Exhibit 10.1

 

FINANCING AGREEMENT

 

The CIT Group/Business Credit, Inc.

 

(as Lender)

 

and

 

Royster-Clark Nitrogen, Inc.

 

(as Borrower)

 

Dated: April 26, 2006

 

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TABLE OF CONTENTS

 

 

 

 

Page

SECTION

1.

Definitions

1

 

1.1

Defined Terms

1

 

 

 

 

SECTION

2.

Conditions Precedent

16

 

2.1

Conditions Precedent to Initial Funding

16

 

 

 

 

SECTION

3.

Revolving Loans and Collections

19

 

3.1

Funding Conditions and Procedures

19

 

3.2

Handling of Proceeds of Collateral; Cash Dominion

20

 

3.3

Revolving Loan Account

20

 

3.4

Repayment of Overadvances

21

 

3.5

Application of Proceeds of Collateral

21

 

3.6

Monthly Statement

22

 

3.7

Access to ClT’s System

22

 

 

 

 

SECTION

4.

Intentionally Omitted

23

 

 

 

 

SECTION

5.

Letters of Credit

23

 

5.1

Assistance and Purpose

23

 

5.2

Authority to Charge Revolving Loan Account

23

 

5.3 

Indemnity Relating to Letters of Credit

23

 

5.4

Compliance of Goods, Documents and Shipments with Agreed Terms

23

 

5.5

Handling of Goods, Documents and Shipments

24

 

5.6

Compliance with Laws; Payments of Levies and Taxes

24

 

5.7

Subrogation Rights

25

 

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SECTION

6.

Collateral

25

 

6.1

Grant of Security Interest

25

 

6.2

Limited License

25

 

6.3

Representations, Covenants and Agreements Regarding Collateral Generally

25

 

6.4

Representations Regarding Accounts and Inventory

26

 

6.5

Covenants and Agreements Regarding Accounts and Inventory

26

 

6.6

General Intangibles

27

 

6.7

Commercial Tort Claims

27

 

6.8

Letter of Credit Rights

28

 

6.9

Covenants and Agreements Regarding Margin Accounts.

28

 

6.10

Reference to Other Loan Documents

28

 

6.11

Credit Balances: Additional Collateral

28

 

 

 

 

SECTION

7.

Representations, Warranties and Covenants

29

 

7.1

Representations and Warranties

29

 

7.2.

Affirmative Covenants

31

 

7.3

Financial Covenants

38

 

7.4

Negative Covenants

38

 

 

 

 

SECTION

8.

Interest, Fees and Expenses

40

 

8.1

Interest on Revolving Loans

40

 

8.2

Default Interest Rate

40

 

8.3

Fees and Expenses Relating to Letters of Credit

40

 

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8.4

Out of Pocket Expenses

41

 

8.5

Line of Credit Fee

41

 

8.6

Loan Facility Fee; Application of Deposits and Commitment Fee

41

 

8.7

Administrative Management Fee

41

 

8.8

Standard Operational Fees

41

 

8.9

LIBOR Loans

41

 

8.10

LIBOR Breakage Costs and Fees

43

 

8.11

Capital Adequacy

44

 

8.12

Taxes, Reserves and Other Conditions

44

 

8.13

Authority to Charge Revolving Loan Account

45

 

8.14

Participations

45

 

8.15

Replacement of a Participant

46

 

 

 

 

SECTION

9.

Powers

46

 

9.1

Authority

46

 

9.2

Limitations on Exercise

46

 

 

 

 

SECTION

10.

Events of Default and Remedies

46

 

10.1

Events of Default

47

 

10.2

Remedies With Respect to Outstanding Loans

48

 

10.3

Remedies With Respect to Collateral

48

 

10.4

General Indemnity

49

 

 

 

 

SECTION

11.

Termination

50

 

 

 

 

SECTION

12.

Miscellaneous

51

 

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12.1

Waivers

51

 

12.2

Entire Agreement; Amendments

51

 

12.3

Usury Limit

51

 

12.4

Severability

52

 

12.5

Waiver of Jury Trial: Service of Process; Consent to Jurisdiction

52

 

12.6

Notices

52

 

12.7

Choice of Law

53

 

 

 

 

EXHIBITS

 

 

 

 

 

Exhibit A – Form of Compliance Certificate

 

 

 

 

SCHEDULES

 

 

 

 

 

Schedule 1.1(a) – Existing Indebtedness

 

Schedule 7.l(b) – Company and Collateral Information

 

Schedule 7.1(f) – Environmental Matters

 

 

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THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, with an office
located at 5445 DTC Parkway, Suite P4, Greenwood Village, CO 80111 (“CIT”), is
pleased to confirm the terms and conditions under which CIT shall make revolving
loans, and other financial accommodations to Royster-Clark Nitrogen, Inc., a
Delaware corporation, (to be renamed Rentech Energy Midwest Corporation after
the Acquisition), (the “Company”), with a principal place of business at c/o
Rentech Development Corporation, 1331 17th Street, Suite 720, Denver, CO 80202.

 

RECITAL

 

Rentech Development Corporation, a Colorado corporation, (“Parent”, as further
defined herein) is a wholly owned subsidiary of Rentech Inc, a Colorado
corporation (“Rentech”). On or about the Closing Date, Parent has acquired all
of the issued and outstanding capital stock of the Company (the “Acquisition”).
The funding requirements for the Acquisition will be provided for by a loan by
Rentech to Parent (the “Investment”). At the time of the Acquisition the Company
will enter into a Distribution Agreement. The Acquisition, the Investment and
the execution of the Distribution Agreement are herein collectively referred to
as the “Transaction”.

 

SECTION 1.         Definitions

 

1.1           Defined Terms. In addition to those set forth in the preamble and
recital, as used in this Financing Agreement:

 

Accounts shall mean any and all of the Company’s present and future: (a)
accounts (as defined in the UCC); (b) 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 to this Financing
Agreement; (f) guaranties, other 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 of the foregoing (including rights to payment, including those arising in
connection with bank and non-bank credit cards), and all books and records and
any electronic media and software relating thereto; (i) notes, deposits or other
property of the Company’s account debtors securing the obligations owed by such
account debtors to the Company; and (j) all Proceeds of any of the foregoing.

 

Acquisition Agreement shall mean the Stock Purchase Agreement, dated November 5,
2005, by and among Parent and Royster-Clark, Inc., a Delaware corporation,
setting forth the terms of the Acquisition, as the same has been and may be
amended.

 

Administrative Management Fee shall mean an amount equal to $10,000 per annum,
payable in accordance with Section 8.7 of this Financing Agreement.

 

Applicable Margin shall mean, with respect to (a) the Revolving Loans, 0.25% for
Chase Bank Rate Loans and 2.50% for LIBOR Loans, and (b) Letters of Credit,
2.50%.

 

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Availability Reserve shall mean an amount equal to the sum (without duplication)
of:

 

(a)           any reserve which CIT may establish from time to time pursuant to
the express terms of this Financing Agreement; plus

 

(b)           (i) three (3) months 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, and (ii) three (3) months estimated payments
(plus any other fees or charges owing by the Company) to any applicable
warehousemen or third party processor (as determined by CIT in the exercise of
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; plus

 

(c)           such other reserves against Net Availability as CIT deems
necessary in the exercise of its reasonable business judgment as a result of (i)
negative forecasts and/or trends in the Company’s business, industry, profits,
operations or financial condition or (ii) other issues, circumstances or facts
that would reasonably be expected to otherwise negatively impact the Company or
its business, profits, operations, industry, financial condition or assets.

 

Balance Sheet shall mean a balance sheet for the Company or a consolidated and
consolidating balance sheet for Rentech, as the case may be, eliminating all
inter-company transactions and prepared in accordance with GAAP.

 

Borrowing Base shall mean, at any time:

 

(a)           the sum at such time of: (i) eighty five percent (85%) of the
Company’s outstanding Eligible Accounts Receivable; plus (ii) (x) during the
period of December 1 of each year through March 31 of each following year eighty
percent (80%) of the aggregate value of the Eligible Inventory and Eligible
Pre-Paid Expense, and (y) during the period of April 1 of each year through
November 30 of each year seventy five percent (75%) of the aggregate value of
the Eligible Inventory and Eligible Pre-Paid Expense, in each case valued at the
lower of cost or market on a first in, first out basis; plus (iii) one hundred
percent (100%) of the net liquidation value of Margin Accounts maintained in
accordance with Section 6.9 of this Financing Agreement; less

 

(b)         the amount of the Availability Reserve in effect at such time.

 

Business Day shall mean any day on which CIT and JPMorgan Chase 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
on the balance sheet of the Company.

 

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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.

 

Casualty Proceeds shall mean (a) payments or other proceeds from an insurance
carrier with respect to any loss, casualty or damage to Collateral, and (b)
payments received on account of any condemnation or other governmental taking of
any of the Collateral.

 

Change of Control shall mean either: (a) the failure of Rentech, directly or
indirectly, to continue to have the power (by ownership of equity interests, by
contract or otherwise) to elect a majority of the board of directors of the
Company.

 

Chase Bank Rate shall mean the rate of interest per annum announced by JPMorgan
Chase Bank (or its successor) 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 JPMorgan Chase Bank to its borrowers).

 

Chase Bank Rate Loans shall mean any loans or advances made pursuant to this
Financing Agreement that bear interest based upon the Chase Bank Rate.

 

CIT’s Bank Account shall mean CIT’s bank account at JPMorgan Chase Bank (or its
successor) in New York, New York.

 

CIT’s System shall mean CIT’s StuckeyNet or other internet-based loan accounting
and reporting system.

 

Closing Date shall mean the date of this Financing Agreement.

 

Collateral shall mean, collectively, all present and future Accounts, Inventory,
Documents of Title, General Intangibles, Investment Property and Other
Collateral.

 

Copyrights shall mean the Company’s present and hereafter acquired copyrights,
copyright registrations, recordings, applications, designs, styles, licenses,
marks, prints and labels bearing any of the foregoing, all reissues and renewals
thereof, all licenses thereof, all other general intangible, intellectual
property and other rights pertaining to any of the foregoing, together with the
goodwill associated therewith, and all income, royalties and other Proceeds of
any of the foregoing.

 

Default shall mean any event specified in Section 10.1 hereof, regardless of
whether any requirement for the giving of notice, the lapse of time, or both, or
any other condition, event or act, has occurred or been satisfied.

 

Default Rate of Interest shall mean a rate of interest equal to two percent (2%)
per annum greater than the interest rate accruing on the Obligations pursuant to
Section 8.1 hereof, which CIT

 

3

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shall be entitled to charge the Company in the manner set forth in Section 8.2
of this Financing Agreement.

 

Depository Account shall mean each bank account (and the related lockbox, if
any) subject to CIT’s control that is established by CIT or the Company pursuant
to Section 2.1(j) or Section 3.2(c) of this Financing Agreement.

 

Depository Account Control Agreement shall mean a three-party agreement in form
and substance reasonably satisfactory to CIT among CIT, the Company and the bank
which will maintain a Depository Account, (a) which provides CIT with control of
such Depository Account and provides for the transfer of funds in a manner
consistent with the provisions of Section 3.2(b) of this Financing Agreement,
and (b) pursuant to which such bank agrees that (i) all cash, checks, wires and
other items received or deposited into the Depository Account are the property
of CIT, and (ii) except as otherwise provided in the Depository Account Control
Agreement, such bank has no lien upon, or right of set off against, the
Depository Account and any cash, checks, wires and other items from time to time
on deposit therein.

 

Dilution Percentage shall mean, with respect to the Company for any twelve-month
period, the quotient (expressed as a percentage) obtained by dividing (a) the
aggregate amount of the Company’s non-cash reductions against Trade Accounts
Receivable, during such period, by (b) the average amount of the Company’s gross
sales during such period, as determined by CIT in the exercise of its reasonable
business judgment. The Dilution Percentage shall be determined by CIT based on
its reviews of the periodic financial and collateral reports submitted by the
Company to CIT as well as the results of the periodic field examinations of the
Company conducted by CIT from time to time.

 

Distribution Agreement shall mean the Distribution Agreement, dated April 26,
2006, by and among the Company and Royster-Clark Resources LLC, a Delaware
limited liability company, (or its assignee) setting forth the terms of the sale
of certain products by the Company to Royster-Clark Resources LLC, or such
assignee, as the same may be amended.

 

Documents of Title shall mean the Company’s 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 non-negotiable, together with all Inventory and other
Goods relating thereto, and all Proceeds of any of the foregoing.

 

EBITDA shall mean, for any period, all earnings (a) before all interest, tax
obligations and depreciation and amortization expense of the Company for such
period, and (b) before the expense of the Company for such period for the fees
paid under the Management Agreement, all determined in conformity with GAAP on a
basis consistent with the latest audited financial statements of the Company,
but excluding the effect of extraordinary and/or nonrecurring gains or losses
for such period.

 

Electronic Transmission shall have the meaning given to such term in Section
7.2(g) of this Financing Agreement.

 

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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 in all material
respects to the warranties contained herein, less, without duplication, the sum
of;

 

(a)         actual returns, discounts, claims, credits and allowances of any
nature (whether issued, owing, granted, claimed or outstanding), plus

 

(b)         reserves for 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 acceptable to CIT having a place of business in the United
States of America, or (y) to customers residing in Canada, provided that such
Accounts are payable in United States Dollars; (iii) Accounts that remain unpaid
more than the earlier of ninety (90) days from invoice date or sixty (60) days
from due date; (iv) contra accounts; (v) sales to any subsidiary (direct or
indirect) or parent (direct or indirect) of the Company, or to any other person
or entity under common control with the Company or with any shareholder,
subsidiary (direct or indirect) or parent (direct or indirect) of the Company in
any way; (vi) bill and hold (deferred shipment) or consignment sales (until the
subject Inventory is actually sold); (vii) sales to any customer which is either
(w) insolvent, (x) the debtor in any bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceedings under any federal or state
law, (y) negotiating, or has called a meeting of its creditors generally for
purposes of negotiating, a compromise of its debts, or (z) financially
unacceptable to CIT or has a credit rating unacceptable to CIT in each case in
the reasonable business judgment of CIT; (viii) all sales to any customer if
twenty-five percent (25%) or more of the aggregate dollar amount of all
outstanding invoices to such customer are unpaid more than the earlier of ninety
(90) days from invoice date or sixty (60) days from due date; (ix) sales to any
customer and/or its affiliates, other than Royster-Clark Resources LLC and/or
its affiliates, to the extent the aggregate outstanding amount of such sales at
the time exceed twenty percent (20%) or more of all Eligible Accounts Receivable
at such time; (x) pre-billed receivables and receivables arising from progress
billings; and (xi) sales not payable in United States currency; plus

 

(c)         reserves established by CIT to account for increases in the
Company’s Dilution Percentage above the Company’s historical Dilution
Percentage.

