EXHIBIT 10.29
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FINANCING AND SECURITY AGREEMENT
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BY AND AMONG
THE CIT GROUP/BUSINESS CREDIT, INC.
(AS LENDER),
SUPERIOR PHARMACEUTICAL COMPANY
(AS BORROWER)
AND
▇▇▇▇▇▇▇▇.▇▇▇, INC.
(AS GUARANTOR)
DATED: FEBRUARY 23, 2001
TABLE OF CONTENTS
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Page
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Section 1. Definitions.......................................................1
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Section 2. Conditions Precedent.............................................15
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Section 3. Revolving Loans..................................................19
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Section 4. Intentionally Omitted............................................22
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Section 5. Intentionally Omitted............................................22
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Section 6. Collateral.......................................................22
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Section 7. Representations, Warranties and Covenants........................25
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Section 8. Interest, Fees and Expenses......................................32
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Section 9. Powers...........................................................38
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Section 10. Events of Default and Remedies..................................38
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Section 11. Termination.....................................................42
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Section 12. Miscellaneous...................................................42
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SCHEDULES
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Schedule 1 Collateral Information
Schedule 2 List of 120-Day Debtors
Schedule 3 Description of Subordinated Debt
Schedule 4 Description of Equipment to be Purchased with Purchase Money
Indebtedness
Schedule 5 Permitted Dividends and Distributions and Permitted Management
and Consulting Fees
Schedule 6 Majority Shareholders
Schedule 7 Permitted Indebtedness
Schedule 8 Insider Transactions
Schedule 9 Equity Investors
Schedule 10 Permitted Encumbrances
Schedule 11 DEA Licenses
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THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, with
offices located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(hereinafter "CIT"), is pleased to confirm the terms and conditions under which
CIT shall make revolving loans and other financial accommodations to
▇▇▇▇▇▇▇▇.▇▇▇, INC., a Delaware corporation with a principal place of business at
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ("Guarantor") and SUPERIOR
PHARMACEUTICAL COMPANY, an Ohio corporation with a principal place of business
at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇. ("Company"; Guarantor and
Company are sometimes referred to herein jointly and severally as the "Debtor").
SECTION 1. DEFINITIONS.
"ACCOUNTS" shall mean all of the Debtor's now existing and future:
(a) accounts (as defined in the UCC), and any and all other receivables (whether
or not specifically listed on schedules furnished to CIT), including, without
limitation, all accounts created by, or arising from, all of the Debtor's sales,
leases, rentals of goods or renditions of services to its customers, including
but not limited to, those accounts arising under any of the Debtor's trade names
or styles, or through any of the Debtor's divisions; (b) any and all
instruments, documents, chattel paper (including electronic chattel paper) (all
as defined in the UCC); (c) unpaid seller's or lessor's rights (including
rescission, replevin, reclamation, repossession and stoppage in transit)
relating to the foregoing or arising therefrom; (d) rights to any goods
represented by any of the foregoing, including rights to returned, reclaimed or
repossessed goods; (e) reserves and credit balances arising in connection with
or pursuant hereto; (f) guarantees, supporting obligations, payment intangibles
and letter of credit rights (all as defined in the UCC); (g) insurance policies
or rights relating to any of the foregoing; (h) general intangibles pertaining
to any and all of the foregoing (including all rights to payment, including
those arising in connection with bank and non-bank credit cards), and including
books and records and any electronic media and software thereto; (i) notes,
deposits or property of account debtors securing the obligations of any such
account debtors to the Debtor, and (j) cash and non-cash proceeds (as defined in
the UCC) of any and all of the foregoing.
"ACQUISITION" shall have the meaning ascribed to such term in
Section 2 (q) of this Financing Agreement.
"ADMINISTRATIVE MANAGEMENT FEE" shall mean the sum of $24,000.00
which shall be paid to CIT in accordance with Section 8, paragraph 8.8 hereof to
offset the expenses and costs (excluding Out-of-Pocket Expenses and auditor
fees) of CIT in connection with administration, record keeping, analyzing and
evaluating the Collateral.
"AFFILIATE" shall mean, as applied to any Person, any other Person
(a) that directly or indirectly, through one or more intermediaries, controls or
is controlled by, or is under common control with, such Person, (b) that
directly or beneficially owns or holds five percent (5%) or more of any class of
the voting stock (or in the case of a Person which is not a corporation, five
percent (5%) or more of the equity interest) of such Person or (c) five percent
(5%) or more of whose voting stock (or in the case of a Person which is not a
corporation, five percent (5%) or
more of the equity interest) is owned directly or beneficially or held by such
Person. Notwithstanding the foregoing, DynaGen, Inc., a Delaware corporation,
shall not be deemed to be an Affiliate of the Debtor.
"ANNIVERSARY DATE" shall mean the date occurring three (3) year(s)
from the Closing Date and the same date in every year thereafter.
"AVAILABILITY" shall mean at any time the amount by which: (a) the
Borrowing Base exceeds (b) the sum of (i) the outstanding aggregate amount of
all Obligations (excluding accrued, unpaid but not overdue interest), including
without limitation, all Obligations (excluding accrued, unpaid but not overdue
interest) with respect to Revolving Loans, and (ii) the Availability Reserve.
"AVAILABILITY RESERVE" shall mean the sum of (a) the Minimum
Availability Reserve, plus (b) (i) one (1) month rental payments or similar
charges for any of the Company's leased premises or other Collateral locations
for which the Company has not delivered to CIT a landlord's waiver in form and
substance reasonably satisfactory to CIT, plus (ii) three (3) months estimated
payments plus any other past due fees or charges owing by the Company to any
applicable warehousemen or third party processor (as determined by CIT in its
reasonable business judgment), provided that any of the foregoing amounts shall
be adjusted from time to time hereafter upon (x) delivery to CIT of any such
acceptable waiver, (y) the opening or closing of a Collateral location and/or
(z) any change in the amount of rental, storage or processor payments or similar
charges; (c) commencing six (6) months prior to the scheduled maturity of the
Subordinated Debt, an amount equal to one-sixth of the outstanding principal,
accrued but unpaid interest and other sums owed in connection with the
Subordinated Debt (the "Sub Debt Reserve Increment") and each month thereafter
for the following five months such reserve shall increase by the Sub Debt
Reserve Increment; (d) any reasonable reserve which CIT may reasonably require
from time to time pursuant to this Financing Agreement; and (e) such other
reasonable reserves as CIT deems necessary in its reasonable judgment as a
result of (i) negative forecasts and/or trends in the Company's business,
industry, prospects, profits, operations or financial condition or (ii) other
issues, circumstances or facts that could otherwise negatively impact the
Company, its business, prospects, profits, operations, industry, financial
condition or assets.
"BORROWING BASE" shall mean the sum of (a) eighty-two percent (82%)
of the Company's aggregate outstanding Eligible Accounts Receivable, provided,
however, that if the then Dilution Percentage is greater than five percent
(5.0%), then the rate of advance herein shall be reduced by the amount such
Dilution Percentage exceeds five percent (5.0%), plus (b) the lesser of the sum
of sixty percent (60%) of the aggregate value of the Company's Eligible
Inventory, in each case, valued at the lower of cost or market value (but not
greater than eighty-one and 41/100 percent (81.41%) of net orderly liquidation
appraised value), on a first in, first out basis, or (ii) the Inventory Loan
Cap. In the event that the Dilution Percentage decreases significantly, then CIT
may, in its sole and absolute discretion, increase the foregoing Eligible
Accounts Receivable advance rate of eighty-two percent (82%) to a percentage
determined by CIT, but in no instance shall such percentage exceed eighty-five
percent (85%). In the event that in any Fiscal Year the Debtor's net income
(exclusive of extraordinary non-recurring income and gains and net of any
dividends or distributions paid to the Guarantor) is less than $750,000.00,
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then the foregoing Eligible Inventory advance rate shall automatically be
reduced from sixty percent (60%) to fifty percent (50%).
"BUSINESS DAY" shall mean any day on which CIT and The Chase
Manhattan Bank are open for business.
"CAPITAL EXPENDITURES" shall mean, for any period, the aggregate
expenditures of the Company during such period on account of, property, plant,
equipment or similar fixed assets that in conformity with GAAP, are required to
be reflected in the balance sheet of the Company.
"CAPITAL LEASE" shall mean any lease of property (whether real,
personal or mixed) which, in conformity with GAAP, is accounted for as a capital
lease or a Capital Expenditure on the balance sheet of the Company.
"CASH EQUIVALENTS" shall mean:
(a) marketable direct obligations issued or guaranteed by
the United States of America or any agency thereof,
maturing no more than one year after the date of
acquisition thereof; and
(b) certificates of deposit or time deposits, maturing no
more than 180 days after the date of creation thereof,
issued by commercial banks incorporated under the laws
of the United States of America, each having a rating
not lower than AA or the equivalent thereof from
Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors
Service, Inc.
"CHASE BANK RATE" shall mean the rate of interest per annum
announced by The Chase Manhattan Bank from time to time as its prime rate in
effect at its principal office in New York City. (The prime rate is not intended
to be the lowest rate of interest charged by The Chase Manhattan Bank to its
borrowers).
"CHASE BANK RATE LOANS" shall mean any loans or advances pursuant to
this Financing Agreement made or maintained at a rate of interest based upon the
Chase Bank Rate.
"CLOSING DATE" shall mean the date that this Financing Agreement has
been duly executed by the parties hereto and delivered to CIT.
"COLLATERAL" shall mean all present and future Accounts, Equipment,
Inventory, Documents of Title, General Intangibles, Real Estate, Pledged Stock
of the Company and the Company's subsidiaries and Other Collateral.
"COLLECTION DAYS" shall mean three (3) Business Days to provide for
the deposit, clearance and collection of checks or other instruments
representing the proceeds of Collateral, the amount of which has been credited
to the Company's Revolving Loan Account, and for which interest may be charged
on the aggregate amount of such deposits, at the rate provided for in Paragraph
8.1 of Section 8 of this Financing Agreement.
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"COMMITMENT LETTER" shall mean the Commitment Letter, dated
September 28, 2000, issued by CIT to, and accepted by, the Company.
"CONSOLIDATED BALANCE SHEET" shall mean a consolidated or compiled,
as applicable, balance sheet for the Debtor and its consolidated Subsidiaries,
eliminating all transactions among the Debtor and its consolidated Subsidiaries
and prepared in accordance with GAAP.
"CONSOLIDATED PROFIT AND LOSS STATEMENT" shall mean a consolidated
or compiled, as applicable, profit and loss statement for the Debtor and its
consolidated Subsidiaries, eliminating all transactions among the Debtor and its
consolidated Subsidiaries and prepared in accordance with GAAP.
"CONSOLIDATING BALANCE SHEET" shall mean a Consolidated Balance
Sheet plus individual balance sheets for the Debtor and its consolidated
Subsidiaries, showing all eliminations of transactions among the Debtor and its
consolidated Subsidiaries, including a balance sheet for each of the Debtor and
the Guarantor exclusively, all prepared in accordance with GAAP.
"CONSOLIDATING PROFIT AND LOSS STATEMENT" shall mean a Consolidated
Profit and Loss Statement plus individual profit and loss statements for the
Debtor and its consolidated Subsidiaries, showing all eliminations of
transactions among the Debtor and its consolidated Subsidiaries, including a
profit and loss statement for each Debtor exclusively, all prepared in
accordance with GAAP.
"CONTROLLED SUBSTANCE" shall mean a drug or any other substance or
precursor thereof, defined as a "controlled substance" pursuant to federal law
or regulation, including, without limitation, controlled substances as defined
pursuant to 21 U.S.C. ss. 802.
"COPYRIGHTS" shall mean all present and hereafter acquired
copyrights, copyright registrations, recordings, applications, designs, styles,
licenses, marks, prints and labels bearing any of the foregoing, goodwill, any
and all general intangibles, intellectual property and rights pertaining
thereto, and all cash and non-cash proceeds thereof.
"CURRENT ASSETS" shall mean those assets of the Company which, in
accordance with GAAP, are classified as current.
"CURRENT LIABILITIES" shall mean those liabilities of the Company
which, in accordance with GAAP, are classified as "current," provided however,
that, notwithstanding GAAP, the Revolving Loans and the current portion of
Permitted Indebtedness shall be considered "current liabilities."
"DEA LICENSES" shall have the meaning ascribed to such term in
Section 7.14 of this Financing Agreement.
"DEBTOR" shall mean the Company and the Guarantor, jointly and
severally.
"DEFAULT" shall mean any event specified in Section 10 hereof,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, event or act, has been satisfied.
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"DEFAULT RATE OF INTEREST" shall mean a rate of interest per annum
on any Obligations hereunder, equal to the sum of (a) two percent (2%) and (b)
the applicable increment over the Chase Bank Rate (as set forth in paragraph 8.1
hereof) plus the Chase Bank Rate or the applicable increment over the LIBOR Rate
(as set forth in paragraph 8.14 hereof) plus the LIBOR Rate, which CIT shall be
entitled to charge the Company on all Obligations due CIT by the Company, as
further set forth in Paragraph 10.2 of Section 10 of this Financing Agreement.
"DEPOSITORY ACCOUNTS" shall mean the collection accounts, which are
subject to CIT's instructions, as specified in Paragraph 3.4 of Section 3 of
this Financing Agreement.
"DILUTION PERCENTAGE" shall mean, as of anytime of calculation, the
then sum of the Company's credits, claims, allowances, discounts, write-offs,
contras, offsets and deductions divided by the then sum of the Company's sales
of Inventory, all calculated on a rolling ninety (90) day basis, as determined
and calculated by CIT from time to time.
"DOCUMENTS OF TITLE" shall mean all present and future documents (as
defined in the UCC), and any and all warehouse receipts, bills of lading,
shipping documents, chattel paper, instruments and similar documents, all
whether negotiable or not and all goods and Inventory relating thereto and all
cash and non-cash proceeds of the foregoing.
"EARLY TERMINATION DATE" shall mean the date on which the Company
terminates this Financing Agreement or the Revolving Line of Credit which date
is prior to an Anniversary Date.
"EARLY TERMINATION FEE" shall: (a) mean the fee CIT is entitled to
charge the Company in the event the Company terminates the Revolving Line of
Credit or this Financing Agreement on a date prior to an Anniversary Date; and
(b) be determined by multiplying the Revolving Line of Credit by (x) three
percent (3%) if the Early Termination Date occurs on or before one (1) year from
the Closing Date, (y) two percent (2%) if the Early Termination Date occurs
after one (1) year from the Closing Date but on or before two (2) years from the
Closing Date; (z) one percent (1%) if the Early Termination Date occurs after
two (2) years from the Closing Date but on or before three (3) years from the
Closing Date; and (zz) one-half of one percent (0.5%) if the Early Termination
Date occurs after three (3) years from the Closing Date but prior to an
Anniversary Date.
"EBITDA" shall mean, for any period, the sum of net income for such
period plus, to the extent deducted in determining net income for such period,
the aggregate amount of Interest Expense and income tax expense for such period,
and all depreciation, amortization, non-cash extraordinary losses and other
non-cash charges for such period, minus, to the extent included in determining
net income for such period, (i) the aggregate amount of extraordinary or
non-recurring income for such period and (ii) any other income that does not
arise in the ordinary course of business, all determined in accordance with GAAP
on a consistent basis.
