11.5; (b) payments of interest on Loans and Reimbursement Obligations; (c) payments of principal of Loans and Reimbursement Obligations; (d) payments of cash amounts to the Lender in respect of outstanding Letters of Credit pursuant to SECTION 9.1(B); (e) amounts due to the Lender pursuant to SECTIONS 3.2(G), 7.15 and 10.9; (f) payments of all other amounts due under any of the Loan Documents, if any; (g) amounts due to any of the Lender in respect of Obligations consisting of liabilities under any Swap Agreement with the Lender; and (h) any surplus remaining after application as provided for herein, to the Borrower or otherwise as may be required by applicable law. 65 ARTICLE X MISCELLANEOUS X.1. PARTICIPATIONS. The Lender may sell participations at its expense to one or more banks or other entities as to all or a portion of its rights and obligations under this Agreement; PROVIDED, that (i) the Lender's obligations under this Agreement shall remain unchanged, (ii) the Lender shall remain solely responsible to the Borrower for the performance of such obligations, (iii) the Lender shall remain the holder of any Note issued to it for the purpose of this Agreement, (iv) such participations shall be in a minimum amount of $1,000,000 and, if greater, an amount which is an integral multiple of $1,000,000, (v) the Borrower shall continue to deal solely and directly with the Lender in connection with the Lender's rights and obligations under this Agreement and with regard to any and all payments to be made under this Agreement; PROVIDED, that the participation agreement between the Lender and its participants may provide that the Lender will obtain the approval of such participant prior to the Lender's agreeing to any amendment or waiver of any provisions of any Loan Document which would (A) extend the maturity of the Note, (B) reduce the interest rates hereunder or (C) increase the Revolving Credit Commitment or Letter of Credit Commitment, and (vi) the sale of any such participations which require Borrower to file a registration statement with the United States Securities and Exchange Commission or under the securities regulations or laws of any state shall not be permitted. X.2. NOTICES. Any notice shall be conclusively deemed to have been received by any party hereto and be effective (i) on the day on which delivered (including hand delivery by commercial courier service) to such party (against receipt therefor), (ii) on the date of receipt at such address, telefacsimile number or telex number as may from time to time be specified by such party in written notice to the other parties hereto or otherwise received), in the case of notice by telegram, telefacsimile or telex, respectively (where the receipt of such message is verified by return), or (iii) on the fifth Business Day after the day on which mailed, if sent prepaid by certified or registered mail, return receipt requested, in each case delivered, transmitted or mailed, as the case may be, to the address, telex number or telefacsimile number, as appropriate, set forth below or such other address or number as such party shall specify by notice hereunder: (a) if to the Borrower: World Fuel Services Corporation 700 South Royal Poinciana Blvd. Suite 800 Miami Springs, Florida 33166 Attn: Chief Financial Officer Telephone: (305) 884-2001 Telefacsimile: (305) 883-0186 66 (b) if to the Lender: NationsBank, N.A. (South) Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Corporate Credit Support Telephone: (704) 388-1112 Telefacsimile: (704) 386-8694 (c) if to any Guarantor, at the address set forth in SECTION 14 of the Facility Guaranty executed by such Guarantor. X.3. SETOFF. From and after the occurrence of a Default or an Event of Default the Lender may set off the obligations and liabilities of Borrower against any and all monies then owed by the Lender to the Borrower in any capacity whatsoever whether or not then due and the Lender shall be deemed to have exercised its right to set off immediately at the time its right to elect such set off accrues even though no charge is made or entered on the books of the Lender at that time and the same is made subsequent thereto; the Lender may proceed against the Borrower's bank account(s), certificates of deposit or any other investments and the Subsidiary's bank account(s) and certificates of deposit or any other investments. For the purposes of this paragraph, all remittances and property shall be deemed to be in the possession of the Lender as soon as the same may be put in transit to it by mail or carrier or by other bailee. X.4. SURVIVAL. All covenants, agreements, representations and warranties made herein shall survive the making by the Lender of the Loans and the issuance of the Letters of Credit and the execution and delivery to the Lender of this Agreement and the Notes and shall continue in full force and effect so long as any of Obligations remain outstanding or the Lender has any commitment hereunder or the Borrower has continuing obligations hereunder unless otherwise provided herein. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party and all covenants, provisions and agreements by or on behalf of the Borrower which are contained in the Loan Documents shall inure to the benefit of the successors and permitted assigns of the Lender. X.5. EXPENSES. The Borrower agrees (a) to pay or reimburse the Lender for all its reasonable out-of-pocket costs and expenses incurred in connection with the preparation, negotiation and execution of, and any amendment, supplement or modification to, any of the Loan Documents (including due diligence expenses 67 and travel expenses relating to closing), and the consummation of the transactions contemplated thereby, including the reasonable fees and disbursements of counsel to the Lender, which shall not exceed $15,000, (b) to pay or reimburse the Lender for all of its costs and expenses incurred in connection with the enforcement or preservation of any rights under the Loan Documents, including the reasonable fees and disbursements of their counsel and any payments in indemnification or otherwise payable by the Lender pursuant to the Loan Documents, and (c) to pay, indemnify and hold the Lender harmless from any and all recording and filing fees and any and all liabilities with respect to, or resulting from any failure to pay or delay in paying, documentary, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of any of the Loan Documents, or consummation of any amendment, supplement or modification of, or any waiver or consent under or in respect of, any Loan Document. X.6. AMENDMENTS. No amendment, modification or waiver of any provision of any Loan Document and no consent by the Lender to any departure therefrom by the Borrower or any other Credit Party shall be effective unless such amendment, modification or waiver shall be in writing and signed by the Lender, shall have been approved by the Lender through its written consent, and the same shall then be effective only for the period and on the conditions and for the specific instances and purposes specified in such writing; PROVIDED, however, that, no such amendment, modification or waiver (i) which changes, extends or waives any provision of SECTION 2.6, SECTION 10.9 or this SECTION 