 

Eligible Inventory shall mean the gross amount of the Company’s Inventory that
is subject to a valid, fully perfected security interest in favor of CIT, that
is, except as provided herein, an exclusive, first priority security interest
and which conforms in all material respects to the warranties contained herein,
less, without duplication, (a) all supplies (other than raw materials, including

 

5

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natural gas), (b) all Inventory not present in the United Stales of America, (c)
all 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, (d) except to the extent covered by a
reserve under Subsection (b) of the definition of Availability Reserve, all
Inventory in transit or in the possession of a warehouseman, bailee, third party
processor, or other third party, (i) unless the Inventory is held under a
Qualified Consignment, (ii) unless such warehouseman, bailee or third party has
executed a notice of security interest agreement (in form and substance
satisfactory to CIT), or (iii) unless such Inventory is covered by negotiable
warehouse receipts or negotiable bills of lading issued by either: (A) a
warehouseman licensed and bonded by the United States Department of Agriculture
or any state’s Department of Agriculture, or (B) a recognized carrier having an
office in the United States and in a financial condition reasonably acceptable
to CIT, which receipts or bills of lading designate CIT directly or by
endorsement as the only Person to which or to the order of which the
warehouseman or carrier is legally obligated to deliver such Inventory, (e)
Inventory reasonably determined by CIT to be out-of-condition or otherwise not
merchantable, including, without limitation, Inventory deemed to be
out-of-condition or otherwise not merchantable by the United States Department
of Agriculture, any state’s Department of Agriculture, or any other Governmental
Authority having regulatory authority over the Company or any of the Company’s
assets or activities; (f) Inventory for which a prepayment has been received, to
the extent of such prepayment; (g) any value attributable to the Platinum
Catalyst; (h) Inventory which in CIT’s reasonable determination is subject to
liens or conflicting claims of ownership (except with regard to Producer
Payables that are not past due or the subject of any lien enforcement action),
whether such liens or conflicting claims are asserted or could be asserted by
any Person; and (i) the amount of such other reserves against Inventory as CIT
deems necessary in the exercise of its reasonable business judgment for
discontinued, slow-moving and obsolete Inventory (other than Inventory subject
to purchase orders or contracts), market value declines, bill and hold (deferred
shipment), consignment sales, shrinkage and any applicable customs, freight,
duties and Taxes.

 

Eligible Pre-Paid Expenses shall mean the outstanding gross amount paid by the
Company in advance of delivery, for natural gas that will meet the standards of
Eligible Inventory when delivered, to one or more of the suppliers of natural
gas with whom the Company does business on the date of this Financing Agreement,
unless CIT shall otherwise consent in writing to one or more new suppliers of
natural gas acceptable to CIT, that create contract rights that are subject to a
valid, fully perfected security interest in favor of CIT, that is, except as
provided herein, an exclusive, first priority security interest and which
conforms in all material respects to the warranties contained herein, less,
without duplication, the sum of: (a) contra accounts; (b) amounts pre-paid to
any subsidiary (direct or indirect) or parent (direct or indirect) of the
Company, or to any other person or entity under common control with the Company
or with any shareholder, subsidiary (direct or indirect) or parent (direct or
indirect) of the Company in any way; (c) amounts pre-paid to any supplier which
is either (w) insolvent, (x) the debtor in any bankruptcy, insolvency,
arrangement, reorganization, receivership or similar proceedings under any
federal or state law, (y) negotiating, or has called a meeting of its creditors
for purposes of negotiating, a compromise of its debts, or (z) financially
unacceptable to CIT or has a credit rating unacceptable to CIT in each case in
the reasonable business judgment of CIT; (d) amounts pre-paid to any supplier
that (x) has breached or

 

6

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otherwise materially failed to perform any material obligations to the Company
or (y) has declared that it will breach or otherwise materially fail to perform
any material obligations to the Company.

 

Equipment shall mean the Company’s present and hereafter acquired equipment (as
defined in the UCC) including, without limitation, all machinery, equipment,
rolling stock, 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 of any of the foregoing.

 

ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time.

 

Eurocurrency Reserve Requirements shall mean for any day, as applied to a LIBOR
Loan, the aggregate (without duplication) of the maximum rates of reserve
requirement (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 rates 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 given to such term in Section 10.1 of
this Financing Agreement.

 

Farm Products shall mean the Company’s present and hereafter acquired farm
products (as defined in the UCC) including, without limitation, all personal
property used or for use in farming or livestock operations, including without
limitation, seed and harvested or un-harvested crops of all types and
descriptions, whether annual or perennial and including trees, vines and the
crops growing thereon, native grass, grain, feed, feed additives, feed
ingredients, feed supplements, fertilizer, hay, silage, supplies (including
without limitation, chemicals, veterinary supplies and related Goods), livestock
of all types and descriptions (including without limitation, the offspring of
such livestock and livestock in gestation).

 

Fixed Charge Coverage Ratio shall mean, for any period, the quotient (expressed
as a ratio) obtained by dividing (a) EBITDA of the Company for such period by
(b) Fixed Charges of the Company for such period.

 

Fixed Charges shall mean, for any period, the sum of (without duplication) (a)
all interest obligations (including the interest component of Capital Leases) of
the Company paid or due during such period, (b) the amount of all scheduled fees
paid to CIT during such period, excluding the Loan Facility Fee, (c) the amount
of principal repaid or scheduled to be repaid on Indebtedness of the Company
(other than the Revolving Loans) during such period, (d) unfinanced Capital
Expenditures,

 

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as incurred by the Company during such period, (e) all federal, state and local
income tax expenses due and payable by the Company during such period; and (f)
the fees paid by the Company under the Management Agreement 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 arc to apply.

 

General Intangibles shall mean the Company’s 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, (b) Patents, utility models, industrial models, and designs, (c)
Copyrights, (d) trade secrets, (e) licenses, permits and franchises, (f) any
other forms of intellectual property, (g) all customer lists, distribution
agreements, supply agreements, blueprints, indemnification rights, tax refunds
and other contract rights, (h) obligations for capital stock or other claims
against any equity holders, (i) all monies and claims for monies now or
hereafter due and payable in connection with the foregoing, including, without
limitation, payments for infringement and royalties arising from any licensing
agreement between the Company and any licensee of any of the Company’s General
Intangibles, and (j) all Proceeds of any of the foregoing.

 

Goods shall mean the Company’s present and hereafter acquired “Goods”, as
defined in the UCC, and all Proceeds thereof.

 

Governmental Authority shall mean any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including without limitation, any arbitration panel, any court, any commission,
any agency or any instrumentality of the foregoing.

 

Governmental Requirement shall mean any material law, statute, code, ordinance,
order, rule, regulation, judgment, decree, injunction, franchise, permit,
certificate, license, authorization or other directive or requirement of any
federal, state, county, municipal, parish, provincial or other Governmental
Authority or any department, commission, board, court, agency or any other
instrumentality of any of them (including any of the foregoing that relate to
environmental standards or controls and occupational safety and health standards
or controls).

 

Guaranties shall mean the guaranty agreements executed and delivered to CIT by
Guarantors.

 

Guarantors shall mean Parent and any other future guarantor of all or any part
of the Obligations.

 

Indebtedness shall mean, without duplication, all liabilities, contingent or
otherwise, which are either (a) obligations in respect of borrowed money or for
the deferred purchase price of property, services or assets, other than trade
payables incurred in the ordinary course of business, or (b) obligations with
respect to Capital Leases.

 

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Indemnified Party shall have the meaning given to such term in Section 10.4 of
this Financing Agreement.

 

Intangible Assets means, with respect to any Person, that portion of the book
value of all of such Person’s assets that would be treated as intangibles under
GAAP, which shall not include loan closing transaction costs.

 

Interest Period shall mean, subject to availability: (a) with respect to an
initial request by the Company for a LIBOR Loan or the conversion of a Chase
Bank Rate Loan to a LIBOR Loan, at the option of the Company a one-month,
two-month, three-month, six-month or twelve-month period commencing on the
borrowing or conversion date with respect to such LIBOR Loan and ending one
month, two months, three months, six months or twelve months thereafter, as
applicable; and (b) with respect to any continuation of a LIBOR Loan, at the
option of the Company a one-month, two-month three-month, six-month or
twelve-month period commencing on the last day of the immediately preceding
Interest Period applicable to such LIBOR Loan and ending one month, two months,
three months, six months or twelve months thereafter, as applicable; provided
that (i) if any Interest Period would otherwise end on a day which is not a
Working Day, such Interest Period shall be extended to the next succeeding
Working Day, and (ii) if any Interest Period begins on the last Working Day of
any month, or on a day for which there is no numerically corresponding day in
the month in which such Interest Period ends, such Interest Period shall end on
the last Working Day of the month in which such Interest Period ends.

 

Inventory shall mean the Company’s present and hereafter acquired inventory (as
defined in the UCC) and Farm Products including, without limitation, all
merchandise and inventory in all stages of production (from raw materials
through work-in-process to finished 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 of the
foregoing, and all Proceeds of any of the foregoing.

 

Investment Property shall mean all present and hereafter acquired “Investment
Property”, as defined in the UCC, including, without limitation, Margin
Accounts, together with all stock and other equity interests in the Company’s
subsidiaries, and all Proceeds thereof.

 

Issuing Bank shall mean any bank issuing a Letter of Credit for the Company.

 

Letters of Credit shall mean all letters of credit issued for or on behalf of
the Company with the assistance of CIT by an Issuing Bank in accordance with
Section 5 hereof.

 

Letter of Credit Guaranty shall mean any guaranty or similar agreement delivered
by CIT to an Issuing Bank of the Company’s reimbursement obligation under such
Issuing Bank’s reimbursement agreement, application for letter of credit or
other like document.

 

Letter of Credit Guaranty Fee shall mean the fee that CIT may charge the Company
under Section 8.3 (a) of this Financing Agreement for issuing a Letter of Credit
Guaranty or otherwise assisting the Company in obtaining Letters of Credit.

 

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Letter of Credit Sub-Line shall mean the commitment of CIT to assist the Company
in obtaining Letters of Credit in an aggregate amount of up to $15,000,000.

 

LIBOR shall mean, for any Interest Period and subject to availability for the
applicable Interest Period, a rate of interest equal to the quotient obtained by
dividing: (a) at CIT’s election, (i) LIBOR for such Interest Period as quoted to
CIT by JPMorgan Chase Bank (or any successor thereof) two (2) Business Days
prior to the first day of such Interest Period, or (ii) the rate of interest
determined by CIT at which deposits in U.S. Dollars are offered for such
Interest Period as presented on Telerate Systems at page 3750 as of 11:00 a.m.
(London time) two (2) Business Days prior to the first day of such Interest
Period (provided that if two or more offered rates are presented on Telerate
Systems at page 3750 for such Interest Period, the arithmetic mean of all such
rates, as determined by CIT, will be the rate elected); by (b) a number equal to
1.00 minus the Eurocurrency Reserve Requirements, if any, in effect on the day
which is two (2) Business Days prior to the beginning of such Interest Period.

 

LIBOR Interest Payment Date shall mean, with respect to any LIBOR Loan, the last
day of the Interest Period for such LIBOR Loan and, if the Interest Period with
respect to such LIBOR Loan exceeds three months, the day which is three months,
six months and nine months after the making of such LIBOR Rate Loan, as the case
may be.

 

LIBOR Lending Office shall mean the office of JPMorgan Chase Bank, or any
successor thereof, maintained at 270 Park Avenue, New York, NY 10017.

 

LIBOR Loan shall mean any loans made pursuant to this Financing Agreement that
bear interest based upon LIBOR.

 

Line of Credit Fee shall mean, for any month, the product obtained by
multiplying (a) (i) the amount of the Revolving Line of Credit minus (ii) the
average daily principal balance of Revolving Loans and the average daily undrawn
amount of Letters of Credit outstanding during such month, times (b) one quarter
of one percent (0.25%) per annum for the number of days in said month.

 

Loan Documents shall mean this Financing Agreement, the Guaranties, the other
closing documents executed by the Company or the Guarantors, and any other
ancillary loan and security agreements executed by the Company or the Guarantors
from time to time in connection with this Financing Agreement, all as may be
renewed, amended, restated 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 Section 8.6 of this Financing Agreement.

 

Management Agreement shall mean that certain Management Services Agreement,
dated as of the Closing Date between Parent and the Company providing for the
payment of a quarterly fee to the Parent in return for the services described
therein.

 

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Margin Accounts shall mean, collectively, the Company’s present and hereafter
acquired Commodity Accounts (as defined in the UCC) and Commodity Contracts (as
defined in the UCC).

 

Material Adverse Effect shall mean a material adverse effect on either (a) the
business, condition (financial or otherwise), operations, performance, and
properties of the Company, (b) the ability of the Company to perform its
obligations under this Financing Agreement and the other Loan Documents, or to
enforce its rights against account debtors of the Company, (c) the value of the
Collateral taken as a whole or (d) the ability of CIT to enforce the Obligations
or its rights and remedies under this Financing Agreement or any of the other
Loan Documents.

 

Net Availability shall mean, at any time, the amount by which (a) the Borrowing
Base of the Company at such time exceeds (b) the sum at such time of (i) the
principal amount of all outstanding Revolving Loans, plus (ii) the undrawn
amount of all outstanding Letters of Credit.

 

Obligations shall mean: (a) all loans, advances and other extensions of credit
made by CIT to the Company or to others for the Company’s account (including,
without limitation, all Revolving Loans and all obligations of CIT under Letter
of Credit Guaranties); (b) any and all other indebtedness, obligations and
liabilities which may be owed by the Company to CIT and arising out of, or
incurred in connection with, this Financing Agreement or any of the other Loan
Documents (including all Out-of-Pocket Expenses and any applicable Documentation
Fees), whether (i) now in existence or incurred by the Company from time to time
hereafter, (ii) secured by pledge, lien upon or security interest in any of the
Company’s assets or property or the assets or property of any other person,
firm, entity or corporation, (iii) such indebtedness is absolute or contingent,
joint or several, matured or unmanned, direct or indirect, or (iv) the Company
is liable to CIT for such indebtedness as principal, surety, endorser, guarantor
or otherwise; (c) all indebtedness, obligations and liabilities owed by the
Company to CIT under any other agreement or arrangement now or hereafter entered
into between the Company, on the one hand, and CIT, on the other hand, whether
or not such agreement or arrangement relates to the transactions contemplated by
this Financing Agreement; (d) indebtedness, obligations and liabilities incurred
by, or imposed on, CIT as a result of environmental claims relating to the
Company’s operations, premises or waste disposal practices or disposal sites;
(e) the Company’s liabilities to CIT as maker or endorser on any promissory note
or other instrument for the payment of money; and (f) the Company’s liabilities
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, including any accommodations extended by CIT with respect
to applications for Letters of Credit, CIT’s acceptance of drafts or CIT’s
endorsement of notes or other instruments for the Company’s account and benefit.

 

Other Collateral shall mean: (a) the Company’s present and hereafter established
lockbox, blocked account and other deposit accounts maintained with any bank or
financial institution into which the proceeds of Collateral are or may be
deposited (including the Depository Accounts); (b) the Company’s cash and other
monies and property in the possession or control of CIT (including negative
balances in the Revolving Loan Account and cash collateral held by CIT pursuant
to this Financing Agreement); (c) the Company’s books, records, ledger cards,
disks and related data processing software at any time evidencing or containing
information relating to any of the Collateral

 

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described herein or otherwise necessary or helpful in the collection thereof or
realization thereon; and (d) all Proceeds of any of the foregoing.