"ELIGIBLE ACCOUNTS RECEIVABLE" shall mean the gross amount of the
Company's Trade Accounts Receivable that are subject to a valid, exclusive,
first priority and fully perfected security interest in favor of CIT, which
conform to the warranties contained herein and which, at all times, continue to
be acceptable to CIT in the exercise of its reasonable judgment, less,
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without duplication, the sum of (a) any returns, discounts, claims, credits and
allowances of any nature (whether issued, owing, granted, claimed or
outstanding), and (b) reserves for any such Trade Accounts Receivable that arise
from or are subject to or include: (i) sales to the United States of America,
any state or other governmental entity or to any agency, department or division
thereof, except for any such sales as to which the Company has complied with the
Assignment of Claims Act of 1940 or any other applicable statute, rules or
regulation, to CIT's satisfaction in the exercise of its reasonable business
judgment; (ii) foreign sales, other than sales which otherwise comply with all
of the other criteria for eligibility hereunder and are (x) secured by letters
of credit (in form and substance satisfactory to CIT) issued or confirmed by,
and payable at, banks having a place of business in the United States of
America, or (y) to customers residing in Canada provided such Accounts do not
exceed $500,000.00 in the aggregate at any one time; (iii) Accounts that remain
unpaid more than ninety (90) days from invoice date (or, with respect to those
debtors listed on Schedule 2 attached hereto, one hundred twenty (120) days from
invoice date provided that the Eligible Accounts Receivable with respect to such
Schedule 2 debtors that are unpaid more than ninety (90) days from invoice date
shall not exceed an aggregate amount of $350,000.00 or, with respect to debtors
not listed on Schedule 2 attached hereto, one hundred twenty (120) days from
invoice date provided that the Eligible Accounts Receivable with respect to such
non-Schedule 2 debtors that are unpaid more than ninety (90) days from invoice
date shall not exceed an aggregate amount of $100,000.00), but in no event more
than sixty (60) days from due date; (iv) contra accounts; (v) sales to a Company
or to any Subsidiary, or to any company affiliated with the Company in any way
which are not part of an arm's-length transaction; (vi) ▇▇▇▇ and hold (deferred
shipment) or consignment sales; (vii) sales to any customer which is: (A)
insolvent, (B) the debtor in any bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceedings under any federal or state
law, (C) negotiating, or has called a meeting of its creditors for purposes of
negotiating, a compromise of its debts, or (D) financially unacceptable to CIT
or has a credit rating unacceptable to CIT; (viii) all sales to any customer if
fifty percent (50%) or more of the aggregate dollar amount of all outstanding
invoices to such customer are unpaid more than ninety (90) days from invoice
date; (ix) sales to any customer and/or its Affiliates to the extent such sales
(but only such sales) exceed at any one time twenty percent (20%) or more of all
Eligible Accounts Receivable; (x) sales to DynaGen, Inc.; (xi) prebilled
receivables and receivables arising from progress billing; (xii) an amount
representing, historically, returns, discounts, claims, credits, allowances and
applicable terms; (xiii) sales not payable in United States currency; and (xiv)
any other reasons deemed necessary by CIT in its reasonable judgment, including
without limitation those which are customary either in the commercial finance
industry or in the lending practices of CIT.
"ELIGIBLE INVENTORY" shall mean the gross amount of the Company's
Inventory that is subject to a valid, exclusive, first priority and fully
perfected security interest in favor of CIT and which conforms to the warranties
contained herein and which, at all times continues to be acceptable to CIT in
the exercise of its reasonable judgment, less, without duplication, any (a)
work-in-process, (b) supplies (other than raw materials), (c) Inventory not
present in the United States of America, (d) Inventory returned or rejected by
the Company's customers (other than goods that are undamaged and resalable in
the normal course of business) and goods to be returned to the Company's
suppliers, (e) Inventory in transit to third parties (other than the Company's
agents or warehouses), or in the possession of a warehouseman, bailee, third
party processor, or other third party, unless such warehouseman, bailee or third
party has executed a
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notice of security interest agreement (in form and substance satisfactory to
CIT) and CIT shall have a first priority perfected security interest in such
Inventory, and (f) less any reserves required by CIT in its reasonable
discretion, including without limitation for special order goods, discontinued,
slow-moving and obsolete Inventory, market value declines, ▇▇▇▇ and hold
(deferred shipment), consignment sales, shrinkage and any applicable customs,
freight, duties and Taxes.
"EQUIPMENT" shall mean all present and hereafter acquired equipment
(as defined in the UCC) including, without limitation, all machinery, equipment,
furnishings and fixtures, and all additions, substitutions and replacements
thereof, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto and all proceeds
thereof of whatever sort.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and the rules and regulations promulgated
thereunder from time to time.
"EUROCURRENCY RESERVE REQUIREMENTS" for any day, as applied to a
LIBOR Loan, shall mean the aggregate (without duplication) of the maximum rates
of reserve requirements (expressed as a decimal fraction) in effect with respect
to CIT and/or any present or future lender or participant on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves under Regulation D or any other applicable regulations of the Board of
Governors of the Federal Reserve System or other governmental authority having
jurisdiction with respect thereto, as now and from time to time in effect,
dealing with reserve requirements prescribed for Eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of such Board)
maintained by CIT and/or any such lenders or participants (such rate to be
adjusted to the nearest one sixteenth of one percent (1/16 of 1%) or, if there
is not a nearest one sixteenth of one percent (1/16 of 1%), to the next higher
one sixteenth of one percent (1/16 of 1%).
"EVENT(S) OF DEFAULT" shall have the meaning provided for in Section
10 of this Financing Agreement.
"FISCAL QUARTER" shall mean, with respect to the Company, each three
(3) month period ending on March 31, June 30, September 30, and December 31 of
each Fiscal Year.
"FISCAL YEAR" shall mean each twelve (12) month period commencing on
January 1st of each year and ending on the following December 31st.
"FIXED CHARGE COVERAGE RATIO" shall mean, for the relevant period,
the ratio determined by dividing (i) the Debtor's EBITDA for such period, by
(ii) the sum of (a) the Debtor's Interest Expense paid or due during such
period, plus (b) the principal amount of mandatory Indebtedness repaid or
scheduled to be repaid during such period (including the portion of payments
made during such period under Capital Leases that are allocable to the repayment
of principal), plus (c) the Debtor's Capital Expenditures made during such
period which were not financed, plus (d) all mandatory dividends and other
distributions of a similar nature made in cash by Debtor to anyone other than
the Company or the Guarantor during such
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period, plus (e) all of the Debtor's federal, state and local income tax
expenses due and payable during such period.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time and for the period as to
which such accounting principles are to apply, provided that in the event the
Company modifies its accounting principles and procedures as applied as of the
Closing Date, the Company shall provide such statements of reconciliation as
shall be in form and substance acceptable to CIT.
"GENERAL INTANGIBLES" shall mean all present and hereafter acquired
general intangibles (as defined in the UCC), and shall include, without
limitation, all present and future right, title and interest in and to: (a) all
Trademarks, trade names, corporate names, business names, logos and any other
designs or sources of business identities, (b) Patents, together with any
improvements on said Patents, utility models, industrial models, and designs,
(c) Copyrights, (d) trade secrets, (e) licenses, permits and franchises, (f) all
applications with respect to the foregoing, (g) all right, title and interest in
and to any and all extensions and renewals, (h) goodwill with respect to any of
the foregoing, (i) any other forms of similar intellectual property, (j) all
customer lists, distribution agreements, supply agreements, blueprints,
indemnification rights and tax refunds, together with all monies and claims for
monies now or hereafter due and payable in connection with any of the foregoing
or otherwise, and all cash and non-cash proceeds thereof, including, without
limitation, the proceeds or royalties of any licensing agreements between the
Debtor and any licensee of any of the Debtor's General Intangibles.
"GUARANTY" shall mean the Guaranty executed and delivered by the
Guarantor.
"INDEBTEDNESS" shall mean, without duplication, all liabilities,
contingent or otherwise, which are any of the following: (a) obligations in
respect of borrowed money or for the deferred purchase price of property,
services or assets, other than inventory, or (b) lease obligations which, in
accordance with GAAP, have been, or which should be capitalized.
"INSURANCE PROCEEDS" shall mean proceeds or payments from an
insurance carrier with respect to any loss, casualty or damage to Collateral.
"INTEREST EXPENSE" shall mean, for any period, all interest expense
paid (whether subsequently capitalized or not) including, without limitation,
the interest portion of payments under Capital Leases.
"INTEREST PERIOD" shall mean:
(a) with respect to any initial request by the Company for a
LIBOR Loan, a one month, two month or three month period
commencing on the borrowing or conversion date with
respect to a LIBOR Loan and ending one, two or three
months thereafter, as applicable; and
(b) thereafter with respect to any continuation of, or
conversion to, a LIBOR Loan, at the option of the
Company, any one month, two month or three month period
commencing on the last day of the immediately preceding
Interest Period applicable to such LIBOR Loan and ending
one, two or three months thereafter,
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as applicable; provided that, the foregoing provisions
relating to Interest Periods are subject to the
following:
(i) if any Interest Period would otherwise end
on a day which is not a Working Day, that
Interest Period shall be extended to the
next succeeding Working Day, unless the
result of such extension would extend such
payment into another calendar month in which
event such Interest Period shall end on the
immediately preceding Working Day;
(ii) any Interest Period that begins on the last
Working 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 Working Day of a calendar month;
and
(iii) for purposes of determining the availability
of Interest Periods, such Interest Periods
shall be deemed available if (x) Chase
Manhattan Bank quotes an applicable rate or
CIT determines LIBOR, as provided in the
definition of LIBOR, (y) the LIBOR
determined by Chase Manhattan Bank or CIT
will adequately and fairly reflect the cost
of maintaining or funding its loans bearing
interest at LIBOR, for such Interest Period,
and (z) such Interest Period will end on or
before the earlier of Anniversary Date or
the last day of the then current term of
this Financing Agreement. If a requested
Interest Period shall be unavailable in
accordance with the foregoing sentence, the
Company shall continue to pay interest on
the Obligations at the applicable per annum
rate based upon the Chase Bank Rate.
"INVENTORY" shall mean all of the Debtor's present and hereafter
acquired inventory (as defined in the UCC) and including, without limitation,
all merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same in all
stages of production from raw materials through work-in-process to finished
goods and all proceeds thereof of whatever sort.
"INVENTOR LOAN CAP" shall mean the amount of $6,300,000.
"LIBOR" shall mean, at any time of determination, and subject to
availability, for each applicable Interest Period, a variable rate of interest
equal to: (a) at CIT's election (i) the applicable LIBOR quoted to CIT by The
Chase Manhattan Bank (or any successor thereof), or (ii) the rate of interest
determined by CIT at which deposits in U.S. dollars are offered for the relevant
Interest Period based on information presented on Telerate Systems at Page 3750
as of 11:00 A.M. (London time) on the day which is two (2) Business Days prior
to the first day of such Interest Period, provided that, if at least two such
offered rates appear on the Telerate System at Page 3750 in respect of such
Interest Period, the arithmetic mean of all such rates (as determined by CIT)
will be the rate used; divided by (b) a number equal to 1.0 minus the aggregate
(but without duplication) of the rates (expressed as a decimal fraction) of
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Eurocurrency Reserve Requirements in effect on the day which is two (2) Business
Days prior to the beginning of such Interest Period.
"LIBOR LENDING OFFICE" with respect to CIT, shall mean the office of
The Chase Manhattan Bank, or any successor thereof, maintained at ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, or such other address as CIT may provide to the
Company in writing.
"LIBOR LOAN" shall mean any loans made pursuant to this Financing
Agreement which are made or maintained at a rate of interest based upon LIBOR,
provided that (i) no Default or Event of Default has occurred hereunder, which
has not been waived in writing by CIT, and (ii) no LIBOR Loan shall be made with
an Interest Period that ends subsequent to an Anniversary Date or any applicable
Early Termination Date.
"LINE OF CREDIT" shall mean the aggregate commitment of CIT to make
Revolving Loans pursuant to Section 3 of this Financing Agreement, in the
maximum aggregate amount equal to $12,500,000.00.
"LOAN DOCUMENTS" shall mean this Financing Agreement, the Revolving
Loan Promissory Note, the other closing documents and any other ancillary loan
and security agreements executed from time to time in connection with this
Financing Agreement, all as may be renewed, amended, extended, increased or
supplemented from time to time.
"LOAN FACILITY FEE" shall mean the fee payable to CIT in accordance
with, and pursuant to, the provisions of Paragraph 8.6 of Section 8 of this
Financing Agreement.
"MINIMUM AVAILABILITY RESERVE" shall mean the sum of $1,000,000.00,
provided however, (i) if subsequent to the Closing Date the Company obtains a
cash equity investment in an amount not less than $2,500,000.00 and the Company
does not directly or indirectly apply all or any portion of such equity
investment to the full or partial payment or prepayment of the Subordinated Debt
or to the indebtedness evidenced by the Promissory Notes described in Schedule 7
attached hereto, and if no Event of Default exists, then the Minimum
Availability Reserve shall be reduced by $500,000.00 and/or (ii) upon CIT's
receipt and satisfactory review of the audited unqualified Consolidated Profit
and Loss Statements and Consolidating Profit and Loss Statements of the Debtor
for the twelve month fiscal period ending December 31, 2001, and provided that
such Profit and Loss Statements disclose a minimum net income (net of
extraordinary and non-recurring income) for the period then ending of at least
$2,236,500.00 and further provided that no Event of Default exists, the Minimum
Availability Reserve shall be reduced by $500,000.00. If the Company satisfies
the Minimum Availability Reserve reduction requirements set forth in clauses (i)
and (ii), then the Minimum Availability Reserve shall be zero.
"MINIMUM BORROWING AMOUNT" shall mean Three Million and 00/100
($3,000,000.00) Dollars.
"OBLIGATIONS" shall mean all loans, advances and extensions of
credit made or to be made by CIT to the Company or to others for the Company's
account (including, without limitation, all Revolving Loans); any and all
indebtedness and obligations which may at any time be owing by the Company to
CIT howsoever arising, whether now in existence or incurred by
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the Company from time to time hereafter, whether principal, interest, fees,
costs, expenses or otherwise; whether secured by pledge, lien upon or security
interest in any of the Company's Collateral, assets or property or the assets or
property of any other person, firm, entity or corporation; whether such
indebtedness is absolute or contingent, joint or several, matured or unmatured,
direct or indirect and whether the Company is liable to CIT for such
indebtedness as principal, surety, endorser, guarantor or otherwise. Obligations
shall also include indebtedness owing to CIT by the Company under any Loan
Document or under any other agreement or arrangement now or hereafter entered
into between the Company and CIT; indebtedness or obligations incurred by, or
imposed on, CIT as a result of environmental claims arising out of the Company's
operations, premises or waste disposal practices or sites in accordance with
paragraph 7.7 hereof, the Company's liability to CIT as maker or endorser of any
promissory note or other instrument for the payment of money; the Company's
liability to CIT under any instrument of guaranty or indemnity, or arising under
any guaranty, endorsement or undertaking which CIT may make or issue to others
for the Company's account, CIT's acceptance of drafts or CIT's endorsement of
notes or other instruments for the Company's account and benefit; and any and
all indebtedness, liabilities or obligations of every kind, nature and
description owing by the Company to any affiliate of CIT.
"OPERATING LEASES" shall mean all leases of property (whether real,
personal or mixed) other than Capital Leases.
"OTHER COLLATERAL" shall mean all now owned and hereafter acquired
lockbox, blocked account and any other deposit accounts maintained with any bank
or financial institutions into which the proceeds of Collateral are or may be
deposited; all cash and other monies and property in the possession or control
of CIT; all books, records, ledger cards, disks and related data processing
software at any time evidencing or containing information relating to any of the
Collateral described herein or otherwise necessary or helpful in the collection
thereof or realization thereon; and all cash and non-cash proceeds of the
foregoing.