11.6, the amount of or the due date of any scheduled installment of or the rate of interest payable on any Obligation, which changes the definition of "Required Lender", which permits an assignment by any Credit Party of its Obligations under any Loan Document, which reduces the required consent of the Lender provided hereunder, which increases, decreases (other than pursuant to the express terms hereof) or extends (other than pursuant to the express terms hereof) the Revolving Credit Commitment or Letter of Credit Commitment of the Lender, or which waives any condition to the making of any Loan, shall be effective unless in writing and signed by the Lender; (ii) which releases Collateral or the guaranty obligation under any Facility Guaranty (other than pursuant to the express terms hereof or thereof) shall be effective unless with the written consent of the Lender; (iii) which affects the rights, privileges or obligations of the Issuing Bank as issuer of Letters of 68 Credit, shall be effective unless signed in writing by the Issuing Bank; (iv) which affects the rights, privileges, immunities or indemnities of the Lender shall be effective unless in writing and signed by the Lender. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances, except as otherwise expressly provided herein. No delay or omission on the Lender's part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any Default or Event of Default. X.7. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such fully-executed counterpart. X.8. TERMINATION. The termination of this Agreement shall not affect any rights of the Borrower or the Lender or any obligation of the Borrower or the Lender, arising prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into or rights created or obligations incurred prior to such termination have been fully disposed of, concluded or liquidated and the Obligations arising prior to or after such termination have been irrevocably paid in full. The rights granted to the Lender under the Loan Documents shall continue in full force and effect, notwithstanding the termination of this Agreement, until all of the Obligations have been paid in full after the termination hereof (other than Obligations in the nature of continuing indemnities or expense reimbursement obligations not yet due and payable, which shall continue) or the Borrower has furnished the Lender with an indemnification satisfactory to the Lender with respect thereto. All representations, warranties, covenants, waivers and agreements contained herein shall survive termination hereof until payment in full of the Obligations unless otherwise provided herein. Notwithstanding the foregoing, if after receipt of any payment of all or any part of the Obligations, the Lender is for any reason compelled to surrender such payment to any Person because such payment is determined to be void or voidable as a preference, impermissible setoff, a diversion of trust funds or for any other reason, this Agreement shall continue in full force and the Borrower shall be liable to, and shall indemnify and hold the Lender harmless for, the amount of such payment surrendered until the Lender shall have been finally and irrevocably paid in full. The provisions of the foregoing sentence shall be and remain effective notwithstanding any contrary action which may have been taken by the Lender in reliance upon such payment, and any such 69 contrary action so taken shall be without prejudice to the Lender's rights under this Agreement and shall be deemed to have been conditioned upon such payment having become final and irrevocable. X.9. INDEMNIFICATION; LIMITATION OF LIABILITY. In consideration of the execution and delivery of this Agreement by the Lender and the extension of credit under the Loans, the Borrower hereby indemnifies, exonerates and holds the Lender and its affiliates, officers, directors, employees, agents and advisors (collectively, the "Indemnified Parties") free and harmless from and against any and all claims, actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (collectively, the "Indemnified Liabilities") that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the execution, delivery, enforcement, performance or administration of this Agreement and the other Loan Documents, or any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan or Letter of Credit, whether or not such action is brought against the Lender, the shareholders or creditors of the Lender or an Indemnified Party or an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated herein are consummated, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. The Borrower agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to it, any of its Subsidiaries, any Credit Party, or any security holders or creditors thereof arising out of, related to or in connection with the transactions contemplated herein, except to the extent that such liability is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct; provided, however, in no event shall any Indemnified Party be liable for consequential, indirect or special, as opposed to direct, damages. X.10. SEVERABILITY. If any provision of this Agreement or the other Loan Documents shall be determined to be illegal or invalid as to one or more of the parties hereto, then such provision shall remain in effect with respect to all parties, if any, as to whom such provision is neither illegal nor invalid, 70 and in any event all other provisions hereof shall remain effective and binding on the parties hereto. X.11. ENTIRE AGREEMENT. This Agreement, together with the other Loan Documents, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all previous proposals, negotiations, representations, commitments and other communications between or among the parties, both oral and written, with respect thereto. X.12.AGREEMENT CONTROLS. In the event that any term of any of the Loan Documents other than this Agreement conflicts with any express term of this Agreement, the terms and provisions of this Agreement shall control to the extent of such conflict. X.13. USURY SAVINGS CLAUSE. Notwithstanding any other provision herein, the aggregate interest rate charged under any of the Notes, including all charges or fees in connection therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate (as such term is defined below). If the rate of interest (determined without regard to the preceding sentence) under this Agreement at any time exceeds the Highest Lawful Rate (as defined below), the outstanding amount of the Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect. In addition, if when the Loans made hereunder are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the extent permitted by law, the Borrower shall pay to the Lender an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of the Lender and the Borrower to conform strictly to any applicable usury laws. Accordingly, if the Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at the Lender's option be applied to the outstanding amount of the Loans made hereunder or be refunded to the Borrower. As used in this paragraph, the term "Highest Lawful Rate" means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to the Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. 