 

Out-of-Pocket Expenses shall mean all of CIT’s present and future costs, fees
and expenses incurred in connection with this Financing Agreement and the other
Loan Documents, including, without limitation, (a) the cost of lien searches
(including tax lien and judgment lien searches), pending litigation searches and
similar items, (b) fees and taxes imposed in connection with the filing of any
financing statements or other personal property security documents; (c) all
costs and expenses incurred by CIT in opening and maintaining the Depository
Accounts and any related lockboxes, depositing checks, and receiving and
transferring funds (including charges imposed on CIT for “insufficient funds”
and the return of deposited checks); (d) any amounts paid by, incurred by or
charged to CIT by an Issuing Bank under any Letter of Credit or the
reimbursement agreement relating thereto, any application for Letter of Credit,
Letter of Credit Guaranty or other like document which pertains either directly
or indirectly to Letters of Credit, and CIT’s standard fees relating to the
Letters of Credit and any drafts thereunder; (e) all appraisal fees and expenses
payable by the Company hereunder, and all costs, fees and expenses incurred by
CIT as provided under Section 7.2(a) hereof; (f) all costs that CIT may incur to
maintain the Required Insurance; (g) all reasonable costs, fees, expenses and
disbursements of outside counsel hired by CIT to consummate the transactions
contemplated by this Financing Agreement (including the documentation and
negotiation this Financing Agreement, the other Loan Documents and all
amendments, supplements and restatements thereto or thereof), and to advise CIT
as to matters relating to the transactions contemplated hereby; (h) all costs,
fees and expenses incurred by CIT in connection with any action taken under
Section 10.3 hereof: and (i) without duplication, all costs, fees and expenses
incurred by CIT in connection with the collection, liquidation, enforcement,
protection and defense of the Obligations, the Collateral and CIT’s rights under
this Financing Agreement, including, without limitation, all reasonable fees and
disbursements of in-house and outside counsel to CIT incurred as a result of a
workout, restructuring, reorganization, liquidation, insolvency proceeding and
in any appeals arising therefrom, whether incurred before, during or after the
termination of this Financing Agreement or the commencement of any case with
respect to the Company, any Guarantor or any subsidiary of the Company (as the
case may be) under the United States Bankruptcy Code or any similar statute.

 

Overadvances shall mean, at any time, the amount by which (a) the sum at such
time of the principal amount of all outstanding Revolving Loans plus the undrawn
amount of all outstanding Letters of Credit exceeds (b) the Borrowing Base at
such time.

 

Parent shall mean Rentech Development Corporation as long as it owns the capital
stock or other equity interests of the Company, and thereafter shall mean its
assignee permitted under the terms of the Loan Documents, provided that such
assignee becomes a Guarantor by executing and delivering to CIT a guaranty
agreement in replacement of the guaranty agreement of the prior Parent, together
with such other documents as CIT may reasonably require.

 

Patents shall mean the Company’s present and hereafter acquired patents, patent
applications, registrations, all reissues and renewals thereof, all licenses
thereof, all inventions and

 

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improvements claimed thereunder, all general intangible, intellectual property
and other rights of the Company with respect thereto, and all income, royalties
and other Proceeds of the foregoing.

 

Permitted Encumbrances shall mean: (a) all liens existing on the Closing Date on
specific items of Equipment and Real Estate except those to be released
according to the terms of the Acquisition; (b) Purchase Money Liens; (c)
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 securing amounts not delinquent (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 Company or a Guarantor in accordance with GAAP; (d)
statutory liens securing Producer Payables incurred in the ordinary course of
business, that are not past due or the subject of any lien enforcement action
(unless they are being contested in good faith, by appropriate proceedings or
other appropriate actions which are sufficient to prevent imminent foreclosure
of such liens) (e) liens granted to CIT; (f) deposits made (and the liens
thereon) in the ordinary course of business (including, without limitation,
security deposits for leases, indemnity bonds, surety 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),
leases, statutory obligations and other similar obligations arising as a result
of progress payments under government contracts; (g) security deposits made (and
the liens thereon) in the ordinary course of business of the Company for
indemnity bonds, surety bonds and appeal bonds, in each case, in connection with
judgments, provided that such deposits combined with the amount of liens
referred to in the following subsection do not exceed $250,000 in the aggregate
at any time; (h) liens of judgment creditors, provided that such liens do not
exceed $250,000 in the aggregate at any time (other than liens bonded or insured
to the reasonable satisfaction of CIT and in compliance with the preceding
subsection); (i) Permitted Tax Liens; and (j) 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 Real
Estate, and which in the aggregate (i) do not materially interfere with the
occupation, use or enjoyment by the Company of its business or property so
encumbered and (ii) in the reasonable business judgment of CIT, do not
materially and adversely affect the value of such Real Estate.

 

Permitted Indebtedness shall mean; (a) Indebtedness (including Capital Leases)
secured by Purchase Money Liens; (b) Indebtedness arising under the Letters of
Credit and this Financing Agreement; (c) deferred Taxes and other expenses
incurred in the ordinary course of business; (d) Subordinated Debt and (e) other
Indebtedness existing on the Closing Date and listed on Schedule 1.1 (a)
attached hereto.

 

Permitted Tax Liens shall mean liens for Taxes not delinquent and liens for
Taxes that the Company is contesting in good faith, by appropriate proceedings
which are sufficient to prevent imminent foreclosure of such liens, and with
respect to which adequate reserves are being maintained by the Company in
accordance with GAAP; provided that in either case, such liens (a) are not filed
of record in any public office, or (b) do not secure taxes owed to the United
States of

 

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America (or any department or agency thereof) or any State or State authority,
if applicable law provides for the priority of such tax liens.

 

Person shall mean any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, 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).

 

Platinum Catalyst shall mean, the gauze made of platinum and rhodium used as a
catalyst in the Company’s ammonia oxidation converters for the production of
nitric acid, now owned or hereafter acquired by the Company.

 

Proceeds shall have the meaning given to such term in the UCC, including,
without limitation, all Casualty Proceeds.

 

Producer Payables shall mean all amounts at any time payable by the Company for
the purchase of Inventory.

 

Proposal Letter shall mean the Proposal Letter dated March 20, 2006 issued by
CIT and accepted by Parent on behalf of the Company.

 

Purchase Money Liens shall mean liens on any item of Equipment or interests in
Real Estate acquired by the Company after the date of this Financing Agreement,
provided that (a) each such lien shall attach only to the Equipment or interest
acquired and proceeds thereof, and (b) the indebtedness incurred by the Company
in connection with such acquisitions shall not exceed $2,000,000 in any fiscal
year of the Company.

 

Qualified Consignment shall mean a consignment of Inventory by the Company (as
consignor) that meets the following qualifications: (a) the consignment is made
(i) under the Distribution Agreement, or (ii) to a consignee disclosed to CIT in
writing prior to the consignment and reasonably acceptable to CIT, (b) the
Company has appropriately filed a UCC-1 Financing Statement against the
consignee and has taken all other actions required under the applicable Uniform
Commercial Code in order to have the equivalent of a perfected purchase money
security interest in the consigned inventory, (c) the consignee has executed a
notice of security interest agreement (in form and substance reasonably
satisfactory to CIT), and (d) the Company maintains audit procedures reasonably
acceptable to CIT to verify the existence and proper maintenance of the
consigned Inventory.

 

Real Estate shall mean all of the Company’s present and future fee and leasehold
interests in real property.

 

Regulatory Change shall mean any change after the Closing Date in United States
federal, state or foreign law or regulation (including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System), or the
adoption or making after the Closing Date of any interpretation, directive or
request applying to a class of lenders including CIT of or under any

 

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United States federal, state or foreign law or regulation, in each case whether
or not having the force of law and whether or not failure to comply therewith
would be unlawful.

 

Required Insurance shall have the meaning provided for in Section 7.2(c) of this
Financing Agreement.

 

Revolving Line of Credit shall mean the commitment of CIT to make Revolving
Loans pursuant to Section 3 of this Financing Agreement and assist the Company
in opening Letters of Credit pursuant to Section 5 of this Financing, in an
aggregate amount equal to $30,000,000.

 

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 when due or
incurred by CIT.

 

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 all indebtedness of the Company (and the note (8)
evidencing such indebtedness) that is subordinated to the prior payment and
satisfaction of the Obligations pursuant to a Subordination Agreement.

 

Subordination Agreement shall mean (a) an 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 Obligations, and (b) any note, indenture, note purchase
agreement or similar instrument or agreement, pursuant to which the indebtedness
evidenced thereby or issued thereunder is subordinated to the Obligations by the
express terms of such note, indenture, note purchase agreement or similar
instrument or agreement.

 

Tangible Net Worth shall mean, as of any date of determination, the result of
(a) the total stockholder’s equity of the Company determined in accordance with
GAAP on a basis consistent with the latest financial statements of the Company,
minus (b) the sum of (i) all Intangible Assets of the Company, (ii) all of the
Company’s prepaid expenses, and (iii) all amounts due to Company from
affiliates, plus (c) the principal amount of the Subordinated Debt.

 

Taxes shall mean all federal, state, municipal and other governmental taxes,
levies, charges, claims and assessments which are or may be owed or collected by
the Company with respect to its business, operations, Collateral or otherwise.

 

Termination Date shall mean the date occurring three (3) years from the Closing
Date and the same date in every year thereafter.

 

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.

 

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Trademarks shall mean the Company’s present and hereafter acquired trademarks,
trademark registrations, recordings, applications, tradenames, trade styles,
corporate names, business names, service marks, logos and any other designs or
sources of business identities, prints and labels (on which any of the foregoing
may appear), all reissues and renewals thereof, all licenses thereof, all other
general intangible, intellectual property and other rights pertaining to any of
the foregoing, together with the goodwill associated therewith, and all income,
royalties and other Proceeds of any of the foregoing.

 

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 Day shall mean any Business Day on which dealings in foreign currencies
and exchanges between banks may be transacted.

 

SECTION 2.  Conditions Precedent

 

2.1          Conditions Precedent to Initial Funding. The obligation of CIT to
make the initial loans and to assist the Company in obtaining initial Letters of
Credit hereunder, immediately prior to or concurrently with the making of such
loans or the issuance of such Letters of Credit, is subject to the satisfaction
or waiver in writing by CIT of the following conditions precedent:

 

(a)           Lien Searches.   CIT shall have received tax lien, judgment lien
and Uniform Commercial Code searches from all jurisdictions reasonably required
by CIT, and such searches shall verify that CIT has a first priority security
interest in the Collateral, subject to Permitted Encumbrances.

 

(b)           Casualty Insurance. The Company shall have delivered to CIT
evidence satisfactory to CIT that all Required Insurance is in full force and
effect, and CIT shall have confirmed that CIT has been named as a loss payee or
additional insured with respect to the Required Insurance in a manner
satisfactory to CIT.

 

(c)           UCC Filings. All UCC financing statements and similar documents
required to be filed in order to create in favor of CIT a first priority and
exclusive perfected security interest in the Collateral (to the extent that such
a security interest may be perfected by a filing under the UCC or applicable
law), shall have been properly filed in each office in each jurisdiction
required, CIT shall have received (i) acknowledgement 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 (ii) evidence that all necessary
filing fees, taxes and other expenses related to such filings have been paid in
full.

 

(d)           Resolutions. CIT shall have received a copy of the resolutions of
the Board of Directors of the Company authorizing the execution, delivery and
performance of the Loan Documents to be executed by the Company, certified by
the Secretary or Assistant Secretary of the Company as of the date hereof,
together with a certificate of such Secretary or Assistant Secretary as to the
incumbency and signature of the officer(s) executing the Loan Documents on
behalf of the Company. CIT shall have received a copy of resolutions of the
board of directors of Parent

 

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authorizing the execution, delivery and performance of the Loan Documents to be
executed by Parent as of the date hereof.

 

(e)           Organizational Documents. CIT shall have received a copy of the
Certificate or Articles of Incorporation of the Company, certified by the
applicable authority in the Company’s State of incorporation, and copies of the
by-laws (as amended through the date hereof) of the Company, certified by the
Secretary or an Assistant Secretary thereof. CIT shall have received a copy of
the Certificate or Articles of Incorporation of Parent, certified by the
applicable authority in the Parent’s State of organization, and copies of the
by-laws (as amended through the date hereof) of Parent, certified by the
Secretary or Assistant Secretary of Parent.

 

(f)            Officer’s Certificate. CIT shall have received an executed
Officer’s Certificate for the Company, satisfactory in form and substance to
CIT, certifying that as of the Closing Date (i) the representations and
warranties contained herein are true and correct in all material respects, (ii)
the Company is in compliance with all of the terms and provisions set forth
herein and (iii) no Default or Event of Default has occurred.

 

(g)           Disbursement Authorizations. 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 disbursement authorizations in
form acceptable to CIT.

 

(h)           Examination & Verification; Net Availability; Projections. CIT
shall have completed and be satisfied with an updated examination and
verification of the Trade Accounts Receivable, Inventory and the books and
records of the Company, and such examination shall indicate that (i) after
giving effect to all loans, advances and extensions of credit to be made at
closing, the Company shall have opening Net Availability of not less than
$4,000,000, and (ii) no material adverse change has occurred in the financial
condition, business, prospects, profits, operations or assets of the Company and
the Guarantors taken as a whole since December 31,2005, other than the
incurrence of Indebtedness in connection with the Acquisition. In addition, the
Company shall have delivered to CIT, and CIT shall be satisfied with, balance
sheet, income statement, cash flows and Net Availability projections for the
Company for not less than twelve (12) months following the Closing Date.

 

(i)            Depository Accounts: Payment Direction. On or before the tenth
(10th) day following the Closing Date, (i) The Company or CIT shall have
established one or more Depository Accounts with respect to the collection of
Accounts and the deposit of proceeds of Collateral, and (ii) CIT, the Company
and each depository bank shall have entered into a Depository Account Control
Agreement with respect to each Depository Account.

 

(j)            Guaranty and Related Documents. The Guarantors shall have
executed and delivered to CIT (i) the Guaranties and (ii) the items described in
Sections 2.1 (d), 2.1 (e) and 2.1(1) hereof with respect to the Guarantors.

 

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(k)           Opinions. Subject to the filing, priority and remedies provisions
of the UCC, the provisions of the Bankruptcy Code, insolvency statutes or other
like laws, the equity powers of a court of law and such other matters as may be
agreed upon with CIT, counsel for the Company and the Guarantors shall have
delivered to CIT opinion(s) satisfactory to CIT opining, inter alia, that each
Loan Document to which the Company or any Guarantor is a party is valid, binding
and enforceable in accordance with its terms, as applicable, and that the
execution, delivery and performance by the Company and each Guarantor of the
Loan Documents to which such person or entity is a party are (i) duly authorized
(except with regard to the guaranty agreement of Parent), (ii) do not violate
any terms, provisions, representations or covenants in the articles of
incorporation, by-laws or other organizational agreement of the Company or such
Guarantor, as the case may be, and (iii) to the best knowledge of such counsel,
do not violate any terms, provisions, representations or covenants in any
material loan agreement, mortgage, deed of trust, note, security agreement or
indenture to which the Company or any Guarantor is a signatory, or by which the
Company or any Guarantor (or any of the Company’s or any Guarantor’s assets) are
hound. On or before the tenth (10th) day following the Closing Date, counsel for
Parent shall have delivered to CIT an opinion satisfactory to CIT opining, inter
alia, that the guaranty agreement of Parent is duly authorized.

 

(l)            Legal Restraints/Litigation. As of the Closing Date, there shall
be no (x) injunction, writ or restraining order restraining or prohibiting the
consummation of the financing arrangements contemplated under this Financing
Agreement, or (y) suit, action, investigation or proceeding (judicial or
administrative) pending against the Company, any Guarantor, or any of their
assets, which, in the opinion of CIT, if adversely determined, could reasonably
be expected to have a Material Adverse Effect.

 

(m)          Additional Documents. The Company shall have executed and delivered
to CIT the Loan Documents necessary to consummate the lending arrangement
contemplated by this Financing Agreement.

 

(n)           Background Checks. CIT shall have received and be satisfied with
background checks on key managers of the Company as CIT shall designate.

 

(o)           Proposal Letter. The Company shall have fully complied with all of
the terms and conditions of the Proposal Letter.