"OUT-OF-POCKET EXPENSES" shall mean all of CIT's present and future
expenses incurred relative to this Financing Agreement or any other Loan
Documents, whether incurred heretofore or hereafter, which expenses shall
include, without being limited to: a field exam fee in an amount equal to
$750.00 per person per day (not to exceed the sum of $21,000.00 per year plus
out-of-pocket expenses, except during the continuance of an Event of Default, in
which event there shall be no maximum field exam fee), the cost of record
searches, all costs and expenses incurred by CIT in opening bank accounts,
depositing checks, receiving and transferring funds, and wire transfer charges,
any charges imposed on CIT due to returned items and "insufficient funds" of
deposited checks and CIT's standard fees relating thereto, travel, lodging and
similar expenses of CIT's personnel in connection with inspecting and monitoring
the Collateral from time to time hereunder, any applicable counsel fees and
disbursements, fees and taxes relative to the filing of financing statements and
all expenses, costs and fees set forth in Paragraph 10.3 of Section 10 of this
Financing Agreement.
"OVERADVANCE RATE" shall mean a rate equal to one-half of one
percent (1/2%) per annum in excess of the applicable contract rate of interest
determined in accordance with Section 8, Paragraph 8.1 (a) of this Financing
Agreement.
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"OVERADVANCES" shall mean the amount by which (a) the sum of all
outstanding Revolving Loans and advances made hereunder exceed (b) the Borrowing
Base.
"PATENTS" shall mean all of the Debtor's present and hereafter
acquired patents, patent applications, registrations, any reissues or renewals
thereof, licenses, any inventions and improvements claimed thereunder, and all
general intangible, intellectual property and patent rights with respect thereto
of the Debtor, and all income, royalties, cash and non-cash proceeds thereof.
"PERMITTED ENCUMBRANCES" shall mean: (a) liens existing on the date
hereof on specific items of Equipment and other liens expressly permitted, or
consented to in writing by CIT; (b) Purchase Money Liens; (c) liens of local or
state authorities for franchise or other like Taxes not overdue; (d) statutory
liens of landlords and liens of carriers, warehousemen, bailees, mechanics,
materialmen and other like liens imposed by law, created in the ordinary course
of business and for amounts not yet due (or which are being contested in good
faith, by appropriate proceedings or other appropriate actions which are
sufficient to prevent imminent foreclosure of such liens and with respect to
which adequate reserves or other appropriate provisions are being maintained by
the Debtor in accordance with GAAP); (e) deposits made (and the liens thereon)
in the ordinary course of business of the Debtor (including, without limitation,
security deposits for leases, indemnity bonds, 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,
contracts (other than for the repayment or guarantee of borrowed money or
purchase money obligations), statutory obligations and other similar obligations
arising as a result of progress payments under government contracts; (f)
easements (including, without limitation, reciprocal easement agreements and
utility agreements), encroachments, minor defects or irregularities in title,
variation and other restrictions, charges or encumbrances (whether or not
recorded) affecting the Real Estate, if applicable, and which in the aggregate
(A) do not materially interfere with the occupation, use or enjoyment by the
Debtor of its business or property so encumbered and (B) in the reasonable
business judgment of CIT do not materially and adversely affect the value of
such Real Estate; and (g) liens granted CIT by the Debtor; (h) liens of judgment
creditors provided such liens do not exceed, in the aggregate, at any time,
$100,000.00 (other than liens bonded or insured to the reasonable satisfaction
of CIT); (i) tax liens which are not yet due and payable or which are being
diligently contested in good faith by the Debtor by appropriate proceedings, and
which liens are not (x) filed on any public records, (y) other than with respect
to Real Estate, senior to the liens of CIT (other than statutory liens that
automatically obtain priority by operation of law) or (z) for Taxes due the
United States of America or any state thereof having similar priority statutes,
as further set forth in paragraph 7.6 hereof, (j) liens permitted pursuant to
the Subordination Agreement and (k) liens described in Schedule 10 attached
hereto.
"PERMITTED INDEBTEDNESS" shall mean: (a) current Indebtedness
maturing in less than one year and incurred in the ordinary course of business
for raw materials, supplies, equipment, services, Taxes or labor; (b) the
Indebtedness secured by Purchase Money Liens; (c) Subordinated Debt; (d)
Indebtedness arising under the Letters of Credit and this Financing Agreement;
(e) deferred Taxes and other expenses incurred in the ordinary course of
business; (f) the indebtedness described in Schedule 7, attached hereto and (g)
other Indebtedness existing on
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the date of execution of this Financing Agreement and listed in the most recent
financial statement delivered to CIT or otherwise disclosed to CIT in writing
prior to the Closing Date.
"PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, entity, party, or
government (whether national, federal, state, provincial, county, city,
municipal or otherwise, including without limitation any instrumentality,
division, agency, body or department thereof).
"PRINCIPALS" shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇.
"PURCHASE MONEY LIENS" shall mean liens on any item of Equipment
acquired after the date of this Financing Agreement, as more particularly
described on Schedule 4 attached hereto, provided that (a) each such lien shall
attach only to the property to be acquired, (b) a description of the Equipment
so acquired is furnished to CIT, and (c) the debt incurred in connection with
such acquisitions shall not exceed $500,000.00 during the 2001 Fiscal Year,
$200,000.00 during the 2002 Fiscal Year or $200,000.00 during the 2003 Fiscal
Year.
"REAL ESTATE" shall mean the Debtor's fee and/or leasehold interests
in the real property, including any such real property which has been, or will
be, encumbered, mortgaged, pledged or assigned to CIT or its designee.
"REVOLVING LINE OF CREDIT" shall mean the aggregate commitment of
CIT to make loans and advances pursuant to Section 3 of this Financing
Agreement, in the maximum aggregate amount equal to the sum of $12,500,000.00,
as the same may from time to time be reduced by mutual written agreement of the
Company and CIT.
"REVOLVING LOAN ACCOUNT" shall mean the account on CIT's books, in
the Company's name, in which the Company will be charged with all Obligations
under this Financing Agreement.
"REVOLVING LOAN PROMISSORY NOTE" shall mean the Revolving Loan
Promissory Note dated as of the date hereof, made by the Company and payable to
the order of CIT, in the original principal amount of $12,500,000.00, as such
Note may from time to time be amended, restated, increased, extended or
otherwise modified.
"REVOLVING LOANS" shall mean the loans and advances made, from time
to time, to or for the account of the Company by CIT pursuant to Section 3 of
this Financing Agreement.
"SUBORDINATED DEBT" shall mean the debt due a Subordinating Creditor
(and the note(s) evidencing such) which is more particularly described in
Schedule 3 attached hereto and which has been subordinated, by a Subordination
Agreement, to the prior payment and satisfaction of the Obligations of the
Company to CIT.
"SUBORDINATING CREDITOR" shall mean, collectively, Finova Mezzanine
Capital, Inc. f/k/a Sirrom Capital Corp., Argosy Investment Partners, L.P. f/k/a
Odyssey Investment Partners, L.P. and any other party hereafter executing a
Subordination Agreement.
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"SUBORDINATION AGREEMENT" shall mean the agreement (in form and
substance satisfactory to CIT) among the Company, a Subordinating Creditor and
CIT pursuant to which Subordinated Debt is subordinated to the prior payment and
satisfaction of the Company's Obligations to CIT.
"SUBSIDIARY" shall mean, at any time, any corporation, limited
liability company, association, trust or other business entity of which more
than fifty percent (50%) of the issued and outstanding capital stock having
ordinary voting power to elect a majority of the board of directors or other
governing body of such entity (irrespective of whether at the time stock or
other equity interests of any other class or classes of such entity shall have
or might have voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, owned by the Debtor, or any partnership or
joint venture of which more than fifty percent (50%) of the outstanding equity
interests are at the time, directly or indirectly, owned by the Debtor.
"TANGIBLE NET WORTH" shall mean, at any date of determination, the
difference between Total Assets minus (without limitation and without
duplication of deductions from Total Assets or Total Liabilities) the sum of (A)
Total Liabilities of the Debtor and its consolidated Subsidiaries plus (B) any
reserves established by the Debtor and its consolidated Subsidiaries for
anticipated losses or expenses plus (C) the amount if any, of all intangible
assets including any leasehold rights, the amount of any investment in any
affiliate or other entity including a consolidated Subsidiary, goodwill
(including any amounts, however designated on the balance sheet, representing
the cost of acquisition of business and investment in excess of underlying
tangible assets), trademarks, trademark rights, trade name rights, copyrights,
patents, patent rights, licenses, unamortized debt discounts, marketing
expenses, deferred financing costs, customer and/or mailing lists plus (D) all
amounts due from employees, officers, directors, Affiliates and Subsidiaries,
all of which shall be determined in accordance with GAAP, on a consistent basis
with the latest audited financial statements of the Debtor.
"TAXES" shall mean all federal, state, municipal and other
governmental taxes, levies, charges, claims and assessments which are or may be
due by the Debtor with respect to its business, operations, Collateral or
otherwise.
"TOTAL ASSETS" shall mean consolidated total assets determined in
accordance with GAAP, on a basis consistent with the latest audited financial
statements of the Debtor and its Subsidiaries.
"TOTAL LIABILITIES" shall mean total liabilities determined in
accordance with GAAP, on a basis consistent with the latest audited financial
statements of the Debtor.
"TRADE ACCOUNTS RECEIVABLE" shall mean that portion of the Company's
Accounts which arises from the sale of inventory or the rendition of services in
the ordinary course of the Company's business.
"TRADEMARKS" shall mean all present and hereafter acquired
trademarks, trademark registrations, recordings, applications, trade names,
trade styles, service marks, prints and labels (on which any of the foregoing
may appear), licenses, reissues, renewals, and any other
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intellectual property and trademark rights pertaining to any of the foregoing,
together with the goodwill associated therewith, and all cash and non-cash
proceeds thereof.
"UCC" shall mean the Uniform Commercial Code as the same may be
amended and in effect from time to time in the State of New York.
"WORKING CAPITAL" shall mean Current Assets in excess of Current
Liabilities.
"WORKING DAY" shall mean any Business Day on which dealings in
foreign currencies and exchanges between banks may be transacted.
All other terms that are used but not otherwise defined herein
shall, if the context so indicates, have the meanings, if any, ascribed to such
terms in the UCC.
SECTION 2. CONDITIONS PRECEDENT.
The obligation of CIT to make the initial loans hereunder is subject
to the satisfaction of, extension of or waiver of in writing, on or prior to,
the Closing Date, the following conditions precedent:
(a) Lien Searches. CIT shall have received tax, judgment and Uniform
Commercial Code searches satisfactory to CIT for all locations presently
occupied or used by the Company.
(b) Casualty Insurance. The Company shall have delivered to CIT
evidence satisfactory to CIT that casualty insurance policies listing CIT as
additional insured, loss payee or mortgagee, as the case may be, are in full
force and effect, all as set forth in Paragraph 7.5 of Section 7 of this
Financing Agreement.
(c) UCC Filings. Any financing statements required to be filed in
order to create, in favor of CIT, a first perfected security interest in the
Collateral, subject only to the Permitted Encumbrances, shall have been properly
filed in each office in each jurisdiction required in order to create in favor
of CIT a perfected lien on the Collateral. CIT shall have received
acknowledgment copies of all such filings (or, in lieu thereof, CIT shall have
received other evidence satisfactory to CIT that all such filings have been
made) and CIT shall have received evidence that all necessary filing fees and
all taxes or other expenses related to such filings have been paid in full.
(d) Board Resolution. CIT shall have received a copy of the
resolutions of the Board of Directors of the Debtor authorizing the execution,
delivery and performance of (i) this Financing Agreement and (ii) any related
agreements, in each case certified by the Secretary or Assistant Secretary of
the Debtor as of the date hereof, together with a certificate of the Secretary
or Assistant Secretary of the Debtor as to the incumbency and signature of the
officers of the Debtor executing such Loan Documents and any certificate or
other documents to be delivered by them pursuant hereto, together with evidence
of the incumbency of such Secretary or Assistant Secretary.
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(e) Corporate Organization. CIT shall have received (i) a copy of
the Certificate of Incorporation of the Debtor certified by the Secretary of
State of the state of its incorporation, and (ii) a copy of the By-Laws of the
Debtor certified by the Secretary or Assistant Secretary thereof, all as amended
through the date hereof.
(f) Officer's Certificate. CIT shall have received an executed
Officer's Certificate of the Debtor, satisfactory in form and substance to CIT,
certifying that (i) the representations and warranties contained herein are true
and correct in all material respects on and as of the Closing Date; (ii) the
Debtor is in compliance with all of the terms and provisions set forth herein;
and (iii) no Default or Event of Default has occurred.
(g) Opinions. Counsel for the Debtor shall have delivered to CIT
opinions satisfactory to CIT opining, inter alia, that, subject to the (i)
filing, priority and remedies provisions of the Uniform Commercial Code, (ii)
the provisions of the Bankruptcy Code, insolvency statutes or other like laws,
(iii) the equity powers of a court of law and (iv) such other matters as may be
agreed upon with CIT: (x) this Financing Agreement, the Guaranty, Stock Pledges
and all other Loan Documents of the Company and the Guarantor are (A) valid,
binding and enforceable according to their terms, (B) are duly authorized,
executed and delivered, and (C) do not violate any terms, provisions,
representations or covenants in the charter or by-laws of the Company or the
Guarantor or, to the best knowledge of such counsel, of any loan agreement,
mortgage, deed of trust, note, security or pledge agreement, indenture or other
contract to which the Company or the Guarantor are signatories or by which the
Company or the Guarantor or their assets are bound; and (y) the provisions of
all federal and state securities laws, Bulk Sales Law and the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Anti-Trust Improvements Act have been fully complied with or that compliance is
not legally required and the reasons supporting such non-compliance. In
addition, counsel for the Company shall have been delivered to CIT a solvency
opinion and a fairness opinion, each in form and substance satisfactory to CIT.
In addition, counsel to the Subordinating Creditor(s) shall have delivered an
opinion satisfactory to CIT that the Subordination Agreement(s) have been duly
authorized, executed and delivered and constitute valid and binding agreements
enforceable against such Subordinating Creditor(s) in accordance with the terms
thereof.
(h) Absence of Default. No Default or Event of Default shall have
occurred and no material adverse change shall have occurred in the financial
condition, business, prospects, profits, operations or assets of the Company or
the Company's Subsidiaries.
(i) Legal Restraints/Litigation. As of the Closing Date, there shall
be no: (x) litigation, investigation or proceeding (judicial or administrative)
pending or threatened against the Debtor or its assets, by any agency, division
or department of any county, city, state or federal government arising out of
the Acquisition or this Financing Agreement; (y) injunction, writ or restraining
order restraining or prohibiting the Acquisition or the consummation of the
financing arrangements contemplated under this Financing Agreement; or (z) suit,
action, investigation or proceeding (judicial or administrative) pending against
the Debtor or its assets, which, in the opinion of CIT, if adversely determined,
could have a material adverse effect on the business, operation, assets,
financial condition or Collateral of the Debtor.
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(j) Subordination Agreement. The Subordinating Creditor shall have
executed and delivered to CIT a Subordination Agreement, in form and substance
satisfactory to CIT, subordinating the debt due the Subordinating Creditor by
the Debtor to the prior payment and satisfaction of the Obligations of the
Debtor.
(k) Pledge Agreement. Guarantor and/or the Company, as the case may
be, shall (i) execute and deliver to CIT a pledge and security agreement
pledging to CIT as additional collateral for the Obligations of the Company not
less than 100% of the issued and outstanding stock of the Company and not less
than 100% of the stock of all subsidiaries of the Company and, (ii) deliver to
CIT the stock certificates evidencing such stock together with duly executed
stock powers (undated and in-blank) with respect thereto, all in form and
substance satisfactory to CIT.
(l) Unlimited Guaranty. The Guarantor shall execute and deliver to
CIT the Guaranty of the Obligations.
