EXHIBIT 10.6
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FORBEARANCE AGREEMENT AND AMENDMENT
This FORBEARANCE AGREEMENT AND AMENDMENT (hereinafter, the
"Agreement"), dated as of this 31st day of August, 2000, is made by and among:
FLEET NATIONAL BANK F/K/A BANKBOSTON, N. A., a national banking
association, having an office at 000 Xxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx, (hereinafter, the "BANK");
DYNAGEN, INC. (hereinafter, in such capacity, the "LEAD BORROWER"), a
Delaware corporation, with its principal executive offices at 0000
Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx, as agent for said DynaGen, Inc;
and
ABLE LABORATORIES, INC. ("ABLE"), a Delaware corporation with its
principal executive offices at 0000 Xxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxxxxxxx; and
SUPERIOR PHARMACEUTICAL COMPANY ("SUPERIOR"), an Ohio corporation with
its principal executive offices at 0000 Xxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxxxxxxx; and
GENERIC DISTRIBUTORS, INC. ("GENERIC"), a Delaware corporation with its
principal executive offices at 0000 Xxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxxxxxxx
(Each of DynaGen, Inc., Able, Superior and Generic being hereinafter
referred to individually as a "BORROWER" and collectively as the
"BORROWERS")
in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.
W I T N E S S E T H:
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BACKGROUND
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1. On November 29, 1999, the Bank and the Borrowers entered into a certain
Loan and Security Agreement (hereinafter , as amended and in effect,
the "LOAN AGREEMENT"), pursuant to which the Bank established, subject
to the terms therein contained, a Revolving Credit facility in favor of
the Borrowers.
The Borrowers' Liabilities to the Bank are secured by a first perfected
security interest in and to all of the Borrowers' assets, including,
without limitation, all of the Borrowers' accounts, inventory,
equipment, general intangibles, trademarks, patents and other
collateral as more particularly described in the Loan Documents.
Various Events of Default have arisen under the Loan Agreement, and the
Borrowers have requested that, notwithstanding the occurrence of such
Events of Default, the Bank continue to forbear from exercising its
rights and remedies upon default on account of such Events of Default.
The Bank is willing to so forbear BUT ONLY upon the terms and
conditions set forth herein.
1. DEFINITIONS
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a. Unless otherwise specified herein, all capitalized terms herein
shall have the same meaning as set forth in the Loan Agreement.
a. "Consolidated EBITDA" shall mean, with respect to any Person, the
consolidated earnings of such Person and its subsidiaries from
continuous operations, before interest, federal income taxes,
depreciation and amortization, each as determined in accordance
with GAAP.
a. "Existing Defaults" shall mean the following Events of Default
existing on the date hereof: (i) Failure to provide a commitment
for refinancing of the Liabilities on or before August 31, 2000;
(ii) Breach of Section 10-11 of the Loan Agreement as of June 30,
2000; and (iii) Breach of Section 10-12 of the Loan Agreement as
of June 30, 2000.
ACKNOWLEDGMENT OF LIABILITIES
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1. The Borrowers each acknowledge and agree that as of August 31, 2000,
the following Liabilities are presently due and owing to the Bank:
Revolving Credit
Principal: $8,095,666.39
Interest: $ 71,451.69
Unused Line Fee: $ 192.95
The Borrowers each acknowledge and agree that the Borrowers are jointly
and severally liable for all Liabilities due and owing to the Bank, including,
without limitation, all interest accrued and hereafter accruing, all previously
and hereafter incurred late charges, all fees (including, without limitation,
the Facility Fee, the Line (Unused Fee), the Collateral Agent Fee, the Early
Termination Fee, forbearance fees, and Letter of Credit fees) accrued and
hereafter accruing, and all costs, expenses, and costs of collection heretofore
or hereafter incurred by the Bank, including attorneys' fees and expenses in
connection with the preparation, negotiation, and/or enforcement of this
Agreement, the Loan Documents, and all documents, instruments, and agreements
incidental thereto or contemplated herein.