 

(p)           Environmental Reports. CIT shall have received environmental
reports on all Real Estate and, if required by CIT, the Company’s waste disposal
practices. The reports must be satisfactory to CIT and must not disclose or
indicate any liability (real or potential) arising out of the Company’s
premises, its operations, its waste disposal practices or waste disposal sites
used by Company, which could reasonably be expected to have a Material Adverse
Effect.

 

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(q)           Closing of the Transaction. A copy of the fully executed
Acquisition Agreement, the Distribution Agreement, and, in each case, related
documents shall have been delivered to CIT. The Acquisition Agreement, the
Distribution Agreement and other documentation related to, and the terms of, the
Transaction shall all be in form and substance satisfactory to CIT. The
conditions of closing the Transaction (other than the closing of this Financing
Agreement and the funding of the initial Revolving Loans as provided for by this
Financing Agreement) shall be satisfied or waived by the parties to the
Transaction.

 

Upon the execution of this Financing Agreement and the initial disbursement of
the initial loans hereunder, all of the above conditions precedent shall have
been deemed satisfied, except as set forth as to post closing conditions or
except as the Company and CIT shall otherwise agree in a separate writing.

 

SECTION 3.  Revolving Loans and Collections

 

3.1     Funding Conditions and Procedures.

 

(a)      Amounts and Requests.    Subject to the terms and conditions of this
Financing Agreement, CIT agrees 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 re-borrow Revolving Loans). In no event shall CIT have an
obligation to make a Revolving Loan to the Company, nor shall the Company be
entitled to request or receive a Revolving Loan, if (i) a Default or Event of
Default shall have occurred and remain outstanding on the date of request for
such Revolving Loan or the date of the funding thereof, (ii) the amount of such
Revolving Loan, when added to the principal amount of the Revolving Loans
outstanding plus the undrawn amount of all Letters of Credit on the date of the
funding thereof, would exceed the Revolving Line of Credit, or (iii) amount of
such Revolving Loan would exceed the Net Availability of the Company on the date
of the request therefor or the funding thereof. Any request for a Revolving Loan
must be received by an officer of CIT no later than 1:00 p.m., Eastern time, (a)
on the Business Day on which such Revolving Loan is required, if the request is
for a Chase Bank Rate Loan, or (b) three (3) Business Days prior to the Business
Day on which such Revolving Loan is required, if the request is for a LIBOR
Loan. The funding of any LIBOR Loan is also subject to the satisfaction of the
conditions set forth in Section 8.9 of this Financing Agreement.

 

(b)      Phone and Electronic Loan Requests.  The Company hereby authorizes CIT
to make Revolving Loans to the Company based upon a telephonic or e-mail request
(or, if permitted by CIT, based upon a request posted on CIT’s System) made by
any officer or other employee of the Company that the Company has authorized in
writing to request Revolving Loans hereunder, as reflected by CIT’s records. 
Each telephonic, e-mail or posted request by the Company shall be irrevocable,
and the Company agrees to confirm any such request for a Revolving Loan in a
writing approved by CIT and signed by such authorized officer or employee,
within one (1) Business Day of CIT’s request for such confirmation. CIT shall
have the right to rely on any telephonic, e-mail or posted request for a
Revolving Loan made by anyone purporting to be an officer or other employee of
the Company that the Company has authorized in writing to request Revolving
Loans hereunder, without further investigation.

 

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(c)           Reaffirmation of Representations and Warranties. Except for the
representations and warranties set forth in Sections 6.7, 6.8, 6.9 and 7.1, all
of the representations and warranties made by the Company in this Financing
Agreement shall be deemed to be remade by the Company each time that the Company
requests a Revolving Loan or a Letter of Credit under this Financing Agreement
(provided that any representation and warranty made as of a specific earlier
date shall only be remade as of such date), and each such request shall also
constitute a representation and warranty by the Company that, after giving
effect to the requested Revolving Loan or Letter of Credit, no Default or Event
of Default shall have occurred and remain outstanding.

 

3.2          Handling of Proceeds of Collateral: Cash Dominion.

 

(a)           Collection of Accounts and Other Proceeds. The Company, at its
expense, will enforce and collect payments and other amounts owing on all
Accounts in the ordinary course of the Company’s business subject to the terms
hereof. Commencing on or before the tenth (10th) day following the Closing Date,
the Company agrees to direct its account debtors to send payments on all
Accounts to the Company and, to promptly deposit such payments and other cash
Proceeds of Collateral in a Depository Account.  Until so deposited, the Company
agrees to hold such cash Proceeds of Collateral in trust for CIT, separate from
the Company’s other property and funds.

 

(b)           Transfer of Funds from Depository Accounts. Funds remaining on
deposit in a Depository Account shall be transferred to CIT’s Bank Account on
each Business Day in accordance with the terms and provisions of the applicable
Depository Account Control Agreement, and the Company agrees to take all actions
reasonably required by CIT or any bank at which a Depository Account is
maintained in order to effectuate the transfer of funds in this manner.  All
amounts received by CIT from a Depository Account and any other proceeds of the
Collateral deposited into CIT’s Bank Account will, for purposes of calculating
Net Availability and interest, be credited to the Revolving Loan Account on the
date of deposit in CIT’s Bank Account. No checks, drafts or other instruments
received by CIT shall constitute final payment to CIT unless and until such
instruments have actually been collected.

 

(c)           New Depository Accounts.  The Company agrees not to open any
lockbox or new bank account into which Proceeds of Collateral are to be
delivered or deposited unless concurrently with the opening of such lockbox
and/or bank account, CIT, the Company and the bank which will maintain such
lockbox or at which such account will be maintained, execute a Depository
Account Control Agreement with respect to such lockbox and/or related bank
account. Upon compliance with the terms set forth above, such lockbox and/or
bank account shall constitute a Depository Account for purposes of this
Financing Agreement.

 

3.3          Revolving Loan Account.   CIT shall charge the Revolving Loan
Account for all loans and advances made by CIT to the Company or for the
Company’s account, and for all any other Obligations, including Out-of-Pocket
Expenses, when due and payable hereunder. Subject to the provisions of Section
3.5 below, CIT will credit the Revolving Loan Account with all amounts received
by CIT from each Depository Account or from others for the Company’s account,
including, as set forth above, all amounts received by CIT in payment of
Accounts, and such amounts will be

 

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applied to payment of the Obligations in the order and manner set forth herein.
In no event shall prior recourse to any Account or other security granted to or
by the Company be a prerequisite to CIT’s right to demand payment of any of the
Obligations. In addition, the Company agrees that CIT shall have no obligation
whatsoever to perform in any respect any of the Company’s contracts or
obligations relating to the Accounts.

 

3.4          Repayment of Overadvances, If at any time (a) the sum of the
outstanding balance of Revolving Loans and undrawn amount of Letters of Credit
exceed the Revolving Line of Credit, or (b) an Overadvance exists, the amount of
such excess (in the case of clause (a)) or the amount of the Overadvance (in the
case of clause (b)) shall be immediately due and payable, unless CIT otherwise
agrees in writing. Should CIT for any reason honor requests for Overadvances,
such Overadvances shall be made in CIT’s sole discretion and subject to any
additional terms CIT deems necessary.

 

3.5          Application of Proceeds of Collateral.

 

(a)           Generally. Unless this Financing Agreement expressly provides
otherwise, so long as no Event of Default shall have occurred and remain
outstanding, CIT agrees to apply all Proceeds of Collateral to the Revolving
Loan Account.

 

(b)           Application of Proceeds to Chase Bank Rate Loans and LIBOR Loans.
So long as no Event of Default shall have occurred and remain outstanding, CIT
agrees to apply all Proceeds of Collateral and other payments described in
Section 3.5(a) to Chase Bank Rate Loans until there are no Chase Bank Rate Loans
outstanding, and then to LIBOR Loans; provided that in the event the aggregate
outstanding principal amount of Revolving Loans that are LIBOR Loans exceeds the
lesser of the Revolving Line of Credit or the Borrowing Base, CIT may apply all
proceeds of Collateral received by CIT to the payment of the Obligations in such
manner and in such order as CIT may elect in the exercise of its reasonable
business judgment.  Subject to the terms of the preceding sentence, so long as
no Event of Default shall have occurred and remain outstanding, if CIT receives
Proceeds of Collateral or other payments that exceed the outstanding principal
amount of Revolving Loans that are Chase Bank Rate Loans, the Company may
request, in writing, that CIT not apply such excess Proceeds to outstanding
Revolving Loans that are LIBOR Loans, in which case CIT shall remit such excess
to the Company. If as a result of the application of the provisions of this
Section 3.5(b). any Proceeds of Collateral are applied to loans that are LIBOR
Loans, such application shall be treated as a prepayment of such LIBOR Loans and
CIT shall be entitled to the costs and fees provided for in Section 8.10 hereof.

 

(c)           Application of Proceeds During an Event of Default If an Event of
Default shall have occurred and remain outstanding, CIT may apply all Proceeds
of Collateral and all other payments received by CIT to the payment of the
Obligations in such manner and in such order as CIT may elect in its sole
discretion. If as a result of the application of the provisions of this Section
3.5(c), any Proceeds or payments are applied to loans that are LIBOR Loans, such
application shall be treated as a prepayment of such LIBOR Loans and CIT shall
be entitled to the costs and fees provided for in Section 8.10 hereof.

 

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3.6          Monthly Statement. After the end of each month, CIT agrees to
prepare and make available to the Company (by mail, facsimile, e-mail or posting
to CIT’s System, as mutually agreed to by the Company and CIT), a statement
showing the accounting for the charges, loans, advances and other transactions
occurring between CIT and the Company during that month. Absent manifest error,
each monthly statement shall be deemed correct and binding upon the Company and
shall constitute an account stated between the Company and CIT unless CIT
receives a written statement of exception from the Company within thirty (30)
days after the receipt of such monthly statement.

 

3.7          Access to CIT’s System. CIT shall provide to the Company access to
CIT’s System during normal business hours, for the purposes of (i) obtaining
information regarding loan balances and Net Availability, and (ii) if permitted
by CIT, making requests for Revolving Loans and submitting borrowing base
certificates. Such access shall be subject to the following terms, in addition
to all terms set forth on the website for CIT’s System:

 

(a)           CIT shall provide to the Company an initial password for secured
access to CIT’s System. The Company shall provide CIT with a list of officers
and employees that are authorized from time to time to access CIT’s System, and
the Company agrees to limit access to the password and CIT’s System to such
authorized officers and employees. After the initial access, the Company shall
be solely responsible for (i) changing and maintaining the integrity of the
Company’s password and (ii) any unauthorized use of the Company’s password or
CIT’s System by the Company’s officers and employees.

 

(b)           The Company shall use CIT’s System and the Company’s information
thereon solely for the purposes permitted above, and shall not access CIT’s
System for the benefit of third parties or provide any information obtained from
CIT’s System to third parties, in each case, other than affiliates, agents,
attorneys and accountants of the Company. CIT makes no representation that loan
balance or Net Availability information is or will be available, accurate,
complete, correct or current at all times. CIT’s System may be inoperable or
inaccessible from time to time, whether for required website maintenance,
upgrades to CIT’s System, or for other reasons, and in any such event the
Company must obtain loan balance and Net Availability information, and (if
permitted by CIT) make requests for Revolving Loans and submit borrowing base
certificates using other available means.

 

(c)           The Company hereby confirms and agrees that CIT’s System consist
of proprietary software, data, tools, scripts, algorithms, business logic,
website designs and interfaces and related intellectual property, information
and documentation.   CIT’s System and related intellectual property, information
and documentation are the sole and exclusive property of CIT, and the Company
shall have no right, title or interest therein or thereto, except for the
limited right to access CIT’s System for the purposes permitted above. Upon
termination of this Financing Agreement, the Company agrees to cease any use of
CIT’s System.

 

(d)           All agreements, covenants and representations and warranties made
by the Company in any borrowing base certificate submitted to CIT by means of
CIT’s System are incorporated herein by reference.

 

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SECTION 4.         Intentionally Omitted

 

SECTION 5.         Letters of Credit

 

In order to assist the Company in establishing or opening Letters of Credit with
an Issuing Bank, the Company has requested that CIT join in the applications for
such Letters of Credit, and/or guarantee payment or performance of such Letters
of Credit and any drafts or acceptances thereunder through the issuance of one
or more Letter of Credit Guaranties, thereby lending ClT’s credit to the
Company, and CIT has agreed to do so. These arrangements shall be handled by CIT
subject to satisfaction of the conditions set forth in Section 2.1 hereof and
the terms and conditions set forth below.

 

5.1          Assistance and Purpose.  Within the Revolving Line of Credit and
subject to sufficient Net Availability, CIT shall assist the Company in
obtaining Letters of Credit in an aggregate undrawn amount outstanding at any
time not to exceed the Letter of Credit Sub-Line. The term, form and purpose of
each Letter of Credit and all documentation in connection therewith, and any
amendments, modifications or extensions thereof, must be mutually acceptable to
CIT, the Issuing Bank and the Company, Notwithstanding any other provision of
this Financing Agreement to the contrary, if a Default or an Event of Default
shall have occurred and remain outstanding, CIT’s assistance in connection with
any Letter of Credit shall be in CIT’s sole discretion.

 

5.2         Authority to Charge Revolving Loan Account. The Company hereby
authorizes CIT, without notice to the Company, to charge the Revolving Loan
Account with the amount of all indebtedness, liabilities and obligations of any
kind incurred by CIT under a Letter of Credit Guaranty, including the charges of
an Issuing Bank, as such indebtedness, liabilities and obligations are charged
to or paid by CIT, or, if earlier, upon the occurrence of an Event of Default,
Any amount charged to the Revolving Loan Account shall be deemed a Chase Bank
Rate Loan hereunder and shall incur interest at the rate provided in Section 8.1
(or Section 8.2. if applicable) of this Financing Agreement. The Company
confirms that any charges which CIT may make to the Revolving Loan Account as
provided herein will be made as an accommodation to the Company and solely at
CIT’s discretion.

 

5.3          Indemnity Relating to Letters of Credit   The Company
unconditionally indemnifies CIT and holds CIT harmless from any and all loss,
claim or liability incurred by CIT arising from any transactions or occurrences
relating to Letters of Credit established or opened for the Company’s account,
the Collateral relating thereto and any drafts or acceptances thereunder, and
all Obligations thereunder, including any such loss, claim or liability arising
from any error, omission, negligence, misconduct or other action taken by an
Issuing Bank, other than for any such loss, claim or liability arising out of
the gross negligence or willful misconduct by CIT with respect to a Letter of
Credit Guaranty, This indemnity shall survive the termination of this Financing
Agreement and the repayment of the Obligations.

 

5.4           Compliance of Goods. Documents and Shipments with Agreed Terms. 
CIT shall not be responsible for: (a) the existence, character, quality,
quantity, condition, packing, value or delivery of the goods purporting to be
represented by any documents relating to any Letter of

 

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Credit; (b) any difference or variation in the character, quality, quantity,
condition, packing, value or delivery of the goods from that expressed in such
documents; (c) the validity, sufficiency or genuineness of such documents or of
any endorsements thereon, even if such documents should in fact prove to be in
any or all respects invalid, insufficient, fraudulent or forged; (d) the time,
place, manner or order in which shipment is made; (e) partial or incomplete
shipment, or failure or omission to ship any or all of the goods referred to in
the Letters of Credit or documents relating thereto; (f) any deviation from
instructions; (g) delay, default, or fraud by the shipper and/or anyone else in
connection with the goods or the shipping thereof; or (h) any breach of contract
between the shipper or vendors and the Company.