(m) Additional Documents. The Company and the Guarantor shall have
executed and delivered to CIT all Loan Documents necessary to consummate the
lending arrangement contemplated between the Company and CIT.
(n) Disbursement Authorization. The Company shall have delivered to
CIT all information necessary for CIT to issue wire transfer instructions on
behalf of the Company for the initial and subsequent loans and/or advances to be
made under this Financing Agreement including, but not limited to, disbursement
authorizations in form acceptable to CIT.
(o) Examination & Verification. CIT shall have completed, to its
satisfaction, an examination and verification of the Accounts, Inventory,
financial statements, books and records of the Company which examination shall
indicate that, after giving effect to all Revolving Loans, advances and
extensions of credit to be made at closing, the Company shall have an opening
additional Availability of at least $1,000,000.00, as evidenced by a Borrowing
Base certificate delivered by the Company to CIT as of the Closing Date, all as
more fully required by the CIT Commitment Letter. It is understood that such
requirement contemplates that all debts and obligations are current, and that
all payables are being handled in the normal course of the Company's business
and consistent with its past practice.
(p) Depository Accounts. The Company shall have established a system
of lockbox and bank accounts with respect to the collection of Accounts and the
deposit of proceeds of Collateral as shall be acceptable to CIT in all respects.
Such accounts shall be subject to three party agreements (between the Company,
CIT and the depository bank), which shall be in form and substance satisfactory
to CIT.
(q) Acquisition. The Guarantor shall have (i) consummated its
acquisition of all of the issued and outstanding stock of Superior (herein the
"Acquisition"), (ii) delivered to CIT a fully executed copy of the Agreement and
Plan of Merger with respect to the Acquisition, which shall be in form and
substance satisfactory to CIT, (iii) delivered to CIT copies of all supporting
documentation provided to the Company in connection with the Acquisition,
including, without limitation, all materials provided to the Company pursuant to
Section 3.26 (Certain DEA
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Matters) of the Agreement and Plan of Merger and (iv) delivered to CIT a
Collateral Assignment of the Company's rights (including the rights acquired by
▇▇▇▇▇▇▇▇.▇▇▇ Acquisition Corp.) pursuant to the Agreement and Plan of Merger and
the written consent of DynaGen, Inc. to such collateral assignment, all in form
and substance satisfactory to CIT.
(r) Liquidation Assistance. CIT shall have received fully executed
Liquidation Assistance Agreements, in form and substance satisfactory to CIT,
from the following individuals: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇.
(s) Financial Statements. CIT shall have received, reviewed and been
satisfied with (i) the audited Consolidating Balance Sheets of DynaGen, Inc. for
the fiscal year ending December 31, 1999, (ii) the pro forma Consolidating
Balance Sheets of DynaGen, Inc. prior to and immediately after the Acquisition.
(t) Equity Investment. The Debtor shall provide CIT with
documentation evidencing a cash equity contribution to the capital of the Debtor
in the amount of $4,500,000.00 by the entities listed in Schedule 9, attached
hereto.
(u) Tangible Net Worth. The Company shall provide CIT with
documentation confirming that the Company's Tangible Net Worth immediately
following the Acquisition and the Equity Investment is at least $3,500,000.00.
(v) Appraisals. CIT shall have received and reviewed satisfactory
appraisal on the Company's Inventory, which appraisal: (i) shall be by an
appraiser acceptable to CIT, and (ii) shall indicate orderly liquidation value
of Inventory satisfactory to CIT.
(w) Schedules. The Debtor or its counsel shall provide CIT with
schedules of, (a) any of the Debtor's and its subsidiaries (i) Trademarks, (ii)
Patents, and (iii) Copyrights, as applicable and all in such detail as to
provide appropriate recording information with respect thereto, (b) any trade
names, (c) monthly rental payments for any leased premises or any other premises
where any Collateral may be stored or processed, and (d) Permitted Liens, all of
the foregoing in form and substance satisfactory to CIT.
Upon the execution of this Financing Agreement and the initial
disbursement of loans hereunder, all of the above Conditions Precedent shall
have been deemed satisfied except as otherwise set forth hereinabove or as the
Company and CIT shall otherwise agree in writing.
2.2 Conditions to Each Extension of Credit. Except to the extent
expressly set forth in this Financing Agreement, the agreement of CIT to make
any extension of credit requested to be made by it to the Company on any date
(including without limitation, the initial extension of credit) is subject to
the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Company in or pursuant to this Financing Agreement shall
be true and correct in all material respects on and as of such date as if made
on and as of such date.
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(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the extension of credit
requested to be made on such date.
(c) Borrowing Base. Except as may be otherwise agreed to from time
to time by CIT and the Company in writing, after giving effect to the extension
of credit requested to be made by the Company on such date, the aggregate
outstanding balance of the Revolving Loans owing by the Company will not exceed
the Borrowing Base and the aggregate outstanding balance of the Revolving Loans
shall not exceed the Revolving Line of Credit.
Each borrowing by the Company hereunder shall constitute a
representation and warranty by the Company as of the date of such loan or
advance that each of the representations, warranties and covenants contained in
the Financing Agreement have been satisfied and are true and correct, except as
the Company and CIT shall otherwise agree herein or in a separate writing.
SECTION 3. REVOLVING LOANS.
3.1 CIT agrees, subject to the terms and conditions of this
Financing Agreement, from time to time from the Closing Date through the
Anniversary Date (but subject to CIT's right to make "Overadvances"), to make
loans and advances to the Company on a revolving basis (i.e. subject to the
limitations set forth herein, the Company may borrow, repay and reborrow
Revolving Loans). Such requests for loans and advances shall be in amounts not
to exceed the lesser of (a) the Availability or (b) the Revolving Line of
Credit. All requests for loans and advances must be received by an officer of
CIT no later than (i) 1:00 p.m., New York time, of the Business Day on which any
such Chase Bank Rate Loans and advances are required or (ii) three (3) Business
Days prior to any requested LIBOR Loan. Should CIT for any reason honor requests
for Overadvances, any such Overadvances shall be made in CIT's sole discretion
and subject to any additional terms CIT deems necessary.
3.2 In furtherance of the continuing assignment and security
interest in the Company's Accounts and Inventory, the Company will, upon the
creation of Accounts and purchase or acquisition of Inventory, execute and
deliver to CIT in such form and manner as CIT may reasonably require, solely for
CIT's convenience in maintaining records of Collateral, such confirmatory
schedules of Accounts and Inventory as CIT may reasonably request, including,
without limitation, daily schedules of Accounts (including a computation of the
Borrowing Base), weekly schedules of Inventory and quarterly inventory appraisal
updates, all in form and substance satisfactory to CIT, and such other
appropriate reports designating, identifying and describing the Accounts and
Inventory as CIT may reasonably request, and provided further that CIT may
request any such information more frequently, from time to time, upon its
reasonable prior request. In addition, the Company shall provide CIT with copies
of agreements with, or purchase orders from, the Company's customers, and copies
of invoices to customers, proof of shipment or delivery, access to its
computers, electronic media and software programs associated therewith
(including any electronic records, contracts and signatures) and such other
documentation and information relating to said Accounts and other Collateral as
CIT may reasonably require. Failure to provide CIT with any of the foregoing
shall in no way affect, diminish, modify or otherwise limit the security
interests granted herein. The Company hereby authorizes CIT to regard the
Company's printed name or rubber stamp signature on assignment
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schedules or invoices as the equivalent of a manual signature by one of the
Company's authorized officers or agents.
3.3 The Company hereby represents and warrants that: each Trade
Account Receivable is based on an actual and bona fide sale and delivery of
Inventory or rendition of services to customers, made by the Company in the
ordinary course of its business; the Inventory being sold, and the Trade
Accounts Receivable created, are the exclusive property of the Company and are
not and shall not be subject to any lien, consignment arrangement, encumbrance,
security interest or financing statement whatsoever, other than the Permitted
Encumbrances; the invoices evidencing such Trade Accounts Receivable are in the
name of the Company; and the customers of the Company have accepted the
Inventory or services, owe and are obligated to pay the full amounts stated in
the invoices according to their terms, without dispute, offset, defense,
counterclaim or contra, except for disputes and other matters arising in the
ordinary course of business with respect to which the Company has complied with
the notification requirements of Paragraph 3.5 of this Section 3. The Company
confirms to CIT that any and all Taxes or fees relating to its business, its
sales, the Accounts or Inventory relating thereto, are its sole responsibility
and that same will be paid by the Company when due, subject to Paragraph 7.6 of
Section 6 of this Financing Agreement, and that none of said Taxes or fees
represent a lien on or claim against the Accounts (other than statutory liens
that arise automatically by operation of law). The Company hereby further
represents and warrants that it shall not acquire any Inventory on a consignment
basis, nor co-mingle its Inventory with any of its customers or any other
person, including pursuant to any ▇▇▇▇ and hold sale or otherwise, and that its
Inventory is marketable to its customers in the ordinary course of business of
the Company, except as it may otherwise report in writing to CIT pursuant to
Paragraph 3.5 hereof from time to time. The Company also warrants and represents
that it is a duly and validly existing corporation and is qualified in all
states where the failure to so qualify would have an adverse effect on the
business of the Company or the ability of the Company to enforce collection of
Accounts due from customers residing in that state. The Company agrees to
maintain such books and records regarding Accounts and Inventory as CIT may
reasonably require and agrees that the books and records of the Company will
reflect CIT's interest in the Accounts and Inventory. All of the books and
records of the Company will be available to CIT upon prior written or verbal
notice at normal business hours, including any records handled or maintained for
the Company by any other company or entity.
3.4 (a) Until CIT has advised the Company to the contrary after the
occurrence and during the continuance of an Event of Default, the Company, at
its expense, will enforce, collect and receive all amounts owing on the Accounts
in the ordinary course of its business and any proceeds it so receives shall be
subject to the terms hereof, and held on behalf of and in trust for CIT. Such
privilege shall terminate at the election of CIT upon the occurrence and during
the continuance of an Event of Default. Any checks, cash, credit card sales and
receipts, notes or other instruments or property received by the Company with
respect to any Collateral, including Accounts, shall be held by the Company in
trust for CIT, separate from the Company's own property and funds, and promptly
turned over to CIT with proper assignments or endorsements by deposit to the
Depository Accounts. The Company shall: (i) indicate on all of its invoices that
funds should be delivered to and deposited in a Depository Account; (ii) direct
all of its account debtors to deposit any and all proceeds of Collateral into
the Depository Accounts; (iii) irrevocably authorize and direct any banks which
maintain the Company's initial receipt of cash,
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checks and other items to promptly wire transfer all available funds to a
Depository Account; and (iv) advise all such banks of CIT's security interest in
such funds. The Company shall provide CIT with prior written notice of any and
all deposit accounts opened or to be opened subsequent to the Closing Date.
Subject to Collection Days, all amounts received by CIT in payment of Accounts
will be credited to the Revolving Loan Account when CIT is advised by its bank
of its receipt of "collected funds" at CIT's bank account in New York, New York
on the Business Day of such advise if advised no later than 1:00 p.m. EST or on
the next succeeding Business Day if so advised after 1:00 PM EST. No checks,
drafts or other instrument received by CIT shall constitute final payment to CIT
unless and until such instruments have actually been collected.
(b) The Company shall establish and maintain, in its name and at its
expense, deposit accounts with such banks as are acceptable to CIT (the "Blocked
Accounts") into which the Company shall promptly cause to be deposited: (i) all
proceeds of Collateral received by the Company, including all amounts payable to
the Company from credit card issuers and credit card processors, and (ii) all
amounts on deposit in deposit accounts used by the Company at each of its
locations, all as further provided in Paragraph 3.4(a) above. The banks at which
the Blocked Accounts are established shall enter into an agreement, in form and
substance satisfactory to CIT (the "Blocked Account Agreements"), providing that
all cash, checks and items received or deposited in the Blocked Accounts are the
property of CIT, that the depository bank has no lien upon, or right of set off
against, the Blocked Accounts and any cash, checks, items, wires or other funds
from time to time on deposit therein, except as otherwise provided in the
Blocked Account Agreements, and that automatically, on a daily basis the
depository bank will wire, or otherwise transfer, in immediately available
funds, all funds received or deposited into the Blocked Accounts to such bank
account as CIT may from time to time designate for such purpose. CIT shall
instruct the depository banks at which the Blocked Accounts are maintained to
transfer the funds on deposit in the Blocked Accounts to such operating bank
accounts of the Company as the Company may specify in writing to CIT until such
time as CIT shall notify the depository bank otherwise. CIT may instruct the
depository banks at which the Blocked Accounts are maintained to transfer all
funds received or deposited into the Blocked Accounts to the Depository Account
at any time. The Company hereby confirms and agrees that all amounts deposited
in such Blocked Accounts and any other funds received and collected by CIT,
whether as proceeds of Inventory or other Collateral or otherwise, shall be the
property of the Company, subject to the lien of CIT.
3.5 The Company agrees to notify CIT: (a) of any matters affecting
the value, enforceability or collectibility of any Account and of all customer
disputes, offsets, defenses, counterclaims, returns, rejections and all
reclaimed or repossessed merchandise or goods, and of any adverse effect in the
value of its Inventory, in its daily, weekly and monthly collateral reports (as
applicable) provided to CIT hereunder, in such detail and format as CIT may
reasonably require from time to time; and (b) promptly of any such matters which
adversely affect the value of any Account or Inventory in an amount of $25,000
or more. The Company agrees to issue credit memoranda promptly (with duplicates
to be immediately forwarded to CIT) upon accepting returns or granting
allowances. Upon the occurrence of an Event of Default (which is continuing and
which is not waived in writing by CIT) and on notice from CIT, the Company
agrees that all returned, reclaimed or repossessed merchandise or goods shall be
set aside by the
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Company, marked with CIT's name (as secured party) and held by the Company for
CIT's account.
3.6 CIT shall maintain a Revolving Loan Account on its books in
which the Company will be charged with all loans and advances made by CIT to it
or for its account, and with any other Obligations, including any and all costs,
expenses and reasonable attorney's fees which CIT may incur in connection with
the exercise by or for CIT of any of the rights or powers herein conferred upon
CIT, in the prosecution or defense of any action or proceeding to enforce or
protect any rights of CIT in connection with this Financing Agreement, the other
Loan Documents or the Collateral assigned hereunder, or any Obligations owing by
the Company. The Company will be credited with all amounts received by CIT from
the Company or from others for the Company's account, including, as above set
forth, all amounts received by CIT in payment of Accounts, and such amounts will
be applied to payment of the Obligations as set forth herein. In no event shall
prior recourse to any Accounts or other security granted to or by the Company be
a prerequisite to CIT's right to demand payment of any Obligation. Further, it
is understood that CIT shall have no obligation whatsoever to perform in any
respect any of the Company's contracts or obligations relating to the Accounts.
3.7 After the end of each month, CIT shall promptly send the Company
a statement showing the accounting for the charges, loans, advances and other
transactions occurring between CIT and the Company during that month. The
monthly statements shall be deemed correct and binding (absent manifest error)
upon the Company and shall constitute an account stated between the Company and
CIT unless CIT receives a written statement of the exceptions within thirty (30)
days of the date of the monthly statement.
3.8 In the event that any requested advance exceeds Availability or
that (a) the sum of the outstanding balance of Revolving Loans exceeds (b)(x)
the Borrowing Base or (y) the Revolving Line of Credit, any such nonconsensual
Overadvance shall be due and payable to CIT immediately upon CIT's demand
therefor.
3.9 Until this Agreement has been terminated, the Company shall (to
the extent that there is sufficient Availability) at all times maintain a
minimum aggregate Revolving Loan balance of at least the Minimum Borrowing
Amount.
SECTION 4. INTENTIONALLY OMITTED.