71 X.14. GOVERNING LAW; WAIVER OF JURY TRIAL. TRIAL (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN THOSE SECURITY INSTRUMENTS WHICH EXPRESSLY PROVIDE THAT THEY SHALL BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (A) THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF FLORIDA, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE BORROWER HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (B) THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER PROVIDED IN SECTION 10.2, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF FLORIDA. (C) NOTHING CONTAINED IN SUBSECTIONS (A) OR (B) HEREOF SHALL PRECLUDE THE LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION WHERE THE BORROWER OR ANY OF THE BORROWER'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW. (D) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND 72 ANY RIGHTS OR REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION THEREWITH, THE BORROWER, THE LENDER HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING. [Signatures on following pages] 73 IN WITNESS WHEREOF, the parties hereto have caused this instrument to be made, executed and delivered by their duly authorized officers as of the day and year first above written. WORLD FUEL SERVICES CORPORATION WITNESS: By:/s/ CARLOS ABAUNZA ---------------------- Name: Carlos Abaunza Title: Chief Financial Officer NATIONSBANK, N.A. (SOUTH) By:/s/ Andrew M. Airheart ---------------------- Name: Andrew M. Airheart Title: Senior Vice President Lending Office: NationsBank, N.A. (South) Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Corporate Credit Support Telephone: (704) 388-1112 Telefacsimile: (704) 386-8694 Wire Transfer Instructions: NationsBank, N.A. (South) ABA# 063100277 Account No.: 136621-0002163 Reference: World Fuel Services Attention: Barbara Pollock EXHIBIT A Applicable Commitment Percentages LENDER REVOLVING APPLICABLE CREDIT COMMITMENT COMMITMENT PERCENTAGE ---------- ---------- NationsBank, N.A. (South) $25,000,000 100% ----------- ---------- Total $25,000,000 100% A-1 EXHIBIT B Notice of Appointment (or Revocation) of Authorized Representative Reference is hereby made to the Amended and Restated Credit Agreement dated as of February 21, 1997 (the "Agreement") by and between World Fuel Services Corporation, a Florida corporation (the "Borrower") and NationsBank, N.A. (South) as Lender (the "Lender"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower hereby nominates, constitutes and appoints each individual named below as an Authorized Representative under the Loan Documents, and hereby represents and warrants that (i) set forth opposite each such individual's name is a true and correct statement of such individual's office (to which such individual has been duly elected or appointed), a genuine specimen signature of such individual and an address for the giving of notice, and (ii) each such individual has been duly authorized by the Borrower to act as Authorized Representative under the Loan Documents: Name and Address Office Specimen Signature - ----------------- ------------------- ------------------- - ----------------- - ----------------- - ----------------- ------------------- -------------------- - ----------------- - ----------------- - ----------------- Borrower hereby revokes (effective upon receipt hereof by the Lender) the prior appointment of ________________ as an Authorized Representative. This the ___ day of __________________, 19__ WORLD FUEL SERVICES CORPORATION By: ---------------------- Name: -------------------- Title: ------------------- B-1 EXHIBIT C Form of Borrowing Notice To: NationsBank, N.A. (South) Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Corporate Credit Support Telefacsimile: (704) 386-8694 Reference is hereby made to the Amended and Restated Credit Agreement dated as of February 21, 1997 (the "Agreement") by and between World Fuel Services Corporation (the "Borrower") and NationsBank, N.A. (South), as Lender (the "Lender"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower through its Authorized Representative hereby gives notice to the Lender that Loans of the type and amount set forth below be made on the date indicated: TYPE OF LOAN INTEREST AGGREGATE (CHECK ONE) PERIOD(1) AMOUNT(2) DATE OF LOAN(3) - ----------- --------- --------- --------------- Base Rate Loan ______ _________ _____________ LIBOR Rate Loan ______ _________ _____________ - ----------------------- (1) For any LIBOR Rate Loan, one, two, three or six months. (2) Must be $100,000 or if greater an integral multiple of $100,000, unless a Base Rate Refunding Loan. (3) At least three (3) Business Days later if a LIBOR Rate Loan; The Borrower hereby requests that the proceeds of Loans described in this Borrowing Notice be made available to the Borrower as follows: _____ [INSERT TRANSMITTAL INSTRUCTIONS] . The undersigned hereby certifies that: 1. No Default or Event of Default exists either now or after giving effect to the borrowing described herein; and 2. All the representations and warranties set forth in ARTICLE VI of the Agreement and in the Loan Documents (other than those expressly stated to refer to a particular date) are true and correct as of the date hereof except that the reference to the financial statements in SECTION 6.6(A) of the Agreement are to those financial statements most recently delivered to you pursuant to SECTION 7.1 of the Agreement (it being understood C-1 that any financial statements delivered pursuant to SECTION 7.1(B) have not been certified by independent public accountants) and attached hereto are any changes to the Schedules referred to in connection with such representations and warranties. 3. All conditions contained in the agreement to the making of any Loan requested hereby have been met or satisfied in full. WORLD FUEL SERVICES CORPORATION BY: _______________________________ Authorized Representative DATE: _____________________________ C-2 EXHIBIT D Form of Interest Rate Selection Notice To: NationsBank, N.A. (South) Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Corporate Credit Support Telefacsimile: (704) 386-8694 Reference is hereby made to the Amended and Restated Credit Agreement dated as of February 21, 1997 (the "Agreement") by and between World Fuel Services Corporation, a Florida corporation (the "Borrower") and NationsBank, N.A. (South), as Lender (the "Lender"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower through its Authorized Representative hereby gives notice to the Lender of the following selection of a type of Loan and Interest Period: TYPE OF LOAN INTEREST AGGREGATE (CHECK ONE) PERIOD(1) AMOUNT(2) DATE OF LOAN(3) - ----------- --------- --------- --------------- Base Rate Loan ______ _________ ____________ LIBOR Rate Loan ______ _________ ____________ - ----------------------- (1) For any LIBOR Rate Loan, one, two, three or six months. (2) Must be $100,000 or if greater an integral multiple of $100,000, unless a Base Rate Refunding Loan. (3) At least three (3) Business Days later if a LIBOR Rate Loan; WORLD FUEL SERVICES CORPORATION BY: ________________________ Authorized Representative DATE: ______________________ D-1 EXHIBIT E Form of Revolving Note Promissory Note (Revolving Credit Facility) $-------------- ---------, -------------- ______ __, 199_ FOR