 

5.5          Handling of Goods. Documents and Shipments. The Company agrees that
any action taken by CIT, if taken in good faith, or any action taken by the
Issuing Bank of whatever nature, under or in connection with the Letters of
Credit, the Letter of Credit Guaranties, drafts or acceptances relating to
Letters of Credit, or the goods subject thereto, shall be binding on the Company
and shall not result in any liability whatsoever of CIT to the Company. CIT
shall have the full right and authority, in CIT's name, to (a) clear and resolve
any questions of non-compliance of documents, (b) give any instructions as to
acceptance or rejection of any documents or goods, (c) execute any and all
steamship or airway guaranties (and applications therefor), indemnities or
delivery orders, (d) grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts, acceptances, or documents, and (e)
agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications, the
Letters of Credit, the Letter of Credit Guaranties or drafts or acceptances
relating to Letters of Credit. An Issuing Bank shall be entitled to comply with
and honor any and all such documents or instruments executed by or received
solely from CIT, without any notice to or any consent from the Company.
Notwithstanding any prior course of conduct or dealing with respect to the
foregoing (including amendments to and non-compliance with any documents, and/or
the Company’s instructions with respect thereto), CIT may exercise its rights
under this Section 5.5 in its sole but reasonable business judgment. In
addition, the Company agrees not to: (a) at any time, (i) execute any
application for steamship or airway guaranties, indemnities or delivery orders,
(ii) grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances or documents, or (iii) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letters of Credit, drafts
or acceptances; and (b) if an Event of Default shall have occurred and remain
outstanding, (i) clear and resolve any questions of non-compliance of documents
or (ii) give any instructions as to acceptances or rejection of any documents or
goods.

 

5.6          Compliance with Laws: Payment of Levies and Taxes. The Company
agrees that (a) all necessary import and export licenses and certificates
necessary for the Company’s import or handling of the Collateral will be
promptly procured, (b) all Governmental Requirements in regard to the shipment
and importation of the Collateral by the Company or the financing thereof will
be promptly and fully complied with, and (c) copies of any such licenses or
certificates that CIT may at any time request will be promptly furnished to CIT.
In connection herewith, the Company represents and warrants to CIT that all
shipments made under any Letter of Credit are and will be in compliance with all
applicable Governmental Requirements except where failure to be in compliance
could not reasonably be expected to have a Material Adverse Effect, and are not
prohibited by any such

 

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Governmental Requirements. The Company assumes all risk, liability and
responsibility for, and agrees to pay and discharge, all present and future
local, state, federal or foreign Taxes, duties, or levies pertaining to the
importation and delivery of the Collateral. Any embargo or Governmental
Requirement, where the Collateral is or may be located, or wherein payments are
to be made, or wherein drafts may be drawn, negotiated, accepted, or paid, shall
be solely the Company’s risk, liability and responsibility.

 

5.7          Subrogation Rights. Upon any payments made to an Issuing Bank under
a Letter of Credit Guaranty, CIT shall acquire by subrogation, any rights,
remedies, duties or obligations granted to or undertaken by the Company to the
Issuing Bank in any application for Letter of Credit, any standing agreement
relating to Letters of Credit or otherwise, all of which shall be deemed to have
been granted to CIT and apply in all respects to CIT and shall be in addition to
any rights, remedies, duties or obligations contained herein.

 

SECTION 6.         Collateral

 

6.1          Grant of Security Interest  (a) As security for the prompt payment
in full of all Obligations, the Company hereby pledges and grants to CIT a
continuing general lien upon, and security interest in, all of the Collateral.

 

(b)           Extent of Security Interests. The security interests granted
hereunder shall extend and attach to:

 

(i)            all Collateral which is presently in existence or hereafter
acquired and which is owned by the Company or in which the Company has any
interest, whether held by the Company or by others for the Company’s account,
and wherever located, and

 

(ii)           all Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either CIT or the Company from the
Company’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 Company, or to the sale, promotion or
shipment thereof.

 

6.2          Limited License.      Regardless of whether CIT’s security
interests in any of the General Intangibles has attached or is perfected, the
Company hereby irrevocably grants to CIT a royalty-free, non-exclusive license
to use the Company’s Trademarks, Copyrights, Patents and other proprietary and
intellectual property rights, in connection with the (i) advertisement for sale,
and the sale or other disposition of, any finished goods Inventory by CIT in
accordance with the provisions of this Financing Agreement, and (ii) the
manufacture, assembly, completion and preparation for sale of any unfinished
Inventory by CIT in accordance with the provisions of this Financing Agreement.

 

6.3          Representations. Covenants and Agreements Regarding Collateral
Generally.

 

(a)           Representations and Warranties. The Company hereby represents and
warrants to CIT that except for Permitted Encumbrances, (i) upon the filing of
UCC financing statements

 

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covering the Collateral in all required jurisdictions, this Financing Agreement
creates a valid, perfected, first priority and exclusive security interest in
all personal property Collateral of the Company as to which perfection may be
achieved by filing, (ii) CIT’s security interests in the Collateral constitute,
and will at all times constitute, first priority and exclusive liens on the
Collateral, and (iii) the Company is, or will be at the time additional
Collateral is acquired by the Company, the absolute owner of the Collateral with
full right to pledge, sell, transfer and create a security interest therein,
free and clear of any and all claims or liens other than Permitted Encumbrances.

 

(b)           Covenants. The Company, at its expense, agrees to forever warrant
and defend the Collateral from any and all claims and demands of any other
person, other than holders of Permitted Encumbrances.

 

6.4          Representations Regarding Accounts and Inventory. The Company
represents and warrants to CIT that:

 

(a)           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;

 

(b)           the Inventory being sold and the Trade Accounts Receivable created
by such sales are the exclusive property of the Company and are not subject to
any lien, consignment arrangement (other than a Qualified Consignment),
encumbrance, security interest or financing statement whatsoever, other than
Permitted Encumbrances;

 

(c)           the invoices evidencing such Trade Accounts Receivable are in the
name of the Company;

 

(d)           with respect to Trade Accounts Receivable 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 of which the Company has
notified CIT pursuant to Section 7.2(g) hereof within the time required thereby;
and

 

(e)           the Company’s Inventory is marketable in the ordinary course of
the Company’s business, and no Inventory has been produced in violation of the
Fair Labor Standards Act (29 U.S.C. §201 et seq.), as amended.

 

6.5          Covenants and Agreements Regarding Accounts and Inventory.

 

(a)           The Company confirms to CIT that all Taxes and fees relating to
the Company’s business, the Company’s sales, and the Accounts or Inventory
relating thereto, are the Company’s sole responsibility, and that same will be
paid by the Company prior to delinquency, subject to Section 7.2(d) hereof, and
that none of said Taxes or fees represents a lien on or claim against the
Accounts, other than a Permitted Tax Lien.

 

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(b)           The Company agrees not to acquire any Inventory on a consignment
basis, nor co- mingle its Inventory with any goods of its customers or any other
person (whether pursuant to any bill and hold sale or otherwise, except for a
Qualified Consignment).

 

(c)           The Company agrees to maintain such books and records regarding
Accounts and Inventory as CIT reasonably may require and agrees that the books
and records of the Company will reflect CIT’s interest in the Accounts and
Inventory. In support of the continuing security interest of CIT in the Accounts
and Inventory, the Company also agrees to deliver to CIT all of the schedules,
reports and other information described in Section 7.2(g) of this Financing
Agreement.   The Company’s failure to maintain its books in the manner provided
herein or to deliver to CIT any of the foregoing information shall in no way
affect, diminish, modify or otherwise limit the security interests granted to
CIT in the Accounts and Inventory.

 

(d)           The Company agrees to issue credit memoranda promptly after
accepting returns or granting allowances, and to deliver to CIT copies of such
credit memoranda as and when required to do so under Section 7.2(g) hereof.

 

(e)           The Company agrees to safeguard, protect and hold all Inventory
for CIT’s account and to make no sale or other disposition thereof except in the
ordinary course of the Company’s business, on open account and on commercially
reasonable terms consistent with the Company’s past practices. Notwithstanding
the ordinary course of the Company’s business and the Company’s past practices,
and except for a Qualified Consignment, the Company agrees not to sell Inventory
on a consignment basis, nor retain any lien on or security interest in any
Inventory sold by the Company. As to any sale or other disposition of Inventory,
CIT shall have all of the rights of an unpaid seller, including stoppage in
transit, replevin, rescission and reclamation. The Company agrees to handle all
Proceeds of sales of Inventory in accordance with the provisions of Section 3.2
hereof.

 

6.6          General Intangibles. The Company represents and warrants to CIT
that as of the date hereof, the Company possesses all General Intangibles
necessary to conduct the Company’s business as presently conducted. The Company
agrees to maintain the Company’s rights in, and the value of, all such General
Intangibles, and to pay when due all payments required to maintain in effect any
licensed rights material to its business. The Company shall provide CIT with
adequate notice of the acquisition of rights with respect to any additional
Patents, Trademarks and Copyrights so that CIT may, to the extent permitted
under the documentation granting such rights or applicable law, perfect its
security interest in such rights in a timely manner.

 

6.7          Commercial Tort Claims. The Company represents and warrants to CIT
that as of the date hereof, the Company holds no interest in any commercial tort
claim. If the Company at any time holds or acquires a commercial tort claim, the
Company agrees to promptly notify CIT in writing of the details thereof, and in
such writing the Company shall grant to CIT a security interest in such
commercial tort claim and in the Proceeds thereof, all upon the terms of this
Financing Agreement.

 

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6.8          Letter of Credit Rights. The Company represents and warrants to CIT
that as of the date hereof, the Company is not the beneficiary of any letter of
credit. If the Company becomes a beneficiary under any letter of credit, the
Company agrees to promptly notify CIT, and upon request by CIT, the Company
agrees to either (a) cause the issuer of such letter of credit to consent to the
assignment of the proceeds of such letter of credit to CIT pursuant to an
agreement in form and substance satisfactory to CIT, or (b) cause the issuer of
such letter of credit to name CIT as the transferee beneficiary of such letter
of credit.

 

6.9          Covenants and Agreements Regarding Margin Accounts. All of the
Company’s Margin Accounts shall be kept with one or more brokers reasonably
acceptable to CIT (in each case the “Broker”).   The Company represents and
warrants to CIT that, with respect to each Margin Account established by the
Company: (a) the Company is and shall be the owner, free and clear of all liens,
security interests and encumbrances, except for those in favor of CIT or Broker
and Permitted Encumbrances, of any and all of the Company’s Margin Accounts; and
(b) except as otherwise permitted by this Financing Agreement, the Company owns
no open futures positions which arc not either covered by existing, unsold
Inventory or covered by reciprocal contracts for future delivery of the product
by reliable sellers, or directly related to Inventory which the Company plans to
purchase in the ordinary course of the Company’s business. The Company warrants
that the Company’s Margin Accounts will be used solely for the hedging of the
Company’s investments in Inventory and not for speculative purposes. With
respect to any Margin Accounts opened after the Closing Date, the Company, the
Broker and CIT shall execute an Assignment of Commodity Accounts and Commodity
Contracts, in a standard form reasonably acceptable to CIT and the Broker. All
of ClT’s rights under such Assignment of Commodity Accounts and Commodity
Contracts shall be in addition to ClT’s rights hereunder, and shall also apply
to any of the Company’s Margin Accounts that are maintained, in violation of
this Financing Agreement, with any Person other than the Broker.

 

6.10        Reference to Other Loan Documents. Reference is hereby made to the
other Loan Documents for additional representations, covenants and other
agreements of the Company regarding the Collateral covered by such Loan
Documents.

 

6.11        Credit Balances; Additional Collateral.

 

(a)           The rights and security interests granted to CIT hereunder shall
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 termination of this
Financing Agreement and the full and final payment and satisfaction of the
Obligations. Any reserves or balances to the credit of the Company (in the
Revolving Loan Account or otherwise), and any other property or assets of the
Company in the possession of CIT, may be held by CIT as Other Collateral, and
applied in whole or partial satisfaction of such Obligations when due, subject
to the terms of this Financing Agreement. The liens and security interests
granted to CIT herein and any other lien or security interest which CIT may have
in any other assets of the Company secure payment and performance of all present
and future Obligations.

 

(b)           Notwithstanding ClT’s security interests in the Collateral, to the
extent that the Obligations are now or hereafter secured by any assets or
property other than the Collateral, or by the

 

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guaranty, endorsement, assets or property of any other person, CIT shall have
the right in its sole discretion to determine which rights, security, 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 such rights, security, liens,
security interests or remedies, or any of CIT’s rights under this Financing
Agreement.

 

SECTION 7.  Representations, Warranties and Covenants

 

7.1     Initial Disclosure Representations and Warranties.  The Company
represents and warrants to CIT that as of the date hereof:

 

(a)           Financial Condition.  (i) The amount of the Company’s assets, at
fair valuation, exceeds the book value of the Company’s liabilities, (ii) the
Company is generally able to pay its debts as they become due and payable, and
(iii) the Company does not have unreasonably small capital to carry on its
business as currently conducted absent extraordinary and unforeseen
circumstances. All financial statements of the Company previously furnished to
CIT present fairly, in all material respects, the financial condition of the
Company as of the date of such financial statements, subject to year end
adjustments and the absence of footnotes.

 

(b)           Organization Matters: Collateral Locations.  Schedule 7.l (b)
attached hereto correctly and completely sets forth (w) the Company’s exact
name, as currently reflected by the records of the Company’s State of
incorporation or formation, (x) the Company’s State of incorporation or
formation, (y) the Company’s federal employer identification number and State
organization identification number (if any), and (z) the address of the
Company’s chief executive office and all locations of Collateral.

 

(c)           Power and Authority; Conflicts; Enforceability.

 

(i)            The Company has full power and authority to execute and deliver
this Financing Agreement and the other Loan Documents to which it is a party,
and to perform all of the Company’s obligations thereunder.

 

(ii)           The execution and delivery by the Company of this Financing
Agreement and the other Loan Documents to which it is a party, and the
performance of the Company’s obligations thereunder, have been duly authorized
by all necessary corporate or other relevant action, and do not (w) require any
consent or approval of any director, shareholder, partner or member of the
Company that has not been obtained, (x) violate any term, provision or covenant
contained in the organizational documents of the Company (such as the
certificate or articles of incorporation, certificate of origin, partnership
agreement, by-laws or operating agreement), (y) violate, or cause the Company to
be in default under, any Governmental Requirement applicable to the Company or
its assets, or (z) violate any term, provision, covenant or representation
contained in, or constitute a default under, or result in the creation of any
lien under, any loan agreement, lease, indenture, mortgage, deed of trust, note,
security agreement or pledge agreement to which the Company is a signatory or by
which the Company or any of the Company’s assets are bound or affected, except
in

 

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each case where such violation or default could not reasonably be expected to
have a Material Adverse Effect.

 

(iii)          This Financing Agreement and the other Loan Documents to which
the Company is a party constitute legal, valid and binding obligations of the
Company, enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium, fraudulent transfer and other
laws affecting creditors’ rights generally, and subject to general principles of
equity, regardless of whether considered in a proceeding at law or in equity.

 

(d)           Schedules.  Each of the Schedules attached to this Financing
Agreement set forth a true, correct and complete description of the matter or
matters covered thereby.

 

(e)           Compliance with Laws.   The Company and the Company’s properties
are in compliance with all Governmental Requirements, except to the extent the
failure to so comply would not have a Material Adverse Effect.   The Company has
obtained and maintains all permits, approvals, authorizations and licenses
necessary to conduct its business as presently conducted, except to the extent
the failure to have such permits, approvals, authorizations or licenses would
not have a Material Adverse Effect.