---------------------
SECTION 5. INTENTIONALLY OMITTED.
---------------------
SECTION 6. COLLATERAL.
----------
6.1 As security for the prompt payment in full of all Obligations,
the Debtor hereby pledges and grants to CIT a continuing general lien upon, and
security interest in, all of its:
(a) Accounts;
(b) Inventory;
(c) General Intangibles;
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(d) Documents of Title;
(e) Other Collateral;
(f) Equipment; and
(g) Real Estate.
6.2 The security interests granted hereunder shall extend and attach
to:
(a) All Collateral which is owned by the Debtor or in which the
Debtor has any interest, whether held by the Debtor or others for its account,
and, if any Collateral is Equipment, whether the Debtor's interest in such
Equipment is as owner, finance lessee or conditional vendee;
(b) All Equipment, whether the same constitutes personal
property or fixtures, including, but without limiting the generality of the
foregoing, all dies, jigs, tools, benches, molds, tables, accretions, component
parts thereof and additions thereto, as well as all accessories, motors, engines
and auxiliary parts used in connection with, or attached to, the Equipment; and
(c) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either CIT or the Debtor from the Debtor's
customers, as well as to all supplies, goods, incidentals, packaging materials,
labels and any other items which contribute to the finished goods or products
manufactured or processed by the Debtor, or to the sale, promotion or shipment
thereof.
6.3 The Debtor agrees to safeguard, protect and hold all Inventory
for CIT's account and make no disposition thereof except in the ordinary course
of its business of the Debtor, as herein provided. The Debtor represents and
warrants that Inventory will be sold and shipped by the Debtor to its customers
only in the ordinary course of the Debtor's business, and then only on open
account and on terms currently being extended by the Debtor to its customers,
provided that, absent the prior written consent of CIT, the Debtor shall not
sell Inventory on a consignment basis nor retain any lien or security interest
in any sold Inventory. Upon the sale, exchange, or other disposition of
Inventory, as herein provided, the security interest in the Inventory provided
for herein shall, without break in continuity and without further formality or
act, continue in, and attach to, all proceeds, including any instruments for the
payment of money, Trade Accounts Receivable, documents of title, shipping
documents, chattel paper and all other cash and non-cash proceeds of such sale,
exchange or disposition. As to any such sale, exchange or other disposition, CIT
shall have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation. The Debtor hereby agrees to immediately
forward any and all proceeds of Collateral to the Depository Account, and to
hold any such proceeds (including any notes and instruments), in trust for CIT
pending delivery to CIT. Irrespective of CIT's perfection status in any and all
of the General Intangibles, including, without limitation, any Patents,
Trademarks, Copyrights or licenses with respect thereto, the Debtor hereby
irrevocably grants CIT a royalty free license to sell, or otherwise dispose of
or transfer, in accordance with Paragraph 10.3 of Section 10 of this Financing
Agreement, and the applicable
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terms hereof, any of the Inventory upon the occurrence and during the
continuance of an Event of Default which has not been waived in writing by CIT.
6.4 The Debtor agrees at its own cost and expense to keep the
Equipment in as good and substantial repair and condition as the same is now or
at the time the lien and security interest granted herein shall attach thereto,
reasonable wear and tear excepted, making any and all repairs and replacements
when and where necessary. The Debtor also agrees to safeguard, protect and hold
all Equipment in accordance with the terms hereof and subject to CIT's security
interest. Any sale, exchange or other disposition of any Equipment shall be made
by the Debtor only with CIT's prior written consent. Upon the sale, exchange, or
other disposition of the Equipment, as herein provided, the security interest
provided for herein shall, without break in continuity and without further
formality or act, continue in, and attach to, all proceeds, including any
instruments for the payment of money, Accounts, documents of title, shipping
documents, chattel paper and all other cash and non-cash proceeds of such sales,
exchange or disposition. As to any such sale, exchange or other disposition, CIT
shall have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation.
6.5 The rights and security interests granted to CIT hereunder are
to continue in full force and effect, notwithstanding the termination of this
Financing Agreement or the fact that the Revolving Loan Account may from time to
time be temporarily in a credit position, until the final payment in full to CIT
of all Obligations and the termination of this Financing Agreement. Any delay,
or omission by CIT to exercise any right hereunder shall not be deemed a waiver
thereof, or be deemed a waiver of any other right, unless such waiver shall be
in writing and signed by CIT. A waiver on any one occasion shall not be
construed as a bar to, or waiver of, any right or remedy on any future occasion.
6.6 Notwithstanding CIT's security interest in the Collateral and to
the extent that the Obligations are now or hereafter secured by any assets or
property other than the Collateral or by the guarantee, endorsement, assets or
property of any other person, CIT shall have the right in its sole discretion to
determine which rights, liens, security interests or remedies CIT shall at any
time pursue, foreclose upon, relinquish, subordinate, modify or take any other
action with respect to, without in any way modifying or affecting any of them,
or any of CIT's rights hereunder.
6.7 Any balances to the credit of the Debtor and any other property
or assets of the Debtor in the possession or control of CIT may be held by CIT
as security for any Obligations and applied in whole or partial satisfaction of
such Obligations when due. The liens and security interests granted herein, and
any other lien or security interest CIT may have in any other assets of the
Debtor, shall secure payment and performance of all now existing and future
Obligations. CIT may in its discretion charge any or all of the Obligations to
the Revolving Loan Account when due.
6.8 The Debtor possesses all General Intangibles and rights thereto
necessary to conduct its business as conducted as of the Closing Date and the
Debtor shall maintain its rights in, and the value of, the foregoing in the
ordinary course of its business, including, without limitation, by making timely
payment with respect to any applicable licensed rights. The Debtor shall deliver
to CIT and/or shall cause the appropriate party to deliver to CIT, from time to
time such pledge or security agreements with respect to General Intangibles (now
or hereafter acquired) of the
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Debtor and its subsidiaries as CIT shall require to obtain valid first liens
thereon. In furtherance of the foregoing, the Debtor shall provide timely notice
to CIT of any additional Patents, Trademarks, trade names, service marks,
Copyrights, brand names, trade names, logos and other trade designations
acquired or applied for subsequent to the Closing Date and the Debtor shall
execute such documentation as CIT may reasonably require to obtain and perfect
its lien thereon. The Debtor hereby confirms that it shall deliver, or cause to
be delivered, any pledged stock issued subsequent to the Closing Date to CIT in
accordance with the applicable terms of the Pledge Agreement and prior to such
delivery, shall hold any such stock in trust for CIT. The Debtor hereby
irrevocably grants to CIT a royalty-free, non-exclusive license in the General
Intangibles, including trade names, Trademarks, Copyrights, Patents, licenses,
and any other proprietary and intellectual property rights and any and all
right, title and interest in any of the foregoing, for the sole purpose, upon
the occurrence and during the continuance of an Event of Default, of the right
to: (i) advertise for sale and sell or transfer any Inventory bearing any of the
General Intangibles, and (ii) make, assemble, prepare for sale or complete, or
cause others to do so, any applicable raw materials or Inventory bearing any of
the General Intangibles, including use of the Equipment and Real Estate for the
purpose of completing the manufacture of unfinished goods, raw materials or
work-in-process comprising Inventory, and apply the proceeds thereof to the
Obligations hereunder, all as further set forth in this Financing Agreement and
irrespective of CIT's lien and perfection in any General Intangibles.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------
7.1 The Debtor warrants and represents that: (i) the Perfection
Certificate attached hereto as Schedule 1 hereto correctly and completely sets
forth the Debtor's (A) chief executive office, (B) Collateral locations, (C)
trade names, and (D) all the other information listed on said Schedule; (ii)
except for the Permitted Encumbrances, after filing of financing statements in
the applicable filing clerks office at the locations set forth in Schedule 1,
this Financing Agreement creates a valid, perfected and first priority security
interest in the Collateral and the security interests granted herein constitute
and shall at all times constitute the first and only liens on the Collateral;
(iii) except for the Permitted Encumbrances, the Debtor is, or will be, at the
time additional Collateral is acquired by it, the absolute owner of the
Collateral with full right to pledge, sell, consign, transfer and create a
security interest therein, free and clear of any and all claims or liens in
favor of others; (iv) the Debtor will, at its expense, forever warrant and, at
CIT's request, defend the same from any and all claims and demands of any other
person other than a holder of a Permitted Encumbrance; (v) the Debtor will not
grant, create or permit to exist; any lien upon, or security interest in, the
Collateral, or any proceeds thereof, in favor of any other person other than the
holders of the Permitted Encumbrances; and that the Equipment does not comprise
a part of the Inventory of the Debtor; and (vi) the Equipment is and will only
be used by the Debtor in its business and will not be held for sale or lease, or
removed from its premises, or otherwise disposed of by the Debtor except as
otherwise permitted in this Financing Agreement.
7.2 The Debtor agrees to maintain books and records pertaining to
the Collateral in accordance with GAAP and in such additional detail, form and
scope as CIT shall reasonably require. The Debtor agrees that CIT or its agents
may upon prior written or verbal notice enter upon the Debtor's premises at any
time during normal business hours, and from time to time in its reasonable
business judgment, for the purpose of inspecting the Collateral and any and all
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records pertaining thereto. The Debtor irrevocably authorizes all accountants
and third parties to disclose and deliver directly to CIT, at the Debtor's
expense, all financial statements and information, books, records, work papers,
management reports and other information generated by them or in their
possession regarding the Debtor and/or the Collateral. The Debtor agrees to
afford CIT thirty (30) days prior written notice of any change in the location
of any Collateral, other than to locations, that as of the Closing Date, are
known to CIT and at which CIT has filed financing statements and otherwise fully
perfected its liens thereon. The Debtor is also to advise CIT promptly, in
sufficient detail, of any material adverse change relating to the type, quantity
or quality of the Collateral or on the security interests granted to CIT
therein.
7.3 The Debtor agrees to: (a) execute and deliver to CIT, from time
to time, solely for CIT's convenience in maintaining a record of the Collateral,
such written statements, and schedules as CIT may reasonably require,
designating, identifying or describing the Collateral; (b) provide CIT, on
reasonable request, with an appraisal of the Inventory which appraisal shall be
at the Debtor's expense and otherwise acceptable to CIT; and (c) provide CIT, on
request, but no more frequently than annually, an environmental audit report on
its leasehold and fee interests, and its waste disposal practices, which report
shall be (i) at the Debtor's expense and otherwise acceptable to CIT and (ii)
not disclose or indicate any material liability (real or potential) stemming
from the Debtor's premises, its operations, its waste disposal practices or
waste disposal sites used by the Debtor. The Debtor's failure, however, to
promptly give CIT such statements, or schedules shall not affect, diminish,
modify or otherwise limit CIT's security interests in the Collateral.
7.4 The Debtor agrees to comply with the requirements of all state
and federal laws in order to grant to CIT valid and perfected first security
interests in the Collateral, subject only to the Permitted Encumbrances. CIT is
hereby authorized by the Debtor to file (including pursuant to the applicable
terms of the UCC) from time to time any financing statements, continuations or
amendments covering the Collateral whether or not the Debtor's signature appears
thereon. The Debtor hereby consents to and ratifies any and all execution and/or
filing of financing statements on or prior to the Closing Date by CIT. The
Debtor agrees to do whatever CIT may reasonably request, from time to time, by
way of: (a) filing notices of liens, financing statements, amendments, renewals
and continuations thereof, (b) cooperating with CIT's agents and employees; (c)
keeping Collateral records; (d) transferring proceeds of Collateral to CIT's
possession; and (e) performing such further acts as CIT may reasonably require
in order to effect the purposes of this Financing Agreement.
7.5 (a) The Debtor agrees to maintain insurance on the Real Estate,
Equipment and Inventory under such policies of insurance, with such insurance
companies, in such reasonable amounts and covering such insurable risks as are
at all times reasonably satisfactory to CIT. All policies covering the Real
Estate, Equipment and Inventory are, subject to the rights of any holders of
Permitted Encumbrances holding claims senior to CIT, to be made payable to CIT,
in case of loss, under a standard non-contributory "mortgagee", "lender" or
"secured party" clause and are to contain such other provisions as CIT may
reasonably require to fully protect CIT's interest in the Real Estate, Inventory
and Equipment and to any payments to be made under such policies. All original
policies or true copies thereof are to be delivered to CIT, premium prepaid,
with the "Lender's Loss Payable Endorsement" in CIT's favor, and shall provide
for not less than thirty (30) days prior written notice to CIT of the exercise
of any right of cancellation. At
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the Debtor's request, or if the Debtor fails to maintain such insurance, CIT may
arrange for such insurance, but at the Debtor's expense and without any
responsibility on CIT's part for: (i) obtaining the insurance; (ii) the solvency
of the insurance companies; (iii) the adequacy of the coverage; or (iv) the
collection of claims. Upon the occurrence of an Event of Default which is
continuing and which is not waived in writing by CIT, CIT shall, subject to the
rights of any holders of Permitted Encumbrances holding claims senior to CIT,
have the sole right, in the name of CIT or the Debtor, to file claims under any
insurance policies, to receive, receipt and give acquittance for any payments
that may be payable thereunder, and to execute any and all endorsements,
receipts, releases, assignments, reassignments or other documents that may be
necessary to effect the collection, compromise or settlement of any claims under
any such insurance policies.
(b)(i)In the event of any loss or damage by fire or other
casualty, insurance proceeds relating to Inventory shall first reduce the
Debtor's Revolving Loans and then to any other Obligations. Upon the occurrence
and during the continuance of a Default or Event of Default, such Insurance
Proceeds may be applied to the Obligations in such order as CIT may elect;
(ii) In the event any part of the Debtor's Real Estate or
Equipment is damaged by fire or other casualty and the Insurance Proceeds for
such damage or other casualty is less than or equal to $100,000.00, CIT shall
promptly apply such Proceeds to reduce the Debtor's outstanding balance in the
Revolving Loan Account. Upon the occurrence and during the continuance of a
Default or Event of Default, CIT may apply Insurance Proceeds to the Obligations
in such manner as it may deem advisable in its sole discretion; and
(iii) In the event any part of the Debtor's Real Estate or
Equipment is damaged by fire or other casualty, and the Insurance Proceeds is
greater than $100,000.00, CIT may, subject to the rights of any holders of
Permitted Encumbrances holding claims senior to CIT, apply the Insurance
Proceeds to the payment of the Obligations in such manner and in such order as
CIT may reasonably elect.
7.6 The Debtor agrees to pay, when due, all Taxes, including sales
taxes, assessments, claims and other charges lawfully levied or assessed upon
the Debtor or the Collateral unless such Taxes are being diligently contested in
good faith by the Debtor by appropriate proceedings and adequate reserves are
established in accordance with GAAP. Notwithstanding the foregoing, if any lien
shall be filed thereunder (a) for Taxes due the United States of America, or (b)
which in CIT's opinion might create a valid obligation having priority over the
rights granted to CIT herein (exclusive of Real Estate), such lien shall not be
deemed to be a Permitted Encumbrance hereunder and the Debtor shall immediately
pay such tax and remove the lien of record. If the Debtor fails to do so
promptly, then at CIT's election, CIT may (i) create an Availability Reserve in
such amount as it may deem appropriate in its business judgment, or (ii) upon
the occurrence and during the continuance of a Default or Event of Default,
imminent risk of seizure, filing of any priority lien, forfeiture, or sale of
the Collateral, pay Taxes on the Debtor's behalf, and the amount thereof shall
be an Obligation secured hereby and due on demand.