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WAIVER OF CLAIMS/RELEASE
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1. The Borrowers each acknowledge and agree that the Borrowers do not have
or ever had any claims, counterclaims, offsets, or defenses against the
Bank directly or indirectly relating to the Liabilities or otherwise,
and to the extent that the Borrowers have or ever had any such claims,
counterclaims, offsets, or defenses, the Borrowers each affirmatively
WAIVE the same. The Borrowers, for themselves and for the Borrowers'
respective heirs, executors, administrators, representatives, officers,
directors, agents, employees, successors and assigns, hereby RELEASE,
and forever discharge the Bank and its officers, directors, agents,
attorneys, and employees, representatives, successors and assigns, of,
to, and from all debts, demands, actions, suits, accounts, covenants,
contracts, agreements, damages, and any and all claims, demands, or
liabilities whatsoever, of every name and nature, both at law and in
equity, known and unknown, from the beginning of the world through the
date hereof.
FORBEARANCE BY BANK
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1. Notwithstanding the existing Events of Default, and without waiving the
same, the Bank agree to forbear from accelerating the time for payment
of the Liabilities, and from exercising its remedies upon default to
foreclose on the Collateral under the Loan Documents until the earlier
of (i) January 15, 2001, or (ii) the occurrence of a Termination Event
(as defined herein). The period commencing as of the date hereof and
ending on the earlier of (i) or (ii) above shall hereinafter be
referred to as the "FORBEARANCE PERIOD").
FORBEARANCE TERMS
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1. The Bank's agreement to forbear is subject to the following terms and
conditions:
a. Suspension of Payments on Subordinated Indebtedness. During the
Forbearance Period, notwithstanding the provisions of Section 6-27
of the Loan Agreement or of any other Loan Document, the Borrowers
shall not make any payments of principal, interest or otherwise on
account of the following Subordinated Indebtedness which is listed
on Schedule 6.7 to the Loan Agreement:
i. Subordinated Loan from Sirrom and Argosy;
ii. Promissory Notes placed by Xxxxxxxxx Securities;
iii. 9% Promissory Notes payable to various private investors; and
iv. Promissory Note payable to Xxxxxxx Xxxxxx
Nothing contained herein shall limit or impair the rights of the Bank
under the subordination agreements entered into with those Persons referenced in
subclauses i ii, iii and iv above (collectively, the "Subordination
Agreements"), each of which remain in full and effect, and the Bank reserve the
right to exercise any of its rights and remedies under the Subordination
Agreements at any time and from time to time.
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a. Revolving Credit. Notwithstanding any other provision in the Loan
Agreement to the contrary, during the Forbearance Period, any loan
or advance by the Bank pursuant to the Revolving Credit,
including, without limitation, the issuance of any L/C, shall be
at the Bank's sole and absolute discretion. Availability as
calculated pursuant to Section 3-1 of the Loan Agreement is solely
for the Bank's guidance and for the monitoring of the Borrowers'
financial condition. The Borrowers recognize that Availability is
only one of several factors considered by the Bank in its
determination whether to make a loan, credit, or advance under the
Revolving Credit.
a. Interest Rate. From and after the date hereof, all loans and
advances pursuant to the Revolving Credit shall accrue interest at
the Base Rate plus four percent (4.0%) per annum. The LIBOR Rate
shall not be available to the Borrowers, and any and all
references to the LIBOR Rate in the Loan Agreement shall be of no
force or effect.
a. Payment of Liabilities. During the Forbearance Period, the
Borrower shall make all payments of principal, interest, fees, and
other Liabilities in the amounts, and as and when due, required
under the Loan Documents.
a. Commitment to Refinance Liabilities. On or before November 30,
2000, the Borrowers shall have provided the Bank with a bona fide
commitment to refinance the Liabilities in full on or before
January 15, 2001. Such commitment to refinance shall be on terms
and conditions satisfactory to the Bank in the Bank's sole and
absolute discretion.