 

(f)           Environmental Matters.  Except as set forth on Schedule 7.1(f), or
as could not reasonably be expected to have a Material Adverse Effect:

 

(i)            None of the operations of the Company are the subject of any
federal, state or local investigation to determine whether any remedial action
is needed to address the presence or disposal of any environmental pollution,
hazardous material or environmental clean-up of the Real Estate or any of the
Company’s leased real property. No enforcement proceeding, complaint, summons,
citation, notice, order, claim, litigation, investigation, letter or other
written communication from a federal, state or local authority has been filed
against or delivered to the Company, regarding or involving any release of any
environmental pollution or hazardous material on any real property now or
previously owned or operated by the Company.

 

(ii)           The Company has no known contingent liability with respect to any
release of any environmental pollution or hazardous material on any real
property now or previously owned or operated by the Company.

 

(iii)          The Company is in compliance with all applicable environmental
Governmental Requirements, except to the extent that the failure to so comply
would not have a Material Adverse Effect.

 

(g)           Pending Litigation.  Except as previously disclosed by the Company
to CIT in writing, there exist no actions, suits or proceedings of any kind by
or against the Company pending in any court or before any arbitrator or
governmental body, that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

 

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7.2          Affirmative Covenants. Until the termination of this Financing
Agreement and the full and final payment and satisfaction of the Obligations:

 

(a)           Maintenance of Financial Records; Inspections. The Company agrees
to maintain books and records pertaining to the Company’s financial matters in
accordance with GAAP.  The Company agrees that CIT or its agents may enter upon
the Company’s premises at any time during normal business hours and upon
reasonable prior notice, and from time to time, but unless an Event of Default
exists, no more than four (4) times each year, in order to (i) examine and
inspect the books and records of the Company, and make copies thereof and take
extracts therefrom, and (ii) verify, inspect and perform physical counts and
other valuations of the Collateral and any and all records pertaining thereto.
The Company irrevocably authorizes all accountants and third parties to disclose
and deliver directly to CIT, at the Company’s expense, subject to any rights of
such accountants or third parties to refuse to so disclose or deliver on any
basis other than lack of such authorization, all financial statements and
information, books, records, work papers and management reports generated by
them or in their possession regarding the Company or the Collateral.  After and
during the continuance of an Event of Default, and in addition to the
Administrative Management Fees payable hereunder, all costs, fees and expenses
incurred by CIT in connection with such examinations, inspections, physical
counts and other valuations, including reasonable travel, meal and lodging
expenses of CIT personnel, shall constitute Out-of-Pocket Expenses.

 

(b)           Further Assurances. The Company agrees to comply with the
requirements of all state and federal laws in order to grant to CIT valid and
perfected first priority security interests in the Collateral, subject only to
the Permitted Encumbrances.   CIT is hereby authorized by the Company to file
any financing statements, continuations and amendments covering the Collateral
without the Company’s signature in accordance with the provisions of the UCC.
 The Company hereby consents to and ratifies the filing of any financing
statements covering the Collateral by CIT on or prior to the Closing Date. The
Company agrees to do whatever CIT reasonably may request from time to time, by
way of (i) filing notices of liens, financing statements, amendments, renewals
and continuations thereof, (ii) cooperating with CIT’s agents and employees,
(iii) keeping Collateral records, (iv) transferring proceeds of Collateral to
CIT’s possession in accordance with the terms hereof and (v) performing such
further acts as CIT reasonably may require in order to effect me purposes of
this Financing Agreement, including the execution of control agreements with
respect to Depository Accounts and Investment Property.

 

(c)           Insurance and Condemnation.

 

(i)            Required Insurance. The Company 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 in the exercise of its
reasonable business judgment (the “Required Insurance”). All policies covering
the Inventory are, subject to the rights of any holder of a Permitted
Encumbrance having priority over the security interests of CIT, to be made
payable solely to CIT, in case of loss, under a standard non-contributory
“secured party” or “lender’s loss payable” clause or endorsement, and are to
contain such other provisions as CIT reasonably may require to fully protect
CIT’s interest in Inventory and to any payments to be made under such policies.
Each loss payable endorsement in

 

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favor of CIT shall provide (x) for not less than thirty (30) days prior written
notice to CIT of the exercise of any right of cancellation and (y) that CIT’s
right to payment under any property insurance policy will not be invalidated by
any act or neglect of, or any breach of warranty or condition by, the Company or
any other party. If an Event of Default shall have occurred and remain
outstanding, CIT, subject to the rights of any holder of a Permitted Encumbrance
having priority over the security interests of CIT, shall have the sole right,
in the name of CIT or the Company, to file claims under any insurance policies
relating to the Collateral, to receive, receipt and give acquittances 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.

 

(ii)           CIT’s Purchase of Insurance. Unless the Company provides CIT with
evidence of the Required Insurance on Inventory in the manner set forth in
Section 7.2(c)(i) above, CIT may purchase insurance at the Company’s expense to
protect CIT’s interests in Inventory, The insurance purchased by CIT may, but
need not, protect the Company’s interests in Inventory, and therefore such
insurance may not pay any claim which the Company may make or any claim which is
made against the Company in connection with the Inventory. The Company may later
request that CIT cancel any insurance purchased by CIT, but only after providing
CIT with satisfactory evidence that the Company has the Required Insurance. If
CIT purchases insurance covering all or any portion of the Inventory, the
Company shall be responsible for the costs of such insurance, including interest
(at the applicable rate set forth hereunder) and other charges accruing on the
purchase price therefor, until the effective date of the cancellation or the
expiration of the insurance, and CIT may charge all of such costs, interest and
other charges to the Revolving Loan Account. The costs of the premiums of any
insurance purchased by CIT may exceed the costs of insurance that the Company
may be able to purchase on its own. In the event that CIT purchases insurance,
CIT will notify the Company of such purchase within thirty (30) days after the
date of such purchase. If, within thirty (30) days after the date of receipt of
such notice, the Company provides CIT with proof that the Company had the
Required Insurance as of the date on which CIT purchased insurance and the
Company has continued at all times thereafter to have the Required Insurance,
then CIT agrees to cancel the insurance purchased by CIT and credit the
Revolving Loan Account for the amount of all costs, interest and other charges
associated with such insurance that CIT previously charged to the Revolving Loan
Account.

 

(iii)         Application of Insurance and Condemnation Proceeds. So long as no
Default or Event of Default shall have occurred and remain outstanding as of the
date of CIT’s receipt of any Casualty Proceeds:

 

(w)          In the event of any loss or damage to any Inventory by
condemnation, fire or other casualty, CIT agrees to apply the Casualty Proceeds
first to repay the outstanding Revolving Loans.

 

(x)            In the event of any loss or damage to any item of Collateral
other than Inventory by condemnation, fire or other casualty, if the Casualty
Proceeds relating to such condemnation, fire or other casualty are less than or
equal to $250,000, CIT agrees to apply such Casualty Proceeds to repay the
outstanding Revolving Loans.

 

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(d)           Payment of Taxes. The Company agrees to pay when due all Taxes
lawfully levied, assessed or imposed upon the Company or the Collateral
(including all sales taxes collected by the Company on behalf of the Company’s
customers in connection with sales of Inventory and all payroll taxes collected
by the Company on behalf of the Company’s employees), unless the Company is
contesting such Taxes in good faith, by appropriate proceedings, and is
maintaining adequate reserves for such Taxes in accordance with GAAP.
 Notwithstanding the foregoing, if a lien securing any Taxes is filed in any
public office and such lien is not a Permitted Tax Lien, then the Company shall
pay all Taxes secured by such lien immediately and remove such lien of record
promptly.  Pending the payment of such Taxes and removal of such lien, CIT may,
at its election and without curing or waiving any Event of Default which may
have occurred as a result thereof, (i) establish an Availability Reserve in the
amount of such Taxes (or such lesser amount as CIT shall deem appropriate in the
exercise of its reasonable business judgment) or (ii) unless the Company is
contesting such Taxes as permitted herein, pay such Taxes on behalf of the
Company, and the amount paid by CIT shall become an Obligation which is due and
payable on demand by CIT.

 

(e)           Compliance With Laws.

 

(i)            The Company agrees to comply with all Governmental Requirements,
if the failure to so comply would have a Material Adverse Effect, provided that
the Company may contest Governmental Requirements unless CIT has notified the
Company that, in the exercise of its reasonable business judgment, such contest
will materially and adversely effect CIT’s rights or priorities in the
Collateral.

 

(ii)           Without limiting the generality of the foregoing, the Company
agrees to comply with all environmental Governmental Requirements, as presently
existing or as adopted or amended in the future, applicable to the ownership
and/or use of its real property and operation of its business, if the failure to
so comply would have a Material Adverse Effect.  The Company shall not be deemed
to have breached any provision of this Section 7.2(e) if (x) the failure to
comply with the requirements of this Section 7.2(e) resulted from good faith
error or innocent omission, (y) the Company promptly commences and diligently
pursues a cure of such breach and (z) such failure is cured within thirty (30)
days following the Company’s receipt of notice from CIT of such failure, or if
such breach cannot in good faith be cured within thirty (30) days following the
Company’s receipt of such notice, then such breach is cured within a reasonable
time frame based on the extent and nature of the breach and the necessary
remediation, and in conformity with any applicable consent order, consensual
agreement and applicable law.

 

(iii)          The Company agrees to furnish to CIT, upon request by CIT, copies
of any documents relating to any audits or inspections of the Company conducted
by any Governmental Authority.

 

(f)            Notices Concerning Environmental. Employee Benefit and Pension
Matters. The Company agrees to notify CIT in writing of:

 

(i)            any expenditure (actual or anticipated) in excess of $500,000 for
environmental clean-up, environmental compliance or environmental testing and
the impact of said expenses on the Company’s working capital;

 

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(ii)           the Company’s receipt of written notice from any local, state or
federal authority advising the Company of any environmental liability (real or
potential) arising from the Company’s operations, its premises, its waste
disposal practices, or waste disposal sites used by the Company if such
liability could reasonably be expected to have a Material Adverse Effect; and

 

(iii)          the Company’s receipt of written notice from any governmental
agency or any sponsor of any “multiemployer plan” (as that term is defined in
ERISA) to which the Company has contributed, relating to any of the events
described in Section 10.1 (g) hereof.

 

The Company agrees to provide CIT promptly with copies of all such notices and
other information pertaining to any matter set forth above if CIT reasonably so
requests.

 

(g)           Collateral Reporting and Information. (i) The Company agrees to
furnish to CIT:

 

(1)           At least once each week (but more frequently upon CIT’s reasonable
request), a borrowing base certificate in form and substance reasonably
satisfactory to CIT, certified by the treasurer or chief financial officer of
the Company (or any other authorized officer satisfactory to CIT), together with
such confirmatory schedules of Trade Accounts Receivable and Inventory (in form
and substance reasonably satisfactory to CIT) as CIT reasonably may request.
CIT, in its sole discretion, may permit the Company to access CIT’s System for
the purpose (in addition to those set forth in Section 3.7) of completing and
submitting borrowing base certificates when required hereunder.

 

(2)           On or before the 20th day of each month other than the first month
of each fiscal year of the Company, and on or before the last day of the first
month of each fiscal year of the Company (but more frequently upon CIT’s
reasonable request), a detailed and summary aging report of Trade Accounts
Receivable existing as of the last day of the preceding month, a roll-forward of
Trade Accounts Receivable from the first day of the preceding month through the
last day of the preceding month, and a summary of Inventory as of the last day
of the preceding month, all in such form as CIT reasonably shall require,
certified by the treasurer or the chief financial officer of the Company (or any
other authorized officer satisfactory to CIT), together with (x) a
reconciliation, as of the last day of the preceding month, of the Company’s
Trade Accounts Receivable aging report to the Company’s general ledger and
applicable borrowing base certificate delivered by the Company to CIT, and (z)
if required by CIT, such other information sufficient to allow CIT to update the
amount of Eligible Accounts Receivable and Eligible Inventory.

 

(3)           On or before the 20th day of each month other than the first month
of each fiscal year of the Company, and on or before the last day of the first
month of each fiscal year of the Company (but more frequently upon CIT’s
reasonable request), an aged trial balance of all the Company’s accounts payable
as of the last day of the preceding month.

 

(4)           Prompt written disclosure of (x) all matters (other than general
economic conditions or matters affecting the industry generally) adversely
affecting the value, enforceability or collectibility of any material amount of
the Trade Accounts Receivable of the Company, (y) all

 

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asserted customer disputes, offsets, defenses, counterclaims, returns,
rejections and all reclaimed or repossessed merchandise or goods, and (z) all
matters (other than general economic conditions and matters affecting the
industry generally) adversely affecting the value of a material amount of the
Inventory, all in such detail and format as CIT reasonably may require, provided
that to the extent that any such matter would not have a Material Adverse
Effect, the Company may disclose such matter to CIT when the Company provides
CIT with the borrowing base certificate described in clause (i) above.

 

(5)           Prior written notice of any change in the location of any
Collateral to any location other than listed on Schedule 7.1 (b) and any
material change in type, quantity, quality or mix of the Inventory.

 

(6)           From time to time, on reasonable prior notice and subject to the
limitations set forth in Section 7.2(a), access to the Company’s computers,
electronic media, software programs (including any electronic records, contracts
and signatures) and such other documentation and information relating to the
Trade Accounts Receivable, Inventory and other Collateral as CIT reasonably may
require.

 

(ii) The Company may deliver to CIT any borrowing base certificate, collateral
report or other material that the Company is required to deliver to CIT under
clauses (1), (2) and (3) of Section 7.2(g)(i) by e-mail or other electronic
transmission (an “Electronic Transmission”), subject to the following terms:

 

(1)           Each Electronic Transmission must be sent by the treasurer or
chief financial officer of the Company (or any other authorized officer
satisfactory to CIT), and must be addressed to the loan officer and the
collateral analyst of CIT that handle the Company’s account, as designated by
CIT from time to time to the Company in writing. If any Electronic Transmission
is returned to the sender as undeliverable, the material included in such
Electronic Transmission must be delivered to the intended recipient in the
manner required by Section 12.6 hereof.

 

(2)           Each certificate, collateral report or other material contained in
an Electronic Transmission must be in a “pdf’ or other imaging format and, to
the extent that such material must be certified by an officer of the Company
under this Section 7.2(g). must contain the signature of the officer submitting
the Electronic Transmission. As provided in Section 12.6. any signature on a
certificate, collateral report or other material contained in an Electronic
Transmission shall constitute a valid signature for purposes hereof. CIT may
rely upon, and assume the authenticity of, any such signature, and any material
containing such signature shall constitute an “authenticated” record for
purposes of the Uniform Commercial Code and shall satisfy the requirements of
any applicable statute of frauds.

 

(3)           Each Electronic Transmission must contain the name and title of
the officer of the Company transmitting the Electronic Transmission, and shall
include following text in the body of the Electronic Transmission:

 

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“Pursuant to the Financing Agreement dated April 26, 2006 between The CIT
Group/Business Credit, Inc. (“CIT”) and Royster-Clark Nitrogen, Inc. now known
as Rentech Energy Midwest Corporation (the “Company”), the undersigned
                    [title of submitting officer] of the Company hereby delivers
to CIT the Company’s                      [describe submitted reports]. The
Company represents and warrants to CIT that the materials included in this
Electronic Transmission are true, correct, and complete in all material
respects. The name of the officer of the Company set forth in this e-mail
constitutes the signature of such officer, and this e-mail shall constitute an
authenticated record of the Company.”

 

(4)           The Company agrees to maintain the original versions of all
certificates, collateral reports and other materials delivered to CIT by means
of an Electronic Transmission and agrees to furnish to CIT such original
versions within five (5) Business Days of ClT’s request for such materials,
signed and certified (to the extent required hereunder) by the officer
submitting the Electronic Transmission.