7.7 The Debtor: (a) agrees to comply with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official, which the failure to comply with would have a material and adverse
impact on the Collateral, or any material part thereof, or on the
-27-
business or operations of the Debtor, provided that the Debtor may contest any
acts, rules, regulations, orders and directions of such bodies or officials in
any reasonable manner which will not, in CIT's reasonable opinion, materially
and adversely effect CIT's rights or priority in the Collateral; (b) agrees to
comply with all environmental statutes, acts, rules, regulations or orders as
presently existing or as adopted or amended in the future, applicable to the
Collateral, the ownership and/or use of its real property and operation of its
business, which the failure to comply with would have a material and adverse
impact on the Collateral, or any material part thereof, or on the operation of
the business of the Debtor; and (c) shall not be deemed to have breached any
provision of this Paragraph 7.7 if (i) the failure to comply with the
requirements of this Paragraph 7.7 resulted from good faith error or innocent
omission, (ii) the Debtor promptly commences and diligently pursues a cure of
such breach, and (iii) such failure is cured within thirty (30) days following
the Debtor's receipt of notice of such failure, or if such cannot in good faith
be cured within thirty (30) days, then such breach is cured within a reasonable
time frame based upon the extent and nature of the breach and the necessary
remediation, and in conformity with any applicable consent order, consensual
agreement and applicable law.
7.8 Until termination of this Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Debtor agrees that, unless
CIT shall have otherwise consented in writing, the Debtor will furnish to CIT:
(a) within sixty (60) days after the end of each Fiscal Year of the Debtor, a
Consolidated Balance Sheet and a Consolidated Profit and Loss Statement, with a
Consolidating Balance Sheet and Profit and Loss Statement attached thereto, as
at the close of such year, and statements of profit and loss, cash flow and
reconciliation of surplus of the Debtor and its consolidated subsidiaries for
such year, prepared by the Debtor's management and certified by an officer of
the Debtor, subject to adjustments based upon the financial statements provided
under clause (b) hereof, (b) within one hundred twenty (120) days after the end
of each Fiscal Year of the Debtor, an audited and unqualified Consolidated
Balance Sheet and a Consolidated Profit and Loss Statement, with a Consolidating
Balance Sheet and Profit and Loss Statement attached thereto, at the close of
such year, and statements of profit and loss, cash flow and reconciliation of
surplus of the Debtor and its consolidated subsidiaries for such year, audited
by independent public accountants selected by the Debtor and satisfactory to
CIT; (c) not later than thirty (30) days prior to each Fiscal Year of the
Debtor, an annual projection for the next Fiscal Year, prepared on a monthly and
Fiscal Year basis setting forth in detail satisfactory to CIT in its reasonable
discretion the projected results of operations of the Debtor and its
consolidated Subsidiaries, including, without limitation, a balance sheet,
profit and loss statement, cash flow and Availability, stating underlying
assumptions and accompanied by a written statement of the Debtor's CFO
certifying as to the approval of such projections by the Debtor's Board of
Directors; (d) within thirty (30) days after the end of each month a
Consolidated Balance Sheet and Profit and Loss Statement and a Consolidating
Balance Sheet and Profit and Loss Statement as at the end of such period and
statements of profit and loss, cash flow and surplus of the Debtor and all
subsidiaries for such period; (e) within ten (10) Business Days after the end of
each month, statements of Accounts (including and distinguishing ineligibles),
accounts payable, and Inventory (including and distinguishing ineligibles)
certified by an authorized financial or accounting officer of the Debtor; and
(f) from time to time, such further information regarding the business affairs
and financial condition of the Debtor and its consolidated subsidiaries as CIT
may reasonably request, including, without limitation (i) the accountant's
management practice letter and (ii) reports regarding the status of the DEA
Licenses, in form satisfactory to CIT. Each financial statement which the Debtor
is required to
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submit hereunder must be accompanied by an officer's certificate, signed by the
President, Vice President, Controller, or Treasurer, pursuant to which any one
such officer must certify that: (x) the financial statement(s) fairly and
accurately represent(s) the Debtor's financial condition at the end of the
particular accounting period, as well as the Debtor's operating results during
such accounting period, subject to year-end audit adjustments; and (y) during
the particular accounting period: (A) there has been no Default or Event of
Default under this Financing Agreement, provided, however, that if any such
officer has knowledge that any such Default or Event of Default, has occurred
during such period, the existence of and a detailed description of same shall be
set forth in such officer's certificate; (B) the Debtor has not received any
notice of cancellation with respect to its property insurance policies; (C) the
Debtor has not received any notice that could result in a material adverse
effect on the value of the Collateral taken as a whole; and (D) the exhibits
attached to such financial statement(s) constitute detailed calculations showing
compliance with all financial covenants contained in this Financing Agreement.
7.9 Until termination of the Financing Agreement and payment and
satisfaction of all Obligations hereunder, the Debtor agrees that, without the
prior written consent of CIT, except as otherwise herein provided, the Debtor
will not:
(a) Mortgage, assign, pledge, transfer or otherwise permit any
lien, charge, security interest, encumbrance or judgment, (whether as a result
of a purchase money or title retention transaction, or other security interest,
or otherwise) to exist on any of the Debtor's Collateral or any other assets,
whether now owned or hereafter acquired, except for the Permitted Encumbrances;
(b) Incur or create any Indebtedness other than the Permitted
Indebtedness;
(c) Sell, lease, assign, transfer or otherwise dispose of (i)
Collateral, except as otherwise specifically permitted by this Financing
Agreement, or (ii) either all or substantially all of the Debtor's assets, which
do not constitute Collateral;
(d) Merge, consolidate or otherwise alter or modify its
corporate name, principal place of business, structure, or existence,
re-incorporate or re-organize, or enter into or engage in any operation or
activity materially different from that presently being conducted by the Debtor,
except that (A) the Debtor may change its corporate name or address and (B) a
Subsidiary (other than a Debtor) may merge into another Subsidiary or into the
Debtor; provided that, with respect to clauses (A) and (B): (i) the Debtor shall
give CIT thirty (30) days prior written notice thereof, and (ii) the Debtor
shall execute and deliver, prior to or simultaneously with any such action, any
and all documents and agreements requested by CIT to confirm the continuation
and preservation of all security interests and liens granted to CIT hereunder;
(e) Assume, guarantee, endorse, or otherwise become liable upon
the obligations of any person, firm, entity or corporation, except by the
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business;
(f) Except as set forth in Schedule 5 attached hereto, declare
or pay any dividend or distributions of any kind on, or purchase, acquire,
redeem or retire, any of the capital stock or
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equity interest, of any class whatsoever, whether now or hereafter outstanding
(other than dividends or distributions by any Subsidiary to the Debtor),
provided however, that notwithstanding anything in Schedule 5 to the contrary,
the Debtor shall not pay any cash dividends to DynaGen, Inc.;
(g) Except with respect to unsecured loans made in the ordinary
course of business from the Company to the Guarantor or from the Guarantor to
the Company, make any advance or loan to, or any investment in, any firm,
entity, person or corporation (other than direct investments in Cash
Equivalents), or purchase or acquire all or substantially all of the stock or
assets of any entity, person or corporation;
(h) Except as set forth in Schedule 5 attached hereto, pay any
management, consulting or other similar fees to any person, corporation or other
entity affiliated with the Debtor; or
(i) Enter into, or be a party to, or permit any Subsidiary of
the Debtor to enter into, or be a party to, any transaction with any Affiliate
of Debtor or any stockholder, except in the ordinary course of and pursuant to
the reasonable terms which are fully disclosed to CIT and are no less favorable
to the Debtor or such Subsidiary than the Debtor or such Subsidiary would obtain
in a comparable arm's length transaction with a Person not an Affiliate or
stockholder of Debtor or any Subsidiary of the Debtor.
7.10 (a) Until termination of the Financing Agreement and payment
and satisfaction in full of all Obligations hereunder, the Debtor (on a
consolidated basis) shall maintain at all times during each fiscal quarter a
Tangible Net Worth of not less than the sum of (i) Tangible Net Worth as of the
Closing Date plus (ii) the sum of (A) the aggregate amount of cash equity
investments in the Debtor subsequent to the Closing Date plus (B) fifty percent
(50%) of the aggregate consolidated net income of the Debtor and its
Subsidiaries as of the end of each fiscal quarter subsequent to the Closing
Date, without deduction for consolidated net losses minus (C) $500,000.00, all
of which shall be determined in accordance with GAAP, on a consistent basis with
the latest financial statements of the Debtor.
(b) Until termination of the Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, as at the end of each period
ending on or after the dates indicated below the Debtor shall maintain a Fixed
Charge Coverage Ratio of not less than the ratio set forth opposite the
applicable date as follows: .
Date Minimum Fixed Charge Coverage Ratio
--------------------------------------------------------------------------------
Three months ending June 30, 2001 1.00:1.00
Six months ending September 30, 2001 1.50:1.00
Nine months ending December 31, 2001
and each twelve-month period ending
at each fiscal quarter end thereafter 1.50:1.00
7.11 The Debtor agrees to advise CIT in writing of: (a) all
expenditures (actual or anticipated) in excess of $150,000.00 from the budgeted
amount therefor in any Fiscal Year for
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(i) environmental clean-up, (ii) environmental compliance or (iii) environmental
testing and the impact of said expenses on the Debtor's Working Capital; and (b)
any notices the Debtor receives from any local, state or federal authority
advising the Debtor of any environmental liability (real or potential) stemming
from the Debtor's operations, its premises, its waste disposal practices, or
waste disposal sites used by the Debtor and to provide CIT with copies of all
such notices if so required.
7.12 The Debtor hereby agrees to indemnify and hold harmless CIT and
its officers, directors, employees, attorneys and agents (each an "Indemnified
Party") from, and holds each of them harmless against, any and all losses,
liabilities, obligations, claims, actions, damages, costs and expenses
(including attorney's fees) and any payments made by CIT pursuant to any
indemnity provided by CIT with respect to or to which any Indemnified Party
could be subject insofar as such losses, liabilities, obligations, claims,
actions, damages, costs, fees or expenses with respect to the Loan Documents,
including without limitation those which may arise from or relate to: (a) the
Depository Account, the Blocked Accounts, the lockbox and/or any other
depository account and/or the agreements executed in connection therewith; and
(b) any and all claims or expenses asserted against CIT as a result of any
environmental pollution, hazardous material or environmental clean-up relating
to the Real Estate; or any claim or expense which results from the Debtor's
operations (including, but not limited to, the Debtor's off-site disposal
practices) and use of the Real Estate, which CIT may sustain or incur (other
than solely as a result of the physical actions of CIT on the Debtor's premises
which are determined to constitute gross negligence or willful misconduct by a
court of competent jurisdiction), all whether through the alleged or actual
negligence of such person or otherwise, except and to the extent that the same
results from the gross negligence or willful misconduct of such Indemnified
Party as finally determined by a court of competent jurisdiction.
The Debtor hereby agrees that this indemnity shall survive
termination of this Financing Agreement, as well as payments of Obligations
which may be due hereunder. CIT may, in its sole business judgment, establish
such Availability Reserves with respect thereto as it may deem advisable under
the circumstances and, upon any termination hereof, hold such reserves as cash
reserves for any such contingent liabilities.
7.13 Without the prior written consent of CIT, the Debtor agrees
that, except as set forth in Schedule 8 attached hereto, it will not enter into
any transaction with any Subsidiary or Affiliate of the Debtor, including,
without limitation, any purchase, sale, lease, loan or exchange of property,
provided that, except as otherwise set forth in this Financing Agreement, the
Debtor may enter into sale and service transactions in the ordinary course of
its business and pursuant to the reasonable requirements of the Debtor, and upon
standard terms and conditions and fair and reasonable terms, no less favorable
to the Debtor than the Debtor could obtain in a comparable arms length
transaction with an unrelated third party, provided further that no Default or
Event of Default exists or will occur hereunder prior to and after giving effect
to any such transaction.
7.14 The Debtor shall at all times be the holder of all United
States Drug Enforcement Agency licenses required for the conduct of the Debtor's
business (the "DEA Licenses"), shall comply with all requirements applicable to
the DEA Licenses and shall immediately notify CIT in writing (a) if any DEA
License is suspended, terminated or is not renewed; or (b) if the Debtor
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receives notice that any DEA License is going to be suspended, terminated or is
not going to be renewed. A list of the DEA Licenses is attached hereto as
Schedule 11.
7.15 Not later than sixty (60) days after the Closing Date, the
Debtor shall provide CIT with the Company's audited financial statements for the
Fiscal Year ending December 31, 2000, such financial statements to be prepared
by ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., Ltd. and to be in form and substance reasonably
satisfactory to CIT.
SECTION 8. INTEREST, FEES AND EXPENSES.
---------------------------
8.1 (a) Interest shall be payable monthly as of the end of each
month. Interest shall in no month be less than the sum of (i) the amount of
interest payable with respect to LIBOR Loans for such month plus (ii) the
product of the rate applicable hereunder for Chase Bank Rate Loans multiplied by
the result of the Minimum Borrowing Amount minus the average amount of
outstanding LIBOR Loans for such month. Chase Bank Rate Loans shall be in an
amount equal to the Chase Bank Rate plus one percent (1.0%) per annum on the
average of the net balances owing by the Company to CIT in the Revolving Loan
Account at the close of each day during such month. In the event of any change
in said Chase Bank Rate, the rate hereunder for Chase Bank Rate Loans shall
change, as of the date of such change, so as to remain one percent (1.0%) above
the Chase Bank Rate. The rate hereunder for Chase Bank Rate Loans shall be
calculated based on a 360-day year. CIT shall be entitled to charge the
Revolving Loan Account at the rate provided for herein when due until all
Obligations have been paid in full.
(b) Notwithstanding any provision to the contrary contained in
this section 8, in the event that the sum of the outstanding Revolving Loans
exceed the lesser of either (x) the maximum aggregate amount available under
Section 3 of this Financing Agreement or (y) the Revolving Line of Credit: (A)
as a result of Revolving Loans advanced by CIT at the request of the Company
(herein "Requested Overadvances"), for any one (1) or more days in any month, or
(B) for any other reason whatsoever (herein "Other Overadvances") and such Other
Overadvances continue for five (5) or more days in any month, the average net
balance of all Requested Overadvances and Other Overadvances for such month
shall bear interest at the Overadvance Rate.
(c) Upon and during the continuance of an Event of Default and
the giving of any required notice by CIT in accordance with the provisions of
Section 10, Paragraph 10.2 hereof, all Obligations shall bear interest at the
Default Rate of Interest.
8.2 Intentionally Omitted.
---------------------
8.3 Intentionally Omitted.
---------------------
8.4 The Company shall reimburse or pay CIT, as the case may be, for
all Out-of-Pocket Expenses.
8.5 Upon the last Business Day of each month, commencing on February
28, 2001, the Company shall pay to CIT interest on the Collection Days. Interest
will be computed at the rate, and in the manner, set forth in Paragraph 8.1 of
this Financing Agreement.
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8.6 To induce CIT to enter into this Financing Agreement and to
extend to the Company the Revolving Loan, the Company shall pay to CIT a Loan
Facility Fee, which shall be deemed fully earned on the Closing Date in the
amount of : (a) one-half of one percent (0.5%) of the Revolving Line of Credit
payable upon execution of this Financing Agreement; (b) one-half of one percent
(0.5%) of the Revolving Line of Credit on the earlier of the first anniversary
of the Closing Date or the date of termination of this Financing Agreement; (c)
one-half of one percent (0.5%) of the Revolving Line of Credit on the earlier of
the second anniversary of the Closing Date or the date of termination of this
Financing Agreement; and (d) one-half of one percent (0.5%) of the Revolving
Line of Credit on each anniversary thereafter of the Closing Date.
8.7 To further induce CIT to enter into this Financing Agreement and
to extend to the Company the Revolving Loan, the Company shall pay to CIT the
unpaid balance of a $100,000.00 Closing Fee, which unpaid balance equals
$65,000.00, which shall be payable in twelve (12) installments. The first
installment shall be due and payable on the Closing Date, the second installment
shall be due and payable on March 1, 2001 and the remaining installments shall
be due and payable on the first business day of each month thereafter, with each
payment to be in the amount of $5,416.67, except for the final payment, which
shall be in the amount of $5,416.63.