a. Satisfaction of Liabilities. Notwithstanding any provision of the
Loan Agreement to the contrary, the Liabilities shall become
immediately due and payable in full without notice or demand by
the Agent upon the expiration of the Forbearance Period.
a. Forbearance Fee. In consideration of the Bank's entering into this
Agreement, the Bank has earned, and the Borrowers have agreed to
pay to the Bank a forbearance fee in the aggregate amount of
$50,225.00 (the "Forbearance Fee"). Unless sooner accelerated as a
result of the occurrence of a Termination Event, such Forbearance
Fee shall be paid as follows: (i) the sum of $8,000.00 shall be
paid on the execution hereof; (ii) the sum of $11,225.00 shall be
paid on October 2, 2000, (iii) the sum of $14,000.00 shall be paid
on November 1, 2000; and (iv) the sum of $17,000.00 shall be paid
on December 1, 2000. Notwithstanding the preceding sentence,
provided that the Borrowers repay the Liabilities in full on or
before November 30, 2000, the Bank agrees to waive that portion of
the Forbearance Fee in the amount of $17,000.00 which would
otherwise have been payable on December 1, 2000. The Forbearance
Fee shall be deemed fully earned upon the execution hereof and,
except as provided for in the preceding sentence, shall not be
subject to refund or rebate under any circumstances.
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a. Reimbursement of Expenses. Upon the execution of this Agreement,
the Borrowers shall pay all costs and expenses of the Bank,
including, without limitation, attorneys' fees and expenses, and
collateral examination fees. The Borrowers hereby authorize Bank
to make an advance under the Revolving Credit to the Borrowers in
a sum sufficient to pay such costs and expenses and any future
costs and expenses incurred by the Bank.
a. Other Amendments to Loan Documents. The Loan Documents are hereby
amended as follows:
i. Article 1 of the Loan Agreement is hereby amended as follows:
(1) Subclause (b)(i) of the definition of "Acceptable
Accounts" is hereby deleted in its entirety, and the
following substituted in its stead:
(i) Any which is more than sixty (60) days from the due
date thereof.
(1) The definition of "Applicable Margin" is hereby deleted
in its entirety, and the following substituted in its
stead:
"APPLICABLE MARGIN": shall mean four percent (4.0%).
(1) The definition of "Commitment" is hereby deleted in its
entirety, and the following substituted in its stead:
"COMMITMENT": shall mean, (a) for the period commencing
September 18, 2000 through and including October 1,
2000, Eight Million Two Hundred Fifty Thousand Dollars
($8,250,000.00); (b) for the period commencing October
2, 2000 through and including October 15, 2000, Eight
Million Dollars ($8,000,000.00); (c) for the period
commencing October 16, 2000 through and including
October 31, 2000, Seven Million Seven Hundred Fifty
Thousand Dollars ($7,750,000.00); (d) for the period
commencing November 1, 2000 through and including
November 15, 2000, Seven Million Five Hundred Thousand
Dollars ($7,500,000.00); (e) for the period commencing
November 16, 2000 through and including November 30,
2000, Seven Million Dollars ($7,000,000.00); (f) for
the period commencing December 1, 2000 through and
including December 14, 2000, Six Million Seven Hundred
Fifty Thousand ($6,750,000.00); (g) for the period
commencing December 15, 2000 through and including
December 31, 2000, Six Million Five Hundred Thousand
($6,500,000.00); and (h) for the period commencing
January 1, 2001 through and including January 15, 2001,
Six Million Two Hundred Fifty Thousand ($6,250,000.00);
(1) The definition of "Maturity Date" is hereby amended by
deleting "May 31, 2001" therefrom and substituting
"January 15, 2001".
i. Article 3 of the Loan Agreement is hereby amended as follows:
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(1) Section 3-1(b)(ii) is hereby deleted in its entirety
and the following substituted in its stead:
up to:
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(A) (i) For the period commencing September 18, 2000
through October 1, 2000, eighty-five percent
(85%) of the face amount of each of the
Borrowers' Acceptable Accounts, less the Dilution
Reserve.