VALUE RECEIVED, WORLD FUEL SERVICES CORPORATION, a Florida corporation having its principal place of business located in Miami Springs, Florida (the "Borrower"), hereby promises to pay to the order of ____________________________ (the "Lender"), in its individual capacity, at the office of the Lender located at One Independence Center, 101 North Tryon Street, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the Lender may designate in writing) at the times set forth in the Amended and Restated Credit Agreement dated as of February 21, 1997 by and between the Borrower and the Lender (the "Agreement" -- all capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Agreement), in lawful money of the United States of America, in immediately available funds, the principal amount of ___________ DOLLARS ($__________) or, if less than such principal amount, the aggregate unpaid principal amount of all Loans made by the Lender to the Borrower pursuant to the Agreement on the Revolving Credit Termination Date or such earlier date as may be required pursuant to the terms of the Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates provided in ARTICLE II of the Agreement. All or any portion of the principal amount of Loans may be prepaid or required to be prepaid as provided in the Agreement. If payment of all sums due hereunder is accelerated under the terms of the Agreement or under the terms of the other Loan Documents executed in connection with the Agreement, the then remaining principal amount and accrued but unpaid interest shall bear interest which shall be payable on demand at the rates per annum set forth in the proviso to SECTION 2.2 (A) of the Agreement. Further, in the event of such acceleration, this Note shall become immediately due and payable, without presentation, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees, and interest due hereunder thereon at E-1 the rates set forth above. Interest hereunder shall be computed as provided in the Agreement. This Note is one of the Notes referred to in the Agreement and is issued pursuant to and entitled to the benefits and security of the Agreement to which reference is hereby made for a more complete statement of the terms and conditions upon which the Loans evidenced hereby were or are made and are to be repaid. This Note is subject to certain restrictions on transfer or assignment as provided in the Agreement. All Persons bound on this obligation, whether primarily or secondarily liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive to the full extent permitted by law the benefits of all provisions of law for stay or delay of execution or sale of property or other satisfaction of judgment against any of them on account of liability hereon until judgment be obtained and execution issues against any other of them and returned satisfied or until it can be shown that the maker or any other party hereto had no property available for the satisfaction of the debt evidenced by this instrument, or until any other proceedings can be had against any of them, also their right, if any, to require the holder hereof to hold as security for this Note any collateral deposited by any of said Persons as security. Protest, notice of protest, notice of dishonor, diligence or any other formality are hereby waived by all parties bound hereon. E-2 IN WITNESS WHEREOF, the Borrower has caused this Note to be made, executed and delivered by its duly authorized representative as of the date and year first above written, all pursuant to authority duly granted. WORLD FUEL SERVICES CORPORATION WITNESS: ______________________ By: _______________________________ ______________________ Name: _____________________________ Title: ____________________________ E-3 ACKNOWLEDGMENT OF EXECUTION ON BEHALF OF WORLD FUEL SERVICES CORPORATION STATE OF ______________ COUNTY OF _____________ Before me, the undersigned, a Notary Public in and for said County and State on this ____ day of ________ __, 199_ A.D., personally appeared _____________________ known to be the __________ of World Fuel Services Corporation (the "Borrower"), who, being by me duly sworn, says [she][he] works at _____________________________, and that by authority duly given by, and as the act of, the Borrower, the foregoing and annexed Note dated __________ __, 199_, was signed by [her][him] as said __________ on behalf of the Borrower. Witness my hand and official seal this ____ day of ___________, 199_. ------------------------------------- Notary Public (SEAL) My commission expires: __________ E-4 AFFIDAVIT OF _________________ The undersigned, being first duly sworn, deposes and says that: 1. [She][He] is an ________________________ of _________________ ______________________________________ (the "Bank") and works at ______________________________. 2. _______ The Note of World Fuel Services Corporation to the Bank in the principal amount of $__________, dated __________ __, 199_ was executed before [her][him] and delivered to [her][him] on behalf of the Bank in __________, __________ on ________ __, 199_. This the _____ day of __________, 199_. ----------------------------------- Name: ACKNOWLEDGMENT OF EXECUTION STATE OF _______________ COUNTY OF ______________ Before me, the undersigned, a Notary Public in and for said County and State on this _____ day of ___________ __, 199_ A.D., personally appeared _________________ who before me affixed his signature to the above Affidavit. Witness my hand and official seal this the _____ day of __________, 199_. ----------------------------------- Notary Public (SEAL) My Commission Expires: __________ E-5 EXHIBIT F Form of Opinion of Borrower's Counsel See attached. F-1 EXHIBIT G Compliance Certificate NationsBank, N.A. (South) Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Corporate Credit Support Telefacsimile: (704) 386-8694 Reference is hereby made to the Amended and Restated Credit Agreement dated as of February 21, 1997 (the "Agreement") by and between World Fuel Services Corporation, a Florida corporation (the "Borrower") and NationsBank, N.A. (South), as Lender (the "Lender"). Capitalized terms used but not otherwise defined herein shall have the respective meanings therefor set forth in the Agreement. The undersigned, a duly authorized and acting Authorized Representative, hereby certifies to you as of __________ (the "Determination Date") as follows: 1. Calculations: A. Consolidated Tangible Net Worth as of the Determination Date was $__________. Required: Not less than $55,000,000. [See Section 8.1(a) of the Agreement] B. Consolidated Funded Indebtedness to Consolidated Capitalization as of the Determination Date was _____ to 1.00 calculated as follows: (i) Consolidated Funded $__________ Indebtedness as of the Determination Date: (ii) Consolidated Capitalization as $__________ of the Determination Date: (iii) (i) divided by (ii): __________ Required: Less than .55 to 1.00. [See Section 8.1(b) of the Agreement] C. Consolidated Fixed Charge Coverage Ratio as of the Determination Date was _____ to 1.00 calculated as follows: G-1 (i) Consolidated EBITDA (for the $__________ Four Quarter Period ending on (or most recently ended prior to) the Determination Date): (ii) capital expenditures (for the $__________ Four Quarter Period ending