8.8 On the Closing Date and each anniversary of the Closing Date
thereafter, the Company shall pay to CIT the Administrative Management Fee in
the amount of $24,000, which shall be deemed fully earned on the Closing Date.
8.9 The Company shall pay CIT's standard charges and fees for CIT's
personnel used by CIT for reviewing the books and records of the Company and for
verifying, testing, protecting, safeguarding, preserving or disposing of all or
any part of the Collateral (which fees shall be in addition to the
Administrative Management Fee and any Out-of-Pocket Expenses).
8.10 The Company hereby authorizes CIT to charge the Revolving Loan
Account with the amount of all payments due hereunder as such payments become
due. The Company confirms that any charges which CIT may so make to the
Revolving Loan Account as herein provided will be made as an accommodation to
the Company and solely at CIT's discretion.
8.11 In the event that CIT or any participant hereunder (or any
financial institution which may from time to time become a participant or lender
hereunder) shall have determined in the exercise of its reasonable business
judgment that, subsequent to the Closing Date, any change in applicable law,
rule, regulation or guideline regarding capital adequacy, or any change in the
interpretation or administration thereof, or compliance by CIT or such
participant with any new request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on CIT's or such participant's capital as a consequence of its obligations
hereunder to a level below that which CIT or such participant could have
achieved but for such adoption, change or compliance (taking into consideration
CIT or such participant's policies with respect to capital adequacy) by an
amount reasonably deemed by CIT or such participant to be material, then, from
time to time, the Company shall pay no later than five (5) days following demand
to CIT or such participant such additional amount or amounts as will compensate
CIT's or such participant's for such reduction. In determining such amount or
amounts, CIT or such
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participant may use any reasonable averaging or attribution methods. The
protection of this Paragraph 8.11 shall be available to CIT or such participant
regardless of any possible contention of invalidity or inapplicability with
respect to the applicable law, regulation or condition. A certificate of CIT or
such participant setting forth such amount or amounts as shall be necessary to
compensate CIT or such participant with respect to this Section 8 and the
calculation thereof when delivered to the Company shall be conclusive on the
Company absent manifest error. Notwithstanding anything in this paragraph to the
contrary, in the event CIT or such participant has exercised its rights pursuant
to this paragraph, and subsequent thereto determines that the additional amounts
paid by the Company in whole or in part exceed the amount which CIT or such
participant actually required to be made whole, the excess, if any, shall be
returned to the Company by CIT or such participant.
8.12 In the event that any applicable law, treaty or governmental
regulation, or any change therein or in the interpretation or application
thereof, or compliance by CIT or such participant with any request or directive
(whether or not having the force of law) from any central bank or other
financial, monetary or other authority, shall:
(a) subject CIT or such participant to any tax of any kind
whatsoever with respect to this Financing Agreement or change the basis of
taxation of payments to CIT or such participant of principal, fees, interest or
any other amount payable hereunder or under any other documents (except for
changes in the rate of tax on the overall net income of CIT or such participant
by the federal government or the jurisdiction in which it maintains its
principal office);
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by CIT
or such participant by reason of or in respect to this Financing Agreement and
the Loan Documents, including (without limitation) pursuant to Regulation D of
the Board of Governors of the Federal Reserve System; or
(c) impose on CIT or such participant any other condition with
respect to this Financing Agreement or any other document, and the result of any
of the foregoing is to increase the cost to CIT or such participant of making,
renewing or maintaining its loans hereunder by an amount that CIT or such
participant deems to be material in the exercise of its reasonable business
judgment or to reduce the amount of any payment (whether of principal, interest
or otherwise) in respect of any of the loans by an amount that CIT or such
participant deems to be material in the exercise of its reasonable business
judgment, then, in any case the Company shall pay CIT or such participant,
within five (5) days following its demand, such additional cost or such
reduction, as the case may be. CIT or such participant shall certify the amount
of such additional cost or reduced amount to the Company and the calculation
thereof and such certification shall be conclusive upon the Company absent
manifest error.
8.13 The Company may request LIBOR Loans on the following terms and
conditions:
(a) The Company may elect, subsequent to the Closing Date and
from time to time thereafter (i) to request any loan made hereunder to be a
LIBOR Loan as of the date of such loan or (ii) to convert Chase Bank Rate Loans
to LIBOR Loans, and may elect from time to time
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to convert LIBOR Loans to Chase Bank Rate Loans by giving CIT at least three (3)
Business Days' prior irrevocable notice of such election, provided that any such
conversion of LIBOR Loans to Chase Bank Rate Loans shall only be made, subject
to the second following sentence, on the last day of an Interest Period with
respect thereto. Should the Company elect to convert Chase Bank Rate Loans to
LIBOR Loans, it shall give CIT at least three Business Days' prior irrevocable
notice of such election. If the last day of an Interest Period with respect to a
loan that is to be converted is not a Business Day or Working Day, then such
conversion shall be made on the next succeeding Business Day or Working Day, as
the case may be, and during the period from such last day of an Interest Period
to such succeeding Business Day, as the case may be, such loan shall bear
interest as if it were an Chase Bank Rate Loan. All or any part of outstanding
Chase Bank Rate Loans then outstanding with respect to Revolving Loans, may be
converted to LIBOR Loans as provided herein, provided that partial conversions
shall be in multiples in an aggregate principal amount of $1,000,000 or more.
(b) Any LIBOR Loans may be continued as such upon the expiration
of an Interest Period, provided the Company so notifies CIT, at least three (3)
Business Days' prior to the expiration of said Interest Period, and provided
further that no LIBOR Loan may be continued as such during the continuance of
any Default or Event of Default under this Financing Agreement, but shall be
automatically converted to a Chase Bank Rate Loan on the last day of the
Interest Period during which occurred such Default or Event of Default. Absent
such notification, LIBOR Rate Loans shall convert to Chase Bank Rate Loans on
the last day of the applicable Interest Period. Each notice of election,
conversion or continuation furnished by the Company pursuant hereto shall
specify whether such election, conversion or continuation is for a one, two, or
three month period. Notwithstanding anything to the contrary contained herein,
CIT (or any participant, if applicable) shall not be required to purchase United
States Dollar deposits in the London interbank market or from any other
applicable LIBOR Rate market for source or otherwise "match fund" to fund LIBOR
Rate Loans, but any and all provisions hereof relating to LIBOR Rate Loans shall
be deemed to apply as if CIT (and any participant, if applicable) had purchased
such deposits to fund any LIBOR Rate Loans.
(c) The Company may request a LIBOR Loan, convert any Chase Bank
Rate Loan or continue any LIBOR Loan provided there is then no Default or Event
of Default in effect.
8.14 (a) The LIBOR Loans shall bear interest for each Interest
Period with respect thereto on the unpaid principal amount thereof at a rate per
annum equal to the sum of the LIBOR determined for each Interest Period in
accordance with the terms hereof plus three and one-half (3.50%) percent.
(b) If all or a portion of the outstanding principal amount of
the Obligations shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such outstanding amount, to the extent it is a LIBOR
Loan, shall be converted to a Chase Bank Rate Loan at the end of the last
Interest Period therefor.
(c) The Company may not have more than three (3) LIBOR Loans
outstanding at any given time.
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8.15 (a) Interest in respect of the LIBOR Loans shall be calculated
on the basis of a 360 day year and shall be payable as of the end of each month.
(b) CIT shall, at the request of the Company, deliver to the
Company a statement showing the quotations given by The Chase Manhattan Bank and
the computations used in determining any interest rate pursuant to Paragraph
8.14 of Section 8 hereof.
8.16 As further set forth in paragraph 8.12 above, in the event that
CIT (or any financial institution which may become a participant hereunder)
shall have determined in the exercise of its reasonable business judgment (which
determination shall be conclusive and binding upon the Company) that by reason
of circumstances affecting the interbank LIBOR market, adequate and reasonable
means do not exist for ascertaining LIBOR applicable for any Interest Period
with respect to: (a) a proposed loan that the Company has requested be made as a
LIBOR Loan; (b) a LIBOR Loan that will result from the requested conversion of a
Chase Bank Rate Loan into a LIBOR Loan; or (c) the continuation of LIBOR Loans
beyond the expiration of the then current Interest Period with respect thereto,
CIT shall forthwith give written notice of such determination to the Company at
least one day prior to, as the case may be, the requested borrowing date for
such LIBOR Loan, the conversion date of such Chase Bank Rate Loan or the last
day of such Interest Period. If such notice is given (i) any requested LIBOR
Loan shall be made as a Chase Bank Rate Loan, (ii) any Chase Bank Rate Loan that
was to have been converted to a LIBOR Loan shall be continued as a Chase Bank
Rate Loan, and (iii) any outstanding LIBOR Loan shall be converted, on the last
day of then current Interest Period with respect thereto, to a Chase Bank Rate
Loan. Until such notice has been withdrawn by CIT, no further LIBOR Loan shall
be made nor shall the Company have the right to convert a Chase Bank Rate Loan
to a LIBOR Loan.
8.17 If any payment on a LIBOR Loan becomes due and payable on a day
other than a Business Day or Working Day, the maturity thereof shall be extended
to the next succeeding Business Day or Working Day unless the result of such
extension would be to extend such payment into another calendar month in which
event such payment shall be made on the immediately preceding Business Day or
Working Day.
8.18 Notwithstanding any other provisions herein, if any law,
regulation, treaty or directive or any change therein or in the interpretation
or application thereof, shall make it unlawful for CIT to make or maintain LIBOR
Loans as contemplated herein, the then outstanding LIBOR Loans, if any, shall be
converted automatically to Chase Bank Rate Loans as of the end of such month, or
within such earlier period as required by law. The Company hereby agrees
promptly to pay CIT, upon demand, any additional amounts necessary to compensate
CIT for any costs incurred by CIT in making any conversion in accordance with
this Section 8 including, but not limited to, any interest or fees payable by
CIT to lenders of funds obtained by CIT in order to make or maintain LIBOR Loans
hereunder.
8.19 The Company agrees to indemnify and to hold CIT (including any
participant) harmless from any loss or expense which CIT or such participant may
sustain or incur as a consequence of (a) Default by the Company in payment of
the principal amount of or interest on any LIBOR Loans, as and when the same
shall be due and payable in accordance with the terms of this Financing
Agreement, including, but not limited to, any such loss or expense arising from
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interest or fees payable by CIT or such participant to lenders of funds obtained
by either of them in order to maintain the LIBOR Loans hereunder; (b) default by
the Company in making a borrowing or conversion after the Company has given a
notice in accordance with Paragraph 8.13 of Section 8 hereof, (c) any prepayment
of LIBOR Loans on a day which is not the last day of the Interest Period
applicable thereto, including, without limitation, prepayments arising as a
result of the application of the proceeds of Collateral to the Revolving Loans;
and (d) default by the Company in making any prepayment after the Company had
given notice to CIT thereof. The determination by CIT of the amount of any such
loss or expense, when set forth in a written notice to the Company, containing
CIT's calculations thereof in reasonable detail, shall be conclusive on the
Company in the absence of manifest error. Calculation of all amounts payable
under this paragraph with regard to LIBOR Loans shall be made as though CIT had
actually funded the LIBOR Loans through the purchase of deposits in the relevant
market and currency, as the case may be, bearing interest at the rate applicable
to such LIBOR Loans in an amount equal to the amount of the LIBOR Loans and
having a maturity comparable to the relevant interest period; provided, however,
that CIT may fund each of the LIBOR Loans in any manner CIT sees fit and the
foregoing assumption shall be used only for calculation of amounts payable under
this paragraph. In addition, notwithstanding anything to the contrary contained
herein, CIT shall apply all proceeds of Collateral and all other amounts
received by it from or on behalf of the Company (i) initially to the Chase Bank
Rate Loans and (ii) subsequently to LIBOR Loans; provided, however, (x) during
the continuance of an Event of Default or (y) in the event the aggregate amount
of outstanding LIBOR Rate Loans exceeds Availability or the applicable maximum
levels set forth therefor, CIT may apply all such amounts received by it to the
payment of Obligations in such manner and in such order as CIT may elect in its
reasonable business judgment. In the event that any such amounts are applied to
Revolving Loans which are LIBOR Loans, such application shall be treated as a
prepayment of such loans and CIT shall be entitled to indemnification hereunder.
This covenant shall survive termination of this Financing Agreement and payment
of the outstanding Obligations.
8.20 Notwithstanding anything to the contrary in this Agreement, in
the event that, by reason of any Regulatory Change (for purposes hereof
"Regulatory Change" shall mean, with respect to CIT, any change after the date
of this Financing Agreement in United States federal, state or foreign law or
regulations (including, without limitation, Regulation D) or the adoption or
making after such date of any interpretation, directive or request applying to a
class of banks including CIT of or under any United States federal, state or
foreign law or regulations (whether or not having the force of law and whether
or not failure to comply therewith would be unlawful), CIT either (a) incurs any
material 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 such bank
which includes deposits by reference to which the interest rate on LIBOR Loans
is determined as provided in this Financing Agreement or a category of
extensions of credit or other assets of CIT which includes LIBOR Loans, or (b)
becomes subject to any material restrictions on the amount of such a category of
liabilities or assets which it may hold, then, if CIT so elects by notice to the
Company, the obligation of CIT to make or continue, or to convert Chase Bank
Rate Loans into LIBOR Loans hereunder shall be suspended until such Regulatory
Change ceases to be in effect.
8.21 For purposes of this Financing Agreement and Section 8 thereof,
any reference to CIT shall include any financial institution which may become a
participant or co-lender subsequent to the Closing Date.
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SECTION 9. POWERS.
------
The Debtor hereby constitutes CIT, or any person or agent CIT may
designate, as its attorney-in-fact, at the Debtor's cost and expense, to
exercise all of the following powers, which being coupled with an interest,
shall be irrevocable until all Obligations to CIT have been paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all in
the name of CIT or the Debtor, any and all checks, notes, drafts, and other
documents or instruments relating to the Collateral;
(b) To receive, open and dispose of all mail addressed to the
Debtor and to notify postal authorities to change the address for delivery
thereof to such address as CIT may designate;
(c) To request from customers indebted on Accounts at any time,
in the name of CIT information concerning the amounts owing on the Accounts;
(d) To request from customers indebted on Accounts at any time,
in the name of the Debtor, in the name of certified public accountant designated
by CIT or in the name of CIT's designee, information concerning the amounts
owing on the Accounts;
(e) To transmit to customers indebted on Accounts notice of
CIT's interest therein and to notify customers indebted on Accounts to make
payment directly to CIT for the Debtor's account; and
(f) To take or bring, in the name of CIT or the Debtor, all
steps, actions, suits or proceedings deemed by CIT necessary or desirable to
enforce or effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the
powers set forth in (b) and (f) above may only be exercised after the occurrence
and during the continuance of an Event of Default and until such time as such
Event of Default is waived in writing by CIT.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.