 

(iii)          The Company hereby authorizes CIT to regard the Company’s printed
name or rubber stamp signature on assignment schedules or invoices as the
equivalent of a manual signature by one of the Company’s authorized officers or
agents. The Company’s failure to promptly deliver to CIT any schedule, report,
statement or other information set forth in this Section 7.2(g) shall not
affect, diminish, modify or otherwise limit CIT’s security interests in the
Collateral.

 

(h)           Financial Reporting.  The Company agrees to furnish to CIT:

 

(i)            within ninety (90) days after the end of each fiscal year of
Rentech, a Balance Sheet of Rentech as at the close of such year, and
consolidated and consolidating statements of profit and loss and cash flow of
Rentech for such year, in each case with such consolidated statements being
audited by independent public accountants selected by the Company and
satisfactory to CIT (it being understood that Rentech’s present independent
public accountants are presently acceptable to CIT), together with (x) the
unqualified opinion as to financial statement of the accountants preparing such
financial statements and (y) if requested by CIT, such accountants’ management
practice letter;

 

(ii)           within thirty (30) days after the end of each month that is not
the end of a fiscal quarter of the Company, (w) a Balance Sheet of the Company
as at the end of such month, (x) statements of profit and loss of the Company
for such month and for the period commencing on the first day of the current
fiscal year through the end of such month, (y) comparative statements of profit
and loss of the Company for the same month and same fiscal year-to-date period
in the prior fiscal year, provided that the foregoing shall not apply to periods
prior to the closing date of the Acquisition, and (z) a summary report of all
purchase and sale commitments, in each case, certified by the treasurer or chief
financial officer of the Company (or any other authorized officer satisfactory
to CIT);

 

(iii)          within forty five (45) days after the end of each fiscal quarter
of the Company, (w) a Balance Sheet of the Company as at the end of such fiscal
quarter, (x) statements of profit and loss and cash flow of the Company for such
fiscal quarter and for the period commencing on the first day

 

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of the current fiscal year through the end of such fiscal quarter, (y)
comparative statements of profit and loss and cash flow of the Company for the
same fiscal quarter and same fiscal year-to-date period in the prior fiscal
year, provided that the foregoing shall not apply to periods prior to the
closing date of the Acquisition, and (z) a summary report of all purchase and
sale commitments, in each case, certified by the treasurer or chief financial
officer of the Company (or any other authorized officer satisfactory to CIT);

 

(iv)          as and when filed by the Company, copies of all (x) financial
reports, registration statements and other documents filed by the Company with
the U.S. Securities and Exchange Commission, as and when filed by the Company,
and (y) annual reports filed pursuant to ERISA in connection with each benefit
plan of the Company subject to ERISA; and

 

(v)           no later than thirty (30) days prior to the beginning of each
fiscal year of the Company, monthly projections of the Company’s Balance Sheet
and statements of profits and loss and cash flow of the Company, as well as
monthly projected Net Availability for the Company for such fiscal year.

 

(vi)          Each financial statement which Rentech or the Company is required
to submit pursuant to clauses (i), (ii) and (iii) above must be accompanied by
an officer’s certificate substantially in the form set forth on Exhibit A
attached hereto, signed by the treasurer or chief financial officer of the
Company (or any other authorized officer satisfactory to CIT). In addition,
should the Company modify its accounting principles and procedures from those in
effect on the Closing Date in any manner that would affect the calculations
related to the covenants set forth in Section 7.3 of this Financing Agreement,
the Company agrees to prepare and deliver to CIT statements of reconciliation in
form and substance reasonably satisfactory to CIT.

 

(i)            Asset Appraisals. From time to time upon the request of CIT, the
Company agrees to permit CIT to perform appraisals of the Company’s Inventory.
The Company agrees to reimburse CIT for the costs and expenses relating to one
(1) Inventory appraisal in any twelve-month period, so long as no Event of
Default shall have occurred and remain outstanding, and all such appraisals
performed while an Event of Default remains outstanding. All appraisals shall be
performed by qualified appraisers selected by CIT. To the extent that the
Company is required by this Section 7.2(i) to reimburse CIT for ClT’s costs and
expenses relating to appraisals, such costs and expenses shall constitute
Out-of-Pocket Expenses.

 

(j)            Business Qualification. The Company agrees to qualify to do
business, and to remain qualified to do business and in good standing, in each
jurisdiction where the failure to so qualify or to remain qualified or in good
standing, would have a Material Adverse Effect.

 

(k)           Anti-Money Laundering and Terrorism Regulations. Without limiting
the generality of the foregoing, the Company agrees to comply with all
applicable anti-money laundering and terrorism laws, regulations and executive
orders in effect from time to time (including, without limitation, the USA
Patriot Act (Pub. L. No. 107-56)). The Company acknowledges that CIT’s
performance hereunder is subject to compliance with all such laws, regulations
and executive orders, and in furtherance of the foregoing, the Company agrees to
provide to CIT all information about the

 

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Company’s ownership, officers, directors, customers and business structure as
CIT reasonably may require to comply with, such laws, regulations and executive
orders.

 

(l)            Distribution Agreement.  If the Distribution Agreement is amended
in any material respect or is terminated or if there is a material
non-performance by any party the Distribution Agreement without, in each case,
the prior written consent of CIT, within 30 days, the Company will (i) provide
to CIT such information as reasonably requested by CIT to describe the amendment
or material non-performance and its effect on the Company (such information and
such effect to be in form and substance reasonably acceptable to CIT) or (ii),
in the case of a termination, provide to CIT a distribution or similar agreement
in form and substance reasonably acceptable to CIT with an entity reasonably
acceptable to CIT or make other arrangements reasonably acceptable to CIT for
the sale of such Inventory that was subject to the Distribution Agreement.

 

7.3          Financial Covenants.  Until termination of this Financing Agreement
and the full and final payment and satisfaction of all Obligations, the Company
agrees:

 

(a)           Tangible Net Worth.  To maintain as of the end of each month.
Tangible Net Worth of not less than $61,000,000

 

(b)           Fixed Charge Coverage.  To maintain a Fixed Charge Coverage Ratio,
calculated for each of the periods set forth below, of not less than:

 

Fiscal Period

 

Ratio

 

 

 

 

 

2-month period ending June 30, 2006

 

1.05 to 1.00

 

5-month period ending September 30, 2006

 

1.10 to 1.00

 

8-month period ending December 31, 2006

 

1.10 to 1.00

 

11 -month period ending March 31, 2007

 

1.10 to 1.00

 

12-month period ending June 30, 2007 and at each quarter-end thereafter

 

1.10 to 1.00

 

 

7.4          Negative Covenants.  Until termination of this Financing Agreement
and full and final payment and satisfaction of all Obligations, the Company
agrees not to, and will cause each Guarantor not to:

 

(a)           Liens and Encumbrances.  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 Collateral or its
other assets, whether now owned or hereafter acquired, except for the Permitted
Encumbrances.

 

(b)           Indebtedness.        Incur or create any Indebtedness other than
the Permitted Indebtedness.

 

(c)           Sale of Assets. Sell, lease, assign, transfer or otherwise dispose
of (x) Collateral, except as otherwise specifically permitted by this Financing
Agreement, or (y) provided that Parent may assign its interest in the capital
stock of the Company to

 

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an affiliate, assets which do not constitute Collateral that have a book value
in excess of $10,000,000.

 

(e)           Corporate Change. (i) Merge or consolidate with any other entity,
(ii) change its name or principal place of business, (iii) change its structure
or organizational form, or reincorporate or reorganize in a new jurisdiction,
(iv) enter into or engage in any operation or activity materially different from
that presently being conducted by the Company or Guarantor, as the case may be;
provided that the Company and any Guarantor may change its name, its principal
place of business or its structure or organization form so long as the Company
provides CIT with thirty (30) days prior written notice thereof and the Company
and any Guarantor, as the case may be, executes and delivers to CIT, prior to
making such change, all documents and agreements required by CIT in order to
ensure that the liens and security interests granted to CIT hereunder continue
in effect without any break or lapse in perfection.

 

(f)            Guaranty Obligations.  Assume, guarantee, endorse, or otherwise
become liable upon the obligations of any person, firm, entity or corporation,
except pursuant to the Guaranties and by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.

 

(g)           Dividends and Distributions.  Declare or pay any dividend or
distribution of any kind on, or purchase, acquire, redeem or retire, any of its
equity interests (of any class or type whatsoever), whether now or hereafter
issued and outstanding, provided, however, so long as no Default or Event of
Default shall have occurred and be continuing and, as applicable, the Company or
a Guarantor has sufficient working capital to pay its debts as such debts come
due, if the Company or a Guarantor is a disregarded entity for tax purposes for
any taxable year, the Company or a Guarantor, as applicable may pay cash
dividends to its shareholders in an aggregate amount equal to such shareholders’
actual federal and state income tax liability for such taxable year (or portion
thereof) attributable to the Company’s or a Guarantor’s taxable income, as
applicable provided that (i) as a condition precedent to any such payment, the
Company shall deliver to CIT a letter from its independent public accountants,
in form and substance satisfactory to CIT, detailing the amount necessary to be
applied to such shareholders’ tax liabilities, which letter may relate to the
estimated tax payments for the next succeeding four quarters, and (ii) such
payment or distribution shall be limited to the amounts specified in said
letter.

 

(h)            Investments.  (i) Create any new subsidiary, or (ii) make any
advance or loan to, or any investment in, any firm, entity, person or
corporation, or (iii) acquire all or substantially all of the assets of, or any
capital stock or any equity interests in, any firm, entity or corporation, other
than current investments of the Company and any Guarantor, as the case may be,
in existing subsidiaries of such entities.

 

(i)            Related Party Transactions.  Enter into any transaction,
including, without limitation, any purchase, sale, lease, loan or exchange of
properly, with any shareholder, officer, director, parent (direct or indirect),
subsidiary (direct or indirect) or other person or entity under common control
with the Company or any Guarantor, unless (i) such transaction otherwise is not
prohibited by the provisions of this Financing Agreement, (ii) such transaction
is in the ordinary

 

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course of business and pursuant to the reasonable requirements of the Company or
any Guarantor, as the case may be, and upon fair and reasonable terms, no less
favorable to such entity than such entity could obtain in a comparable arms
length transaction with an unrelated third party, and (iii) no Event of Default
shall have occurred and remain outstanding at the time such transaction occurs,
or would occur after giving effect to such transaction. CIT acknowledges that
the Management Agreement as presented to CIT on or about the Closing Date does
not violate this Section 7.4(i). provided, however, (i) the fees or other
compensation payable by the Company thereunder shall not be increased; and (ii)
the fees or other compensation payable by the Company thereunder shall not be
pre-paid and shall not be paid by the Company if a Default or Event of Default
shall have occurred and be continuing or would result thereby.

 

(j)            Restricted Payments. (i) Make any payment of the principal of, or
interest on, any Subordinated Debt, or purchase, acquire or redeem any of the
Subordinated Debt, unless (x) such payment, purchase, acquisition or redemption
is expressly permitted by the terms of the applicable Subordination Agreement
and (y) no Default or Event of Default shall have occurred and remain
outstanding on the date on which such payment or transaction occurs, or would
occur as a result thereof; (ii) except as provided in Section 7.4(i) of this
Financing Agreement with regard to the Management Agreement, pay any management,
consulting or other similar fees to any shareholder, director, parent (direct or
indirect), subsidiary (direct or indirect) or other person or entity under
common control with the Company or any Guarantor.

 

SECTION 8.  Interest. Fees and Expenses

 

8.1          Interest on Revolving Loans. Interest on the outstanding principal
balance of the Revolving Loans that are Chase Bank Rate Loans shall be due and
payable monthly on the first day of each month and shall accrue at a rate per
annum equal to the Applicable Margin plus the Chase Bank Rate on the average net
principal balance of such Revolving Loans at the close of each day during the
immediately preceding month, as reflected by ClT’s System.  On each Revolving
Loan that is a LIBOR Loan, interest shall be due and payable on the LIBOR
Interest Payment Date and shall accrue at a rate per annum equal to the
Applicable Margin plus the applicable LIBOR on the outstanding principal balance
of such LIBOR Loan. In the event of any change in said Chase Bank Rate, the rate
set forth in the first sentence of this Section 8.1 shall change, effective as
of the date of such change, so as to remain equal to the Applicable Margin plus
the new Chase Bank Rate. All interest rates shall be calculated based on a
360-day year and actual days elapsed.

 

8.2         Default Interest Rate.  Upon the occurrence of an Event of Default,
(a) provided that CIT has given the Company written notice of such Event of
Default (other than an Event of Default described in Section 10.1 (c) of this
Financing Agreement, for which no written notice shall be required), all
Obligations may, at the election of CIT, bear interest at the Default Rate of
Interest until such Event of Default is waived, and (b) at CIT’s election at any
time thereafter, interest on each outstanding LIBOR Loan shall be due and
payable on the first day of each month, notwithstanding the Interest Period with
respect thereto.

 

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8.3          Fees and Expenses Relating to Letters of Credit.

 

(a)          Letter of Credit Guaranty Fee.  In consideration of the issuance of
any Letter of Credit Guaranty by CIT or other assistance of CIT in obtaining
Letters of Credit pursuant to Section 5 hereof, the Company agrees to pay to CIT
a Letter of Credit Guaranty Fee equal to the Applicable Margin per annum on the
face amount of each Letter of Credit. All Letter of Credit Guaranty Fees shall
be due and payable monthly on the first day of each month.

 

(b)           Charges of Issuing Bank.  The Company agrees to reimburse CIT for
any and all charges, fees, commissions, costs and expenses charged to CIT for
the Company’s account by an Issuing Bank in connection with, or arising out of.
Letters of Credit or out of transactions relating thereto, when charged to or
paid by CIT, or as may be due upon any termination of this Financing Agreement.

 

8.4          Out-of Pocket Expenses.  The Company agrees to reimburse CIT for
all Out-of-Pocket Expenses when charged to or paid by CIT.

 

8.5         Line of Credit Fee.  On the first day of each month, commencing on
May 1, 2006, the Company agrees to pay to CIT the Line of Credit Fee.

 

8.6          Loan Facility Fee; Application of Deposits and Commitment Fee. To
induce CIT to enter into this Financing Agreement and to extend to the Company
the Revolving Line of Credit, the Company agrees to pay to CIT a Loan Facility
Fee in the amount of $112,500, which shall be fully earned upon execution of
this Financing Agreement by CIT and the Company. On or about the Closing Date,
CIT shall credit the unused portion, if any, of the $25,000 commitment fee paid
by the Company to CIT under the Proposal Letter to the Loan Facility Fee, and
shall charge the Revolving Loan Account for the $87,500 balance of the Loan
Facility Fee concurrently with CIT’s initial disbursement of loans hereunder.
Any unused due diligence deposit held by CIT pursuant to the Proposal Letter
shall be credited to the Revolving Loan Account.

 

8.7          Administrative Management Fee.  On the Closing Date and on the
first day of the month following the month in which each annual anniversary of
the Closing Date occurs, the Company agrees to pay to CIT the Administrative
Management Fee, which shall be fully earned when due.

 

8.8          Standard Operational Fees.  In addition to the Administrative
Management Fee and all Out-of-Pocket Expenses incurred by CIT in connection with
any action taken under Section 7.2(a) hereof (but without duplication), the
Company agrees to pay to CIT, the standard charges of CIT for each wire transfer
made by CIT to or for the benefit of the Company (currently $30) and for Dunn
and Bradstreet searches conducted by CIT for the Company’s account (currently
$65), provided that such standard charges may be increased by CIT from time to
time.   Such charges shall be due and payable in accordance with CIT’s standard
practices, as in effect from time to time.