on (or most recently ended prior to) the Determination Date): (iii) (i) MINUS (ii): $__________ (iv) Consolidated Fixed Charges (for $__________ the Four Quarter Period ending on (or most recently ended prior to) the Determination Date): (v) (iii) divided by (iv): __________ Required: Equal or greater than 1.35 to 1.00. [See Section 8.1(c) of the Agreement] D. Working Asset Coverage Ratio as of the Determination Date was _____ to 1.00 calculated as follows: (i) Consolidated Working Assets as $__________ of the Determination Date: (ii) Obligations of the Borrower $__________ under the Agreement as of the Determination Date: (iii) trade accounts payable as of $__________ the Determination Date (iv) (ii) PLUS (iii): $__________ (v) (i) divided by (iv): __________ G-2 Required: Equal or greater than 1.125 to 1.00. [See Section 8.1(d) of the Agreement] 2. No Default A. _______ Since __________ (the date of the last similar certification), (a) the Borrower has not defaulted in the keeping, observance, performance or fulfillment of its obligations pursuant to any of the Loan Documents; and (b) no Default or Event of Default specified in ARTICLE IX of the Agreement has occurred and is continuing. B. If a Default or Event of Default has occurred since __________ (the date of the last similar certification), the Borrower proposes to take the following action with respect to such Default or Event of Default:______________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ _________. (NOTE, if no Default or Event of Default has occurred, insert "Not Applicable"). C. The Borrower and its Subsidiaries are current with all trade payables, except trade payables contested in good faith in the ordinary course of business. D. As of the Determination Date, the Borrower and its Subsidiaries are in full compliance with the established sublimits and terms of the Letters of Credit issued pursuant to the Agreement. The Determination Date is the date of the last required financial statements submitted to the Lender in accordance with SECTION 7.1 of the Agreement. IN WITNESS WHEREOF, I have executed this Certificate this _____ day of __________, 19___. By:________________________________ Authorized Representative Name:______________________________ Title:_____________________________ G-3 EXHIBIT H FORM OF GUARANTY AGREEMENT THIS GUARANTY AGREEMENT (the "Guaranty") is entered into as of this ___ day of _________, 199_, by and among the undersigned Subsidiaries of World Fuel Services Corporation, a Florida corporation (individually a "Guarantor" and collectively the "Guarantors"), and NATIONSBANK, N.A. (SOUTH), a national banking association and successor in interest by merger to The Citizens and Southern National Bank of Florida, N.A., as Lender (the "Lender"). Unless the context otherwise requires, all terms used herein without definition shall have the respective definitions provided therefor in the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, World Fuel Services Corporation (the "Borrower") and the Lender have entered into that certain Amended and Restated Credit Agreement, dated as of February 21, 1997, whereby the Lender has made available to the Borrower a Revolving Credit Facility (as at any time hereafter amended, restated, modified or supplemented, the "Credit Agreement"); and WHEREAS, the Credit Agreement requires the execution of this Guaranty by any Subsidiary of the Borrower acquired or created after the date thereof, and WHEREAS, the Guarantors will substantially benefit from the loans and advances made or to be made by the Lender and the letters of credit issued or to be issued by the Issuing Bank to the Borrower under the Credit Agreement; NOW, THEREFORE, in consideration of the premises and conditions herein set forth, it is hereby agreed as follows: 2. Guarantors hereby absolutely and unconditionally guaranty, jointly and severally, to the Lender, with full power to satisfy, discharge, release, foreclose, assign and transfer the within Guaranty, the due performance and full and prompt payment, whether at maturity or by acceleration or otherwise, of any and all Borrower's Liabilities (as hereinafter defined) (hereinafter collectively referred to as the "Guarantors' Obligations"); PROVIDED, HOWEVER, that the liability of any Guarantor hereunder with respect to the Guarantors' Obligations shall not exceed at any time the Maximum Amount (as hereinafter defined). The "Maximum Amount" means the greater of (x) the aggregate amount of (a) all advances to or investments in such Guarantor made directly or indirectly with the proceeds of Loans and Advances made to the Borrower under the Credit Agreement plus (b) all Letters of Credit issued on behalf of such Guarantor H-1 under the Credit Agreement, or (y) 95% of (a) the fair salable value of the assets of such Guarantor as of the date hereof minus (b) the total liabilities of such Guarantor (including contingent liabilities, but excluding liabilities of such Guarantor under this Guaranty and the other Loan Documents executed by such Guarantor) as of the date hereof; PROVIDED, FURTHER, that if the calculation of the Maximum Amount in the manner provided above as of the date payment is required of such Guarantor pursuant to this Guaranty would result in a greater positive number, then the Maximum Amount shall be deemed to be such greater positive number. 3. For purposes of this Guaranty, "Borrower's Liabilities" shall mean and include any and all advances (including those made by the Lender to protect, enlarge or preserve the priority, propriety, or amount of any lien in favor of the Lender against mechanic's lien, equitable lien, or statutory claimants, or otherwise), debts, obligations and liabilities of Borrower pursuant to the terms of the Credit Agreement, the Notes and all other Loan Documents executed in connection therewith heretofore, now, or hereafter made, incurred or created, extended, renewed, replaced, refinanced or restructured, whether or not from time to time decreased or extinguished and later increased, created or incurred, whether voluntary or involuntary and, however arising, whether due or not, absolute or contingent, liquidated or non-liquidated, determined or undetermined, and whether Borrower may be liable individually or jointly with others, or whether recovery upon such indebtedness may be or hereafter become barred by any statute of limitations, or whether such indebtedness may be or hereafter become otherwise unenforceable (collectively referred to hereinafter as the "Borrower's Liabilities"). This is a continuing Guaranty relating to the Borrower's Liabilities, and any other indebtedness arising under subsequent or successive transactions which increase the Borrower's Liabilities, and said Guaranty shall be irrevocable and remain outstanding until all the Borrower's Liabilities are satisfied in full and the Lender shall have no further obligation to make Loans and Advances and the Issuing Bank to issue Letters of Credit under the Credit Agreement. 4. The obligations of the Guarantors hereunder are independent of the obligations of Borrower, and a separate action or actions may be brought and prosecuted against any Guarantor, whether such action is brought against Borrower or whether Borrower be joined in any such action or actions. 