------------------------------
10.1 Notwithstanding anything hereinabove to the contrary, CIT may
terminate this Financing Agreement immediately upon the occurrence of any of the
following Events of Default:
(a) cessation of the business of the Debtor or the calling of a
meeting of the creditors of the Debtor for purposes of compromising the debts
and obligations of the Debtor;
(b) the failure of the Debtor to generally meet its debts as
they mature;
(c) (i) the commencement by the Debtor of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
under any federal or state law; (ii) the commencement against the Debtor of any
bankruptcy, insolvency, arrangement,
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reorganization, receivership or similar proceeding under any federal or state
law by creditors of the Debtor, provided that such Default shall not be deemed
an Event of Default if such proceeding is controverted within ten (10) days and
dismissed and vacated within ninety (90) days of commencement, except in the
event that any of the actions sought in any such proceeding shall occur or the
Debtor shall take action to authorize or effect any of the actions in any such
proceeding; or (iii) the commencement (x) by the Debtor's subsidiaries, or any
one of them, of any bankruptcy, insolvency, arrangement, reorganization,
receivership or similar proceeding under any applicable state law, or (y)
against the Debtor's subsidiaries, or any one of them, of any involuntary
bankruptcy, insolvency, arrangement, reorganization, receivership or similar
proceeding under applicable law, provided that such Default shall not be deemed
an Event of Default if such proceeding is controverted within ten (10) days and
dismissed or vacated within ninety (90) days of commencement, except in the
event that any of the actions sought in any such proceeding shall occur or the
Debtor's subsidiaries, or any one of them, shall take action to authorize or
effect any of the actions in any such proceeding;
(d) breach by the Debtor of any warranty, representation or
covenant contained herein (other than those referred to in sub-paragraph (e)
below) or in any other written agreement between the Debtor or CIT, provided
that such Default by the Debtor of any of the warranties, representations or
covenants referred in this clause (d) shall not be deemed to be an Event of
Default unless and until such Default shall remain unremedied to CIT's
satisfaction for a period of ten (10) days from the date of such breach;
(e) breach by the Debtor of any warranty, representation or
covenant of Paragraphs 3.3 (other than the fourth sentence of Paragraph 3.3) and
3.4 of Section 3 hereof; Paragraphs 6.3 and 6.4 (other than the first sentence
of Paragraph 6.4) of Section 6 hereof; Paragraphs 7.1, 7.5, 7.6, and 7.8 through
7.14 hereof;
(f) failure of the Debtor to pay any of the Obligations within
five (5) Business Days of the due date thereof, provided that nothing contained
herein shall prohibit CIT from charging such amounts to the Revolving Loan
Account on the due date thereof;
(g) the Debtor shall (i) engage in any "prohibited transaction"
as defined in ERISA, (ii) have any "accumulated funding deficiency" as defined
in ERISA, (iii) have any "reportable event" as defined in ERISA, (iv) terminate
any "plan", as defined in ERISA or (v) be engaged in any proceeding in which the
Pension Benefit Guaranty Corporation shall seek appointment, or is appointed, as
trustee or administrator of any "plan", as defined in ERISA, and with respect to
this sub-paragraph (g) such event or condition (x) remains uncured for a period
of thirty (30) days from date of occurrence and (y) could, in the reasonable
opinion of CIT, subject the Debtor to any tax, penalty or other liability
material to the business, operations or financial condition of the Debtor;
(h) without the prior written consent of CIT and, except as
permitted in the Subordination Agreement, the Debtor shall (x) amend or modify
the Subordinated Debt, or (y) make any payment on account of the Subordinated
Debt;
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(i) the occurrence of any default or event of default (after
giving effect to any applicable grace or cure periods) under any instrument or
agreement evidencing (x) Subordinated Debt or (y) any other Indebtedness of the
Debtor having a principal amount in excess of $50,000;
(j) at least two of the three Principals ceases (other than as a
result of death) to be actively engaged in the management of the Debtor and such
individual or individuals shall not have been replaced with persons having
comparable experience and expertise (as reasonably determined by CIT) within 120
days of such individual ceasing to actively be engaged in the Debtor's
management; or
(k) the Shareholders listed in Schedule 6 attached hereto shall
cease to be the beneficial and legal owner of at least fifty percent (50%) of
the issued and outstanding capital stock of Guarantor unless due to a public
offering of such stock or unless due to a private sale of such stock pursuant to
an equity investment approved by CIT, which approval shall not be unreasonably
withheld or delayed.
10.2 Upon the occurrence and during the continuance of a Default
and/or an Event of Default, at the option of CIT, all loans, advances and
extensions of credit provided for in Section 3 of this Financing Agreement shall
be thereafter in CIT's sole discretion and the obligation of CIT to make
Revolving Loans, shall cease unless such Default is cured to CIT's satisfaction
or Event of Default is waived in writing by CIT and at the option of CIT upon
the occurrence and during the continuance of an Event of Default: (a) all
Obligations shall become immediately due and payable; (b) CIT may charge the
Company the Default Rate of Interest on all then outstanding or thereafter
incurred Obligations in lieu of the interest provided for in Section 8 of this
Financing Agreement, and (c) CIT may immediately terminate this Financing
Agreement upon notice to the Company; provided, however, that upon the
occurrence of an Event of Default listed in Paragraph 10.1 (c) of this Section
10, this Financing Agreement shall automatically terminate and all Obligations
shall become due and payable, without any action, declaration, notice or demand
by CIT. The exercise of any option is not exclusive of any other option, which
may be exercised at any time by CIT.
10.3 Immediately upon the occurrence and during the continuance of
any Event of Default, CIT may, to the extent permitted by law: (a) remove from
any premises where same may be located any and all books and records, computers,
electronic media and software programs associated with any Collateral (including
any electronic records, contracts and signatures pertaining thereto), documents,
instruments, files and records, and any receptacles or cabinets containing same,
relating to the Accounts, or CIT may use, at the Debtor's expense, such of the
Debtor's personnel, supplies or space at the Debtor's places of business or
otherwise, as may be necessary to properly administer and control the Accounts
or the handling of collections and realizations thereon; (b) bring suit, in the
name of the Debtor or CIT, and generally shall have all other rights respecting
said Accounts, including without limitation the right to: accelerate or extend
the time of payment, settle, compromise, release in whole or in part any amounts
owing on any Accounts and issue credits in the name of the Debtor or CIT; (c)
sell, assign and deliver the Collateral and any returned, reclaimed or
repossessed Inventory, with or without advertisement, at public or private sale,
for cash, on credit or otherwise, at CIT's sole option and discretion, and CIT
may bid or become a purchaser at any such sale, free from any right of
redemption, which right is hereby expressly waived by the Debtor; (d) foreclose
the
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security interests in the Collateral created herein or by the Loan Documents by
any available judicial procedure, or to take possession of any or all of the
Collateral, including any Inventory, Equipment and/or Other Collateral without
judicial process, and to enter any premises where any Inventory and Equipment
and/or Other Collateral may be located for the purpose of taking possession of
or removing the same; and (e) exercise any other rights and remedies provided in
law, in equity, by contract or otherwise. CIT shall have the right, without
notice or advertisement (except as required by the UCC), to sell, lease, or
otherwise dispose of all or any part of the Collateral, whether in its then
condition or after further preparation or processing, in the name of the Debtor
or CIT, or in the name of such other party as CIT may designate, either at
public or private sale or at any broker's board, in lots or in bulk, for cash or
for credit, with or without warranties or representations, and upon such other
terms and conditions as CIT in its sole discretion may deem advisable, and CIT
shall have the right to purchase at any such sale. If any Inventory and
Equipment shall require rebuilding, repairing, maintenance or preparation, CIT
shall have the right, at its option, to do such of the aforesaid as is
necessary, for the purpose of putting the Inventory and Equipment in such
saleable form as CIT shall deem appropriate and any such costs shall be deemed
an Obligation hereunder. The Debtor agrees, at the request of CIT, to assemble
the Inventory and Equipment and to make it available to CIT at premises of the
Debtor or at such other location as CIT may reasonably request and to make
available to CIT the premises and facilities of the Debtor for the purpose of
CIT's taking possession of, removing or putting the Inventory and Equipment in
saleable form. If notice of intended disposition of any Collateral is required
by law, it is agreed that ten (10) days notice shall constitute reasonable
notification and full compliance with the law. The net cash proceeds resulting
from CIT's exercise of any of the foregoing rights, (after deducting all
charges, costs and expenses; including reasonable attorneys' fees) shall be
applied by CIT to the payment of the Obligations, whether due or to become due,
in such order as CIT may elect, and the Debtor shall remain liable to CIT for
any deficiencies, and CIT in turn agrees to remit to the Debtor or its
successors or assigns, any surplus resulting therefrom. The enumeration of the
foregoing rights is not intended to be exhaustive and the exercise of any right
shall not preclude the exercise of any other rights, all of which shall be
cumulative. The Debtor hereby indemnifies CIT and holds CIT harmless from any
and all reasonable costs, expenses, claims, liabilities and Out-of-Pocket
Expenses, incurred or imposed on CIT by reason of the exercise of any of its
rights, remedies and interests hereunder, including, without limitation, from
any sale or transfer of Collateral, preserving, maintaining or securing the
Collateral, defending its interests in Collateral (including pursuant to any
claims brought by the Debtor, the Debtor as debtor-in-possession, any secured or
unsecured creditors of the Debtor, any trustee or receiver in bankruptcy, or
otherwise), and the Debtor hereby agrees to so indemnify and hold CIT harmless,
absent CIT's gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction. The foregoing indemnification shall survive
termination of this Financing Agreement until such time as all Obligations
(including the foregoing) have been finally and indefeasibly paid in full. In
furtherance thereof CIT, may establish such reserves for Obligations hereunder
(including any contingent Obligations) in accordance with Section 7.12. Any
applicable mortgage(s), deed(s) of trust or assignment(s) issued to CIT on the
Real Estate shall govern the rights and remedies of CIT thereto.
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SECTION 11. TERMINATION.
-----------
Except as otherwise permitted herein, CIT may terminate this
Financing Agreement only as of the initial or any subsequent Anniversary Date
and then only by giving the Company at least sixty (60) days prior written
notice of termination. Notwithstanding the foregoing CIT may terminate the
Financing Agreement immediately upon the occurrence and during the continuance
of an Event of Default, provided, however, that if the Event of Default is an
event listed in Paragraph 10.1 (c) of Section 10 of this Financing Agreement,
this Financing Agreement shall terminate in accordance with paragraph 10.2 of
Section 10. This Financing Agreement, unless terminated as herein provided,
shall automatically continue from Anniversary Date to Anniversary Date. The
Company may terminate this Financing Agreement at any time upon sixty (60) days'
prior written notice to CIT, provided that the Company pays to CIT immediately
on demand an Early Termination Fee. All Obligations shall become due and payable
as of any termination hereunder or under Section 10 hereof and, pending a final
accounting, CIT may withhold any balances in the Company's account (unless
supplied with an indemnity satisfactory to CIT) to cover all of the Obligations,
whether absolute or contingent, including, but not limited to, cash reserves for
any contingent Obligations. All of CIT's rights, liens and security interests
shall continue after any termination until all Obligations have been paid and
satisfied in full.
SECTION 12. MISCELLANEOUS.
-------------
12.1 The Debtor hereby waives diligence, notice of intent to
accelerate, notice of acceleration, demand, presentment and protest and any
notices thereof as well as notice of nonpayment. No delay or omission of CIT or
the Debtor to exercise any right or remedy hereunder, whether before or after
the happening of any Event of Default, shall impair any such right or shall
operate as a waiver thereof or as a waiver of any such Event of Default. No
single or partial exercise by CIT of any right or remedy precludes any other or
further exercise thereof, or precludes any other right or remedy.
12.2 This Financing Agreement and the Loan Documents executed and
delivered in connection therewith constitute the entire agreement between the
Debtor and CIT; supersede any prior agreements; can be changed only by a writing
signed by both the Debtor and CIT; and shall bind and benefit the Debtor and CIT
and their respective successors and assigns.
12.3 In no event shall the Debtor, upon demand by CIT for payment of
any Indebtedness relating hereto, by acceleration of the maturity thereof, or
otherwise, be obligated to pay interest and fees in excess of the amount
permitted by law. Regardless of any provision herein or in any agreement made in
connection herewith, CIT shall never be entitled to receive, charge or apply, as
interest on any indebtedness relating hereto, any amount in excess of the
maximum amount of interest permissible under applicable law. If CIT ever
receives, collects or applies any such excess, it shall be deemed a partial
repayment of principal and treated as such; and if principal is paid in full,
any remaining excess shall be refunded to the Company. This paragraph shall
control every other provision hereof, the Loan Documents and of any other
agreement made in connection herewith.
12.4 If any provision hereof or of any other agreement made in
connection herewith is held to be illegal or unenforceable, such provision shall
be fully severable, and the remaining
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provisions of the applicable agreement shall remain in full force and effect and
shall not be affected by such provision's severance. Furthermore, in lieu of any
such provision, there shall be added automatically as a part of the applicable
agreement a legal and enforceable provision as similar in terms to the severed
provision as may be possible.
12.5 THE DEBTOR AND CIT HEREBY CONSENT TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, AS WELL AS TO THE JURISDICTION OF ALL COURTS FROM
WHICH AN APPEAL MAY BE TAKEN FROM SUCH COURTS, FOR THE PURPOSE OF ANY SUIT,
ACTION OR OTHER PROCEEDING ARISING OUT OF ANY OF ITS OBLIGATIONS ARISING
HEREUNDER OR UNDER THE REVOLVING LOAN PROMISSORY NOTE OR THE LOAN DOCUMENTS OR
WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND EXPRESSLY WAIVE ANY
AND ALL OBLIGATIONS THEY MAY HAVE AS TO VENUE IN ANY OF SUCH COURTS. THE DEBTOR
AND CIT EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING OUT OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREUNDER THE DEBTOR HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED. IN NO EVENT WILL CIT BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR
CONSEQUENTIAL DAMAGES.
12.6 Except as otherwise herein provided, any notice or other
communication required hereunder shall be in writing and shall be sufficiently
given if delivered personally, sent by facsimile transmission (provided that
confirmation of receipt of all pages is provided by the receiving facsimile
marking) or sent by FedEx or another nationally recognized overnight delivery
service, or by registered or certified mail, postage prepaid, addressed as
follows:
(A) if to CIT, at:
The CIT Group/Business Credit, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Regional Credit Manager
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esquire
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(B) if to the Debtor at:
▇▇▇▇▇▇▇▇.▇▇▇, Inc. and Superior Pharmaceutical Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a courtesy copy of any material notice to the Debtor's counsel
at:
▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esquire
provided, however, that the failure of CIT to provide the Debtor's counsel with
a copy of such notice shall not invalidate any notice given to the Debtor and
shall not give the Debtor any rights, claims or defenses due to the failure of
CIT to provide such additional notice.
12.7 THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT
TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT INCLUDES AN EXPRESS ELECTION TO BE
GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.
12.8 This Agreement may not be assigned by the Debtor without the
prior written consent of CIT. Whenever in this Agreement there is reference made
to any of the parties hereto, such reference shall be deemed to include,
wherever applicable, a reference to the successors and permitted assigns of the
Debtor and the successors and assigns of CIT.
12.9 CIT shall be under no obligation to ▇▇▇▇▇▇▇▇ any assets in
favor of the Debtor or any other person or against or in payment of any or all
of the Obligations. To the extent that the Debtor makes a payment or payments to
CIT or CIT enforces its liens or exercises its rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
12.10 CIT shall have the right, without the consent of the Debtor,
to sell interests and participations in or to assign all or any portion of its
interest under any or all of the Loan Documents .on such terms as CIT and a
purchaser of such participation shall determine. However, CIT shall have no
obligation to sell interests or any participations in the Loan Documents.
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IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be effective, executed under seal, accepted and delivered at
Boston, Massachusetts, by their proper and duly authorized officers as of the
date set forth above.
COMPANY:
SUPERIOR PHARMACEUTICAL COMPANY
By: /s/ C. ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
C. ▇▇▇▇▇▇ ▇▇▇▇▇▇, President and CEO
GUARANTOR:
▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ C. ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
C. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Executive Vice President
CIT:
THE CIT GROUP/BUSINESS CREDIT, INC.
By: illegible
--------------------------------
Title: Vice President
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