(ii) For the period commencing October 2, 2000
through January 15, 2001, eighty percent (80%) of
the face amount of each of the Borrowers'
Acceptable Accounts, less the Dilution Reserve.
Plus
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(B) (i) For the period commencing September 18, 2000
through October 31, 2000, (A) sixty percent (60%)
of the cost of the Borrowers' Acceptable
Inventory minus (B) $1,000,000.00.
(ii) For the period commencing November 1, 2000
through November 30, 2000, (A) fifty percent
(50%) of the cost of the Borrowers' Acceptable
Inventory minus (B) $1,000,000.00.
(iii) For the period commencing December 1, 2000
through January 15, 2001, (A) forty percent (40%)
of the cost of the Borrowers' Acceptable
Inventory minus (B) $1,000,000.00.
Plus
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(C) the lesser of (i) eighty percent (80%) of the
forced liquidation value of the Borrowers'
Equipment, as determined by the Lender, or (ii)
the Equipment Cap.
Minus
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(D) The then aggregate of such Reserves (other than
the Dilution Reserve) as may be established by
the Lender from time to time.
Minus
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(E) The then unpaid principal balance of the Loan
Account.
Minus
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(F) The aggregate amounts then undrawn on all
outstanding L/C's, acceptances, or any other
accommodations issued or incurred, or caused to
be issued or incurred, by the Lender for the
account and/or the benefit of the Borrowers.
Notwithstanding the foregoing, (i) for the period
commencing September 18, 2000 through and including
November 30, 2000, the maximum amounts available to be
borrowed pursuant to clause (B) shall not exceed the
lesser of $4,000,000 or fifty percent (50%) of all
outstanding Revolving Credit Loans and L/Cs, and (ii)
for the period commencing December 1, 2000 through and
including January 15, 2001, the maximum amounts
available to be borrowed pursuant to clause (B) shall
not exceed fifty percent (50%) of all outstanding
Revolving Credit Loans and L/Cs
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(1) Section 3-9(a) is hereby deleted in its entirety, and
the following substituted in its stead:
(a) Revolving Credit Loans shall bear interest at the
Base Rate plus the Applicable Margin.
(1) Section 3-9(c) is hereby amended by deleting the
following text therefrom
four percent (4.0%)
and substituting the following in its stead:
seven percent (7.0%)
(1) Section 3-20 is hereby amended by deleting "4%" and
substituting "7%" in its stead.
i. Article 10 of the Loan Agreement is hereby amended as
follows:
(1) In addition to the financial statements and the
reporting requirements required by Article 10 of the
Loan Agreement, the Borrowers shall furnish to the Bank
the following (each of which shall be in form and
substance satisfactory to the Bank and shall be
certified by the Lead Borrower's chief financial
officer):
(a) A cash receipt and disbursement budget for the
months of September, October and November, broken
down on a weekly basis by each week of the
subject month, to be delivered as follows:
(i) on or before September 18, 2000, for the
month of September;
(ii) on or before October 6, 2000, for the month
of October;
(iii) on or before November 6, 2000, for the
month of November;
(iv) on or before December 6, 2000, for the month
of December
(v) on or before January 5, 2001, for the month
of January.
(a) On or before September 18, 2000, those monthly
reports required to be delivered pursuant to
Section 10-5 of the Loan Agreement, for the month
of July, 2000.
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(a) On or before September 25, 2000, a consolidating
monthly projected profit and loss statement for
the months of September; October, November,
December, 2000 and January 2001 (the "P&L
Projection"), which P&L Projection shall be in
form and substance satisfactory to the Bank.