5. Each Guarantor authorizes the Lender, without notice or demand and without affecting such Guarantor's liability hereunder, from time to time to (a) renew, amend, compromise, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the Borrower's Liabilities or any part thereof, including increase or decrease of the rate of interest thereon; (b) take and hold security for the payment of H-2 this Guaranty and the Guarantors' Obligations and exchange, enforce, waive and release any such security; (c) apply such security and direct the order or manner of sale thereof as the Lender may determine; and (d) release or substitute any one or more endorsers or guarantors of the Borrower's Liabilities. The Lender may without notice assign this Guaranty in whole or in part in connection with an assignment as permitted under the Credit Agreement. 6. Each Guarantor waives any right to require the Lender to (a) proceed against Borrower; (b) proceed against or exhaust any security held from Borrower; or (c) pursue any other remedy in the Lender's power whatsoever. Each Guarantor waives any defense arising by reason of any disability or other defense of Borrower or by reason of the cessation from any cause whatsoever of the liability of the Borrower to the Lender. Until all the Borrower's Liabilities shall have been paid in full and the Lender shall have no further obligation to make Loans and Advances and the Issuing Bank to issue Letters of Credit under the Credit Agreement, each Guarantor waives any right to endorse any remedy which the Lender now has or may hereafter have against the Borrower, and waives any benefit of, and any right to participate in, any security now or hereafter held by the Lender as collateral security for the Borrower's Liabilities. Each Guarantor waives all presentments, demands for performance, notices of non-performance, protests, notices of dishonor, notices of acceptance of this Guaranty and of the existence, creation, or incurring of new or additional indebtedness; any defense or circumstance which might otherwise constitute a legal or equitable discharge of a guarantor or a surety; and all rights under any state or federal statute dealing with or affecting the rights of creditors. Each Guarantor covenants to cause Borrower to maintain and preserve the enforceability of any instruments now or hereafter executed in favor of the Lender, and to take no action of any kind which might be the basis for a claim that such Guarantor has any defense hereunder in connection with the above-mentioned Loan Documents, other than payment in full of the Borrower's Liabilities. Each Guarantor waives any right or claim of right to cause a marshaling of Borrower's assets or to require the Lender to proceed against the Guarantors or any other guarantor of the Borrower's Liabilities in any particular order. No delay on the part of the Lender in the exercise of any right, power or privilege under the Loan Documents or under this Guaranty shall operate as a waiver of any such privilege, power or right. 7. Until the Borrower's Liabilities are paid in full and the Lender is under no further obligation to make Loans and Advances and the Issuing Bank to issue Letters of Credit under the Credit Agreement, any indebtedness of Borrower now or hereafter held by any Guarantor is hereby subordinated to the Borrower's Liabilities; and such indebtedness of Borrower to any Guarantor, if the Lender so requests, shall be collected, H-3 enforced and received by such Guarantor as trustee for the Lender and be paid over to the Lender on account of the Borrower's Liabilities, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty. Each Guarantor, at the request of the Lender, shall execute such further documents in favor of the Lender to further evidence and support the purpose of this Section 6. Each Guarantor hereby irrevocably waives and releases any right or rights of subrogation or contribution existing at law, by contract or otherwise to recover all or a portion of any payment made hereunder from the Borrower or any other guarantor. 8. Upon the default of Borrower with respect to any of its obligations or liabilities to the Lender in connection with the Loan Documents, or in case Borrower or any Guarantor shall become insolvent or make an assignment for the benefit of creditors, or if a petition in bankruptcy or for corporate reorganization or for an arrangement be filed by or against Borrower or any Guarantor (and if such petition is filed against Borrower or any Guarantor and is not stayed or dismissed within sixty (60) days), or in the event of the appointment of a receiver for Borrower or any Guarantor of their properties, or in the event a judgment is obtained or warrant of attachment is issued against Borrower or any Guarantor (which judgment or warrant is not satisfied or bonded or removed within sixty (60) days), all or any part of the Guarantors' Obligations shall, without notice or demand, at the option of the Lender, become immediately due and payable and shall be paid forthwith, jointly and severally, by Guarantors without any offset of any kind whatsoever, without the Lender first being required to make demand upon the Borrower or pursue any of its rights against Borrower, or against any other person, including other guarantors (whether or not party to this Guaranty). 9. Notwithstanding any provision herein or in any instrument now or hereafter executed in connection with this Guaranty or the Guarantors' Obligations hereunder, the total liability for payments in the nature of interest shall not exceed the limits now imposed by the usury laws of the State of Florida governing the provisions of this Guaranty or in any instrument now or hereafter executed in connection with this Guaranty or the Guarantors' Obligations hereunder. 10. Each Guarantor acknowledges that the Lender has been induced by this Guaranty to make and to continue to make Loans and Advances to the Borrower and the Issuing Bank to issue and continue to issue Letters of Credit on behalf of the Borrower and its Subsidiaries under the Credit Agreement, and this Guaranty shall, without further reference or assignment, pass to, and may be relied upon and enforced by, any successor or participant or assignee of the Lender in and to any of Borrower's Liabilities. 11. Each Guarantor hereby warrants and represents to the H-4 Lender, that: (a) it is a duly organized and validly existing corporation under the laws of the state of its incorporation; (b) it is qualified to do business in each state in which qualification is necessary; (c) it has the power to execute this Guaranty; (d) that the execution of this Guaranty has been duly authorized; and (e) that this Guaranty is a binding and valid corporate obligation. 12. Each Guarantor acknowledges that the liabilities of said Guarantor shall be independent of the Obligations of Borrower, and separate or joint actions may be instituted by the Lender, against such Guarantors; and said actions may be instituted against Borrower and any of the Guarantors, or separately against any of the Guarantors. Any action taken by the Lender pursuant to the provisions herein contained or contained in the Credit Agreement, the Notes or the Loan Documents, shall not release the party to this Guaranty until all of the Borrower's Liabilities are paid in full and the Lender shall have no further obligation to make Loans and Advances and the Issuing Bank to issue Letters of Credit under the Credit Agreement. 13. The Guarantors will upon demand pay to the Lender, jointly and severally, the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which it may reasonably incur in connection with enforcement of this Guaranty or the failure by any Guarantor to perform or observe any of the provisions hereof. The Guarantors agree to indemnify and hold harmless the Lender from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind or nature, growing out of or resulting from this Guaranty or the exercise by the Lender of any right or remedy granted to it hereunder or under the other Loan Documents, other than such items arising out of the bad faith, gross negligence or willful misconduct on the part of the Lender. If and to the extent that the obligations of the Guarantors under this Section 12 are unenforceable for any reason, Guarantors hereby agree to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 14. If claim is ever made upon the Lender for repayment or recovery of any amount or amounts received in payment or on account of the Guarantors' Obligations and the Lender repays all or part of said amount by reason of (a) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property, or (b) any settlement or compromise of any such claim effected by the Lender with any such claimant (including the original obligor), then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon it, notwithstanding any revocation hereof or the cancellation of any Notes H-5 or other instrument evidencing any Guarantied Obligations or any security therefor, and the Guarantors shall be and remain jointly and severally liable to the Lender for the amount so repaid or recovered to the same extent as if such amount had never originally been received by the Lender. 15. All notices required to be given hereunder shall be in writing, and shall be given by certified mail, return receipt requested, and shall be deemed given when they shall have been deposited in the United States Mail, with sufficient postage prepaid thereon to carry them to their addressed destination, addressed to the party for whom it is intended, as follows: For a Guarantor: such Guarantor c/o World Fuel Services Corporation 700 South Royal Poinciana Blvd. Suite 800 Miami Springs, FL 33166 Attention: Chief Financial Officer For Lender: NationsBank, N.A. 101 N. Tryon Street Independence Center, 15th Floor Charlotte, North Carolina 28255 Attention: Corporate Credit Support 16. Whenever the text of this instrument so requires, the use of any gender shall be deemed to include all genders, and the use of the singular shall include the plural, and in such event, wherever the word "Guarantor" is used herein, then such word shall be deemed to be "Guarantors" or either or any of them. 17. This Guaranty shall be binding upon each Guarantor, successors, legal representatives and assigns of each Guarantor. 18. This Guaranty shall, for all purposes, be governed by and construed in accordance with the laws of the State of Florida. 19. THE LENDER AND EACH GUARANTOR KNOWINGLY, INTENTIONALLY AND VOLUNTARILY HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN CONNECTION WITH ANY MATTER DIRECTLY OR INDIRECTLY RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT. H-6 IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be duly executed by their duly authorized officers, all as of the day and year first above written. [GUARANTOR]: By:________________________ Name:___________________ Title:__________________ [GUARANTOR]: By:________________________ Name:___________________ Title:__________________ SIGNATURE PAGE 1 0F 2 H-7 LENDER: NATIONSBANK, N.A. (SOUTH) By:_______________________ Name:_____________________ Title:____________________ SIGNATURE PAGE 2 OF 2 H-8 SCHEDULE 6.4 ------------ SUBSIDIARIES AND INVESTMENTS IN OTHER PERSONS WHOLLY OWNED SUBSIDIARIES Advance Petroleum, Inc., A Florida corporation Advance Aviation Services, Inc., a Florida corporation (1) Air Terminaling, Inc., a Florida corporation (1) Cherokee Group, Inc., A Florida corporation International Petroleum Corporation, a Florida corporation International Petroleum Corporation Of La, a Louisiana corporation International Petroleum Corporation Of Lafayette, a Louisiana corporation (1) International Petroleum Corporation Of Maryland, a Maryland corporation International Petroleum Corp. Of Georgia, a Georgia corporation (1) International Petroleum Corp. Of Delaware, a Delaware corporation International Petroleum Corp. Of Pennsylvania, a Pennsylvania corporation (1) International Environmental Services, Inc., a Florida corporation (1) Petroservicios de Mexico, a Mexican corporation Petroservicios de Costa Rica S.A., a Costa Rican corporation Resource Recovery Of America, Inc., a Florida corporation Resource Recovery Mid South, Inc., a Virginia corporation (1) Resource Recovery Atlantic, Inc., A Delaware corporation (1) Trans-Tec Services, Inc., a Delaware corporation Trans-Tec Services (UK) Ltd., a United Kingdom corporation Trans-Tec Services (Singapore) PTE. LTD., a Singapore corporation World Fuel International S.A., a Costa Rican corporation World Fuel Services, Inc., A Texas corporation World Fuel Services, Ltd., a United Kingdom corporation World Fuel Services (Singapore) PTE., Ltd. a Singapore corporation (1) INACTIVE 50/50 JOINT VENUTURE - -------------------- Petrosur, an Ecquadorian partnership S-1 SCHEDULE 6.6 Indebtedness None S-2 SCHEDULE 6.7 Liens None S-3 SCHEDULE 6.8 Tax Matters None S-4 SCHEDULE 6.10 Litigation None S-5 SCHEDULE 6.18 ------------- HAZARDOUS MATERIALS The Company has exited several environmental businesses which handled hazardous wastes. These wastes were transported to various disposal facilities and/or treated by the Company. The Company may be held liable as a potentially responsible party for the cleanup of such disposal facilities in certain cases pursuant to current Federal and State laws and regulations. The Company is currently responsible to Federal and Florida environmental agencies for cleanup costs at the Mulberry, Florida site formerly operated by its subsidiary, Resource Recovery of America, which has been sold by the Company. Under the terms of the sale, the Company contractually transferred to the buyer the responsibility for the state cleanup. However, the buyer has been unwilling to fund expenses incurred to date. The site also qualified under the state reimbursement program, which the Company anticipates will cover the cost of the cleanup. The Company is actively involved in the coordination of cleanup requirements by the EPA and the state to assure the Company's compliance. The Company intends to pay an estimated $1,000,000 over the next several years to cleanup contamination which was present at the Company's Delaware used oil recycling facility when it was acquired by the Company. The cleanup costs will be capitalized as part of the cost of the site, up to the fair market value of the site. S-6 SCHEDULE 7.6 INDEBTEDNESS Promissory notes issued in connection with the acquisition of the Trans-Tec group of companies 9.00% $2,057,753 