(1) Without limiting the provisions of Sections 10-10 of
the Loan Agreement, the Borrowers shall permit the Bank
to conduct, at the Borrowers' sole cost and expense,
such appraisals of the Collateral as the Bank may
require.
a. Financial Covenants
During the Forbearance Period, the financial covenants set
forth in Sections 10-11 through 10-13, inclusive, of the Loan
Agreement shall be of no effect, and during the Forbearance
Period, the Borrowers shall comply with the following
financial covenant in lieu thereof:
Minimum EBITDA. The Borrowers shall not permit the
Consolidated EBITDA of the Borrowers to be less than
ninety percent (90%) of the projected monthly
Consolidated EBITDA as set forth on the P&L
Projections, tested on a monthly basis.
a. Survival. The provisions of Paragraph 6(a) through and
including 6(i) hereof shall survive any termination of the
Forbearance Period.
RATIFICATION OF LOAN DOCUMENTS
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1. The Borrowers hereby ratify, confirm, and reaffirm, each of the terms
and conditions, and the execution and the delivery, of the Loan
Documents (as modified hereby), and warrant and represent that all of
the terms and conditions of the Loan Documents (as modified hereby)
remain in full force and effect. The Borrowers hereby ratify and
confirm each of the representations and warranties set forth in the
Loan Documents. Without limiting the generality of the foregoing, the
Borrowers each ratify and confirm that all Liabilities (as modified
hereby) are secured by the Collateral.
CONDITIONS PRECEDENT TO EFFECTIVENESS OF AGREEMENT
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1. This Agreement and the Bank's forbearance hereunder shall not be
effective until each of the following conditions precedent have been
fulfilled to the satisfaction of the Bank:
a. All action on the part of the Borrowers necessary for the valid
execution, delivery and performance by the Borrowers of this
Agreement shall have been duly and
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effectively taken and evidence thereof satisfactory to the Bank
shall have been provided to the Bank.
a. The Borrower shall have paid to the Bank all fees, expenses and
other amounts then due and owing pursuant to this Agreement and
the Loan Documents.
a. The Borrowers shall have provided such additional instruments and
documents to the Bank as Bank's counsel may have reasonably
requested.
a. There shall have been no material adverse change in the financial
condition of each of the Borrowers.
TERMINATION EVENTS
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1. The occurrence of any one of the following events shall constitute a
"Termination Event") within the meaning of this Agreement:
a. The occurrence of any Default or Event of Default after the date
hereof under any of the Loan Documents, other than any Existing
Defaults;
a. The failure of the Borrowers to satisfy in all material respects
the terms and conditions of this Agreement as and when due; or
a. The determination by the Bank that any representation or warranty
made to the Bank by any Borrower was not true, correct and
accurate in any material respect when made or given.
Upon the occurrence of any Termination Event, the Forbearance Period
may, at the option of the Bank, immediately terminate, and the Bank may
immediately proceed to enforce all of its contractual and other rights and
remedies against the Borrowers, including without limitation, the foreclosure of
the Collateral granted to the Bank by any Borrower and including, to the full
extent permitted by applicable law, the obtaining of the ex parte appointment of
a receiver, to which appointment each Borrower hereby consents. The Borrowers
shall cooperate with the Bank in connection with the disposition of the
Collateral.
NO WAIVER BY BANK
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1. In entering into this Agreement, the Bank is not waiving any existing
Events of Default. Further, the rights, remedies, powers, privileges,
and discretions of the Bank hereunder shall be cumulative and not
exclusive of any rights or remedies which it otherwise would have. No
delay or omission by the Bank in exercising or enforcing any of its
rights and remedies hereunder or under the Loan Documents or otherwise
shall operate as, or constitute, a waiver thereof. No waiver by the
Bank of any default under any other agreement shall operate as a waiver
of any other default hereunder, now existing or hereafter arising, or
under any other agreement. No waiver by the Bank of any of its rights
and remedies on any one occasion shall be deemed a waiver on any
subsequent occasion, nor shall it be deemed a continuing waiver.