Equipment notes: Polar Tank Trailers 7.00% - 8.52% 172,328 Mack Tractors 6.76% - 8.52% 369,878 ---------- Total Indebtedness $2,599,959 ========== S-7 EX-10.B(II) 3 EXHIBIT 10b(ii) Promissory Note (Revolving Credit Facility) $25,000,000.00 Teaneck, New Jersey February 21, 1997 FOR VALUABLE CONSIDERATION RECEIVED, WORLD FUEL SERVICES CORPORATION, a Florida corporation having its principal place of business located in Miami Springs, Florida (the "Borrower"), hereby promises to pay to the order of NATIONSBANK, N.A. (SOUTH) (the "Lender"), in its individual capacity, at the office of the Lender located at One Independence Center, 101 North Tryon Street, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places as the Lender may designate in writing) at the times set forth in the Amended and Restated Credit Agreement dated as of February 21, 1997 by and between the Borrower and the Lender (the "Agreement" - all capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Agreement), in lawful money of the United States of America, in immediately available funds, the principal amount of TWENTY-FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00) or, if less than such principal amount, the aggregate unpaid principal amount of all Loans made by the Lender to the Borrower pursuant to the Agreement on the Revolving Credit Termination Date or such earlier date as may be required pursuant to the terms of the Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in like money, at said office, on the dates and at the rates provided in ARTICLE II of the Agreement. All or any portion of the principal amount of Loans may be prepaid or required to be prepaid as provided in the Agreement. If payment of all sums due hereunder is accelerated under the terms of the Agreement or under the terms of the other Loan Documents executed in connection with the Agreement, the then remaining principal amount and accrued but unpaid interest shall bear interest which shall be payable on demand at the rates per annum set forth in the proviso to SECTION 2.2 (A) of the Agreement. Further, in the event of such acceleration, this Note shall become immediately due and payable, without presentation, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorney's fees, and interest due hereunder thereon at the rates set forth above. Interest hereunder shall be computed as provided in the Agreement. This Note is one of the Notes referred to in the Agreement and is issued pursuant to and entitled to the benefits and security of the Agreement to which reference is hereby made for a more complete evidenced hereby were or are made and are to be repaid. This Note is subject to certain restrictions on transfer or assignment as provided on the Agreement. All Persons bound on this obligation, whether primarily or secondarily liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive to the full extent permitted by law the benefits of all provisions of law for stay or delay of execution or sale of property or other satisfaction of judgment against any of them on account of liability hereon until judgment be obtained and execution issues against any other of them and returned satisfied or until it can be shown that the maker or any other party hereto had no property available for the satisfaction of the debt evidenced by this instrument, or until any other proceedings can be had against any of them, also their right, if any, to require the holder hereof to hold as security for this Note any collateral deposited by any of said Persons as security. Protest, notice of protest, notice of dishonor, diligence or any other formality are hereby waived by all parties bound hereon IN WITNESS WHEREOF, the Borrower has caused this Note to be made, executed and delivered by its duly authorized representative as of the date and year first above written, all pursuant to authority duly granted. WORLD FUEL SERVICES CORPORATION By: /s/ CARLOS ABAUNZA ------------------------- Name: Carlos Abaunza Title: Chief Financial Officer EX-21 4 EXHIBIT 21 Exhibit 21 - Subsidiaries of the Registrant Advance Petroleum, Inc., a Florida corporation (1) Advance Aviation Services, Inc., a Florida corporation (9) Air Terminaling, Inc., a Florida corporation (9) Casa Petro S.A., a Costa Rica corporation Cherokee Group, Inc., a Florida corporation International Petroleum Corporation, a Florida corporation (2) International Petroleum Corporation of LA, a Louisiana corporation (2) International Petroleum Corporation of Lafayette, a Louisiana corporation (2) International Petroleum Corporation of Maryland, a Maryland corporation (2) International Petroleum Corp. of Georgia, a Georgia corporation (9) International Petroleum Corp. of Delaware, a Delaware corporation (2) International Petroleum Corp. of Pennsylvania, a Pennsylvania corporation (9) International Environmental Services, Inc., a Florida corporation PetroServicios de Mexico S.A. de C.V., a Mexico corporation (6) PetroServicios de Costa Rica S.A., a Costa Rica corporation (7) Resource Recovery of America, Inc., a Florida corporation (9) Resource Recovery Mid South, Inc., a Virginia corporation (3)(9) Resource Recovery Atlantic, Inc., a Delaware corporation (3)(9) Trans-Tec International S.A., a Costa Rica corporation (8) Trans-Tec Services, Inc., a Delaware corporation Trans-Tec Services (UK) Ltd., a United Kingdom corporation Trans-Tec Services (Singapore) PTE. Ltd., a Singapore corporation (4) World Fuel International S.A., a Costa Rica corporation (5) World Fuel Services, Inc., a Texas corporation World Fuel Services, Ltd., a United Kingdom corporation World Fuel Services (Singapore) PTE., Ltd. a Singapore corporation (1) Advance Petroleum, Inc., operates under the name "World Fuel Services of FL." (2) These corporations collect and purchase used oil under the name "International Oil Service." (3) These corporations are subsidiaries of Resource Recovery of America, Inc. (4) This corporation is a subsidiary of Trans-Tec Services (UK) Ltd. (5) World Fuel International S.A., is also known as Petromundo Internacional S.A. (6) This corporation is owned 50% by Advance Aviation Services, Inc. and 50% by Air Terminaling, Inc. (7) This corporation is owned 55% by Casa Petro S.A and 45% by World Fuel Services Corporation. (8) Trans-Tec International S.A., is also known as Trans-Tec Mundial S.A. (9) Inactive. EX-23 5 EXHIBIT 23 Exhibit 23 - Consent of Independent Certified Public Accountants CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS As independent certified public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into World Fuel Services Corporation's previously filed Form S-8 Registration Statement File No. 333-23125. /s/ Arthur Andersen LLP - ----------------------- ARTHUR ANDERSEN LLP Miami, Florida May 20, 1997. EX-27 6
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S MARCH 31, 1997 AUDITED FINANCIAL STATEMENTS FILED ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS MAR-31-1997 MAR-31-1997 11,035,000 0 75,179,000 4,360,000 6,449,000 93,436,000 23,375,000 7,094,000 123,139,000 44,851,000 0 0 0 81,000 75,177,000 123,139,000 772,618,000 772,618,000 725,991,000 725,991,000 0 5,107,000 395,000 17,869,000 4,604,000 13,625,000 0 0 0 13,625,000 1.62 1.62
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