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NO ADDITIONAL AGREEMENTS
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1. This Agreement incorporates all discussions and negotiations between
the Borrowers and the Bank, either express or implied, concerning the
matters included herein and in any other instruments, documents, or
agreements executed in connection herewith, any statute, custom, or
usage to the contrary notwithstanding. No such discussions or
negotiations shall limit, modify, or otherwise affect the provisions
hereof. No modification, amendment, or waiver of any provision of this
Agreement and the Loan Documents, or any provision under any other
agreement between the Borrowers and the Bank shall be effective unless
executed in writing by the party to be charged with such modification,
amendment, or waiver, and if such party be the Bank, then by a duly
authorized officer thereof.
BINDING EFFECT
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1. This Agreement shall be binding upon the Borrowers and their respective
representatives and successors and shall inure to the benefit of the
Bank and its successors and assigns.
ILLEGALITY OR UNENFORCEABILITY
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1. Any determination that any provision of this Agreement or any
application thereof is invalid, illegal, or unenforceable in any
respect or in any instance shall not affect the validity, legality, or
enforceability of such provision in any other instance, nor the
validity, legality, or enforceability of any other provision of this
Agreement.
WAIVER OF JURY TRIAL
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1. The Borrowers make the following waiver knowingly, voluntarily, and
intentionally, and understand that the Bank, in entering into the
within Agreement, is relying thereon. THE BORROWERS, TO THE EXTENT
OTHERWISE ENTITLED THERETO, HEREBY IRREVOCABLY WAIVE ANY PRESENT OR
FUTURE RIGHT OF THE BORROWERS, TO A JURY IN ANY TRIAL OF ANY CASE OR
CONTROVERSY IN WHICH THE BANK IS OR BECOMES A PARTY (WHETHER SUCH CASE
OR CONTROVERSY IS INITIATED BY OR AGAINST THE BANK OR IN WHICH THE BANK
IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT
OF, OR IS IN RESPECT OF, ANY RELATIONSHIP BETWEEN THE BORROWERS AND THE
BANK.
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INFORMED EXECUTION
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1. The Borrowers hereby warrant and represent to the Bank that the
Borrowers have each read and understand all and singular the terms and
conditions of this Agreement and that the Borrowers are entering into
this Agreement freely and voluntarily, without duress, after having had
an opportunity for consultation with independent counsel of the
Borrowers' own selection, and not in reliance upon any representations,
warranties, or agreements made by the Bank and not set forth in this
Agreement.
MISCELLANEOUS
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1. This Agreement shall be deemed to constitute a "Loan Document" for all
purposes under the Loan Agreement or any other Loan Document.
1. This Agreement and all rights and obligations hereunder, including
matters of construction, validity, and performance, shall be governed
by the laws of The Commonwealth of Massachusetts. The Borrowers each
submit to the jurisdiction of the Courts of said Commonwealth for all
purposes with respect to this Agreement and the Borrowers' relationship
with the Bank.
1. The Borrowers shall execute such instruments and documents as theBank
may from time to time request in connection with the Loan Agreement and
the other Loan Documents, this Agreement and the arrangements
contemplated hereby.
1. This Agreement may be executed in several counterparts and by each
party on a separate counterpart, each of which when so executed and
delivered shall be an original, and all of which together shall
constitute one instrument.
1. The provisions of this Agreement are severable, and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability
shall affect only such clause or provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or provision
of this Agreement in any jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed, in multiple
counterparts, as a sealed instrument as of the date first above written.
DYNAGEN, INC.
By:_______________________
Name:_____________________
Title:____________________
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ABLE LABORATORIES, INC.
By:_______________________
Name:_____________________
Title:____________________
SUPERIOR PHARMACEUTICAL COMPANY
By:_______________________
Name:_____________________
Title:____________________
GENERIC DISTRIBUTORS, INC.
By:_______________________
Name:_____________________
Title:____________________
ACKNOWLEDGED AND AGREED:
"BANK"
FLEET NATIONAL BANK
By: ____________________________
Name:___________________________
Title: _________________________
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