 

8.9          LIBOR Loans.

 

(a)           Conditions Applicable to LIBOR Loans. The Company may elect to use
LIBOR as to any Revolving Loans, convert any Chase Bank Rate Loan to a new LIBOR
Loan or continue any

 

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existing LIBOR Loan as a new LIBOR Loan on the last day of the Interest Period
with respect to such existing LIBOR Loan, so long as:

 

(j)            no Default or Event of Default shall have occurred and remain
outstanding on the date on which such new LIBOR Loan is requested and on the
first day of the Interest Period for such new LIBOR Loan;

 

(ii)           the Company requests the new LIBOR Loan no later than three (3)
Business Days preceding the first day of the Interest Period for such new LIBOR
Loan (or three (3) Business Days prior to the expiration of any Interest Period,
in the case of a continuation of an existing LIBOR Loan);

 

(iii)          if CIT requests written confirmation of any new LIBOR Loan from
the Company, the Company shall have signed and returned to CIT any such
confirmation on or prior to the first day of the Interest Period for such new
LIBOR Loan; and

 

(iv)          with respect to the Interest Period selected by the Company for
such new LIBOR Loan, (x) either (1) JPMorgan Chase Bank provides a LIBOR quote
for such Interest Period or CIT otherwise determines the LIBOR for such Interest
Period, as provided in the definition of LIBOR, or (2) the LIBOR for such
Interest Period as quoted by JPMorgan Chase Bank or as determined by CIT
adequately and fairly reflects the cost of maintaining or funding CIT’s loans
bearing interest at LIBOR for such Interest Period, and (y) such Interest Period
ends on or before the Termination Date.

 

Any LIBOR election must be for at least $150,000 and if greater, in integral
multiples of $50,000, and there shall be no more than six (6) LIBOR Loans
outstanding at one lime, Elections for LIBOR Loans shall be irrevocable once
made. If any condition for a LIBOR election is not satisfied, then the requested
new loan (or continuation of an existing LIBOR Loan) shall be made to the
Company as a Chase Bank Rate Loan.

 

(b)           Restrictions Affecting the Making or Funding of LIBOR Loans.
Notwithstanding any other provision of this Financing Agreement to the contrary,
if any law, regulation, treaty or directive, or any amendment thereto or change
in the interpretation or application thereof, shall make it unlawful for CIT to
make or maintain any LIBOR Loan, then (x) such LIBOR Loan shall convert
automatically to a Chase Bank Rate Loan at the end of the applicable Interest
Period, or such earlier date as may be required by such law, regulation, treaty
or directive, and (y) the obligation of CIT thereafter to make or continue LIBOR
Loans and to convert Chase Bank Rate Loans into LIBOR Loans hereunder shall be
suspended until CIT determines that it is no longer unlawful to make and
maintain LIBOR Loans as contemplated herein. In addition, in the event that, by
reason of any Regulatory Change (other than reserve requirements included in the
calculation of the LIBOR Rate), CIT either (x) 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 CIT which includes deposits by
reference to which the interest rate on LIBOR Loans is determined hereunder, or
a category of extensions of credit or other assets of CIT which includes LIBOR
Loans, or (y) becomes subject to any material restrictions on the amount of such
a category of liabilities or assets which CIT may hold, then if CIT so elects by
written notice to the Company, the obligation of CIT thereafter to

 

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make or continue LIBOR Loans and to convert Chase Bank Rate Loans into LIBOR
Loans hereunder shall be suspended until such Regulatory Change ceases to be in
effect.

 

(c)           Inability to Determine LIBOR.  Notwithstanding any other provision
of this Financing Agreement to the contrary, if CIT determines 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 to an Interest Period with respect to any election
of a new LIBOR Loan, CIT shall give written notice of such determination to the
Company prior to the effective date of such election. Upon receipt of such
notice, the Company may cancel the Company’s request for such new LIBOR Loan, in
which case the requested LIBOR Loan shall be made as a Chase Bank Rate Loan.
Until such notice has been withdrawn by CIT, the obligation of CIT thereafter to
make or continue LIBOR Loans and to convert Chase Bank Rate Loans into LIBOR
Loans hereunder shall be suspended until CIT determines that adequate and
reasonable means again exist for ascertaining LIBOR applicable to an Interest
Period with respect to any election of a new LIBOR Loan.

 

(d)           Compensation for Costs. The Company hereby agrees to pay to CIT,
on demand, any additional amounts necessary to compensate CIT for any costs
incurred by CIT in making any conversions from LIBOR Loans to Chase Bank Rate
Loans in accordance with this Section 8.9. including, without limitation,
breakage costs provided for in Section 8.10 of this Financing Agreement.

 

(e)           Loan Participants. For purposes of this Section 8.9. the term
“CIT” shall include any financial institution that purchases from CIT a
participation in the loans made by CIT to the Company hereunder.

 

8.10        LIBOR Breakage Costs and Fees. In the event that the Company (i)
pays all or any part of the principal amount of a LIBOR Loan on a date prior to
the last day of an Interest Period for such LIBOR Loan, (ii) fails to borrow a
LIBOR Loan, or fails to convert a Chase Bank Rate Loan to a LIBOR Loan, on the
date for such borrowing or conversion specified in the relevant request to CIT,
or (iii) fails to pay to CIT the principal of, or interest on, any LIBOR Loan
when due, the Company agrees to pay to CIT (and any financial institution that
purchases from CIT a participation in the loans made by CIT to the Company
hereunder), on demand, such amount as shall compensate CIT and such financial
institution for any actual loss, cost or expense that CIT or such financial
institution may sustain or incur as a result of such event (including, without
Limitation, any interest or fees payable by CIT or such financial institution to
lenders or depositors of funds obtained by CIT or such financial institution in
order to make or maintain any LIBOR Loans under this Financing Agreement), and
(z) in the case of a prepayment of any LIBOR Loan, the excess (if any) of the
amount of interest that would have accrued on such loan from the first day of
the Interest Period to the date of prepayment, assuming that such loan was a
Chase Bank Rate Loan, over the amount of interest that actually accrued on such
loan from the first day of the Interest Period to the date of prepayment. The
determination by CIT of the amount of any such loss, cost or expense described
in clause (y) of the preceding sentence, when set forth in a written notice to
the Company containing CIT’s calculations thereof in reasonable detail, shall be
conclusive and binding upon the Company, in the absence of manifest error.

 

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8.11        Capital Adequacy. In the event that CIT (or any financial
institution that purchases from CIT a participation in the loans made by CIT to
the Company hereunder), subsequent to the Closing Date, determines in the
exercise of its reasonable business judgment that (x) any change in applicable
law, rule, regulation or guideline regarding capital adequacy, or (y) any change
in the interpretation or administration thereof, or (z) compliance by CIT or
such financial institution with any new request or directive regarding capital
adequacy (whether or not having the force of law) of any central bank or other
governmental or regulatory authority, has or would have the effect of reducing
the rate of return on CIT’s or such financial institution’s capital as a
consequence of its obligations hereunder to a level below that which CIT or such
financial institution could have achieved but for such change or compliance
(taking into consideration CIT’s or such financial institution’s policies with
respect to capital adequacy) by an amount deemed material by CIT or such
financial institution in the exercise of their reasonable business judgment, the
Company agrees to pay to CIT, no later than five (5) days following demand by
CIT, such additional amount or amounts as will compensate CIT or such financial
institution for such reduction in rate of return, In determining such amount or
amounts, CIT and such financial institution may use any reasonable averaging or
attribution methods. The protection of this Section 8.12 shall be available to
CIT and such financial institution regardless of any possible contention of
invalidity or inapplicability with respect to the applicable law, regulation or
condition, A certificate of CIT or such financial institution setting forth such
amount or amounts as shall be necessary to compensate CIT or such financial
institution with respect to this Section 8.12 and the calculation thereof, when
delivered to the Company, shall be conclusive and binding on the Company absent
manifest error. In the event CIT or such financial institution exercises its
rights pursuant to this Section 8.12. and subsequent thereto determines that the
amounts paid by the Company exceeded the amount which CIT or such financial
institution actually required to compensate CIT or such financial institution
for any reduction in rate of return on its capital, such excess shall be
returned to the Company by CIT or such financial institution, as the case may
be.

 

8.12.       Taxes. Reserves and Other Conditions.  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 by any
financial institution that purchases from CIT a participation in the loans made
by CIT to the Company hereunder) with any new request or directive (whether or
not having the force of law) of any central bank or other governmental or
regulatory authority, shall:

 

(a)           subject CIT or such financial institution to any tax of any kind
whatsoever with respect to this Financing Agreement or the other Loan Documents,
or change the basis of taxation of payments to CIT or such financial institution
of principal, fees, interest or any other amount payable hereunder or under any
of the other Loan Documents (except for changes in the rate of tax on the
overall net income of CIT or such financial institution by the federal
government or other 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
financial institution by reason of or in respect to this Financing

 

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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 financial institution any other condition
with respect to this Financing Agreement or any other document;

 

and the result of any of the foregoing is to (i) increase the cost to CIT of
making, renewing or maintaining CIT’s loans hereunder (or the cost to such
financial institution in participating in such loans) by an amount deemed
material by CIT or such financial institution in the exercise of its reasonable
business judgment, or (ii) reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of the loans made hereunder
by an amount that CIT or such financial institution deems to be material in the
exercise of its reasonable business judgment, the Company agrees to pay to CIT,
no later than five (5) days following demand by CIT, such additional amount or
amounts as will compensate CIT or such financial institution for such increase
in cost or reduction in payment, as the case may be. A certificate of CIT or
such financial institution setting forth such amount or amounts as shall be
necessary to compensate CIT or such financial institution with respect to this
Section 8.13 and the calculation thereof, when delivered to the Company, shall
be conclusive and binding on the Company absent manifest error. In the event CIT
or such financial institution exercises its rights pursuant to this Section
8.13. and subsequent thereto determines that the amounts paid by the Company in
whole or in part exceeded the amount which CIT or such financial institution
actually required to compensate CIT or such financial institution for any
increase in cost or reduction in payment, such excess shall be returned to the
Company by CIT or such financial institution, as the case may be.

 

8.13        Authority to Charge Revolving Loan Account. The Company hereby
authorizes CIT to charge the Revolving Loan Account with the amount of all
payments due under this Section 8 as such payments become due.  Any amount
charged to the Revolving Loan Account shall be deemed a Chase Bank Rate Loan
hereunder and shall bear interest at the rate provided in Section 8.1 (or
Section 8.2. if applicable) of this Financing Agreement. The Company confirms
that any charges which CIT may make to the Revolving Loan Account as provided
herein will be made as an accommodation to the Company and solely at CIT’s
discretion.

 

8.14       Participations.   CIT may (provided that no Event of Default has
occurred and is continuing, subject to the prior written consent of the Company,
such consent not to be unreasonably withheld) sell participations to one or more
banks or other financial institutions in or to all or a portion of its rights
and obligations under this Financing Agreement; provided however, that (i) CIT’s
obligations under this Financing Agreement shall remain unchanged, (ii) CIT
shall remain solely responsible to the Company for the performance of such
obligations, (iii) CIT shall remain the holder of the Obligations for all
purposes of this Agreement; and (iv) the agreement providing for the
participation shall bind the participating financial institution the transfer
provisions of Section 8.15 of this Financing Agreement.   Subject to Section
8.15 of this Financing Agreement, financial institutions that purchase
participations from CIT in accordance with this Section 8.14 shall be entitled
to the benefits of Sections 8.9, 8.10, 8.11 and 8.12 of this Financing Agreement
as set forth therein.

 

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8.15        Replacement of a Participant. A financial institution that purchases
a participation from CIT will become a “Replacement Candidate” if it has made a
demand under Section 8.9, 8.10. 8.11 or 8.12 of this Financing Agreement. If a
financial institution that purchases a participation from CIT becomes a
Replacement Candidate, the Company shall have the right to require CIT to
transfer to another financial institution selected by (he Company and reasonably
satisfactory to CIT, the participation held by such Replacement Candidate in
accordance with Section 8.14 ; provided, that CIT shall not have any obligation
to the Company to find any such other financial institution and in order for the
Company to replace a Replacement Candidate, and the Company must require such
replacement within three (3) months of the date the Replacement Candidate became
a Replacement Candidate.

 

SECTION 9.         Powers

 

9.1          Authority. The Company hereby authorizes CIT, or any person or
agent which CIT may designate, at the Company’s cost and expense, to exercise
all of the following powers, which authority shall be irrevocable until the
termination of this Financing Agreement and the full and final payment and
satisfaction of the Obligations:

 

(a)           To receive, take, endorse, sign, assign and deliver, all in the
name of CIT or the Company, 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 Company
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 Company, any certified public accountant designated by CIT or any
other designee of CIT, 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 Company’s account; and

 

(f)            To take or bring, in the name of CIT or the Company, all steps,
actions, suits or proceedings deemed by CIT necessary or desirable to enforce or
effect collection of the Accounts.

 

9.2          Limitations on Exercise.  Notwithstanding any other provision of
this Financing Agreement to the contrary, the powers set forth in Sections
9.1(b), (c), (e) and (f) may only be exercised if an Event of Default shall have
occurred and remain outstanding.

 

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SECTION 10.       Events of Default and Remedies

 

10.1        Events of Default.  Each of the following events shall constitute an
“Event of Default” under this Agreement:

 

(a)           the cessation of the business of the Company or any Guarantor, or
the calling of a meeting of the creditors of the Company or any Guarantor for
purposes of compromising its debts and obligations;

 

(b)           the failure of either the Company or any Guarantor to generally
meet its debts as those debts mature;

 

(c)           (i) the commencement by the Company or any Guarantor of any
bankruptcy, insolvency, arrangement, reorganization, receivership, assignment
for the benefit of creditors or similar proceedings under any federal or state
law; or (ii) the commencement against the Company or any Guarantor of any
bankruptcy, insolvency, arrangement, reorganization, receivership, assignment
for the benefit of creditors or similar proceeding under any federal or state
law by creditors of any of them, but only if such proceeding is not contested by
the Company or any Guarantor within ten (10) days and not dismissed or vacated
within sixty (60) days of commencement, or any of the actions or relief sought
in any such proceeding shall occur or be authorized by the Company or any
Guarantor;

 

(d)           the breach or violation by the Company of any warranty,
representation or covenant contained in this Financing Agreement (other than
those referred to in Section 10.1(e) below), provided that such breach or
violation shall not be deemed to be an Event of Default unless the Company fails
to cure such breach or violation to CIT’s reasonable satisfaction within ten
(10) days from the date of such breach or violation;

 

(e)           the breach or violation by the Company of any warranty,
representation or covenant contained in Sections 3.2, 6.3, 6.4, 6.5, 7.2(c),
7.2(d), 7.2(g)(i), 7.3 and 7.4;

 

(f)            the failure of the Company 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 Company shall (i) engage in any “prohibited transaction” as
defined in ERISA, (ii) incur any “accumulated funding deficiency” as defined in
ERISA, (iii) incur any ‘reportable event” as defined in ERISA, (iv) terminate
any “plan”, as defined in ERISA or (v) become involved 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 this Section 10.1(g), such event or condition either (x) remains
uncured for a period of thirty (30) days from date of occurrence and (y) could,
in CIT’s reasonable business judgment, subject the Company to any tax, penalty
or other liability having a Material Adverse Effect;

 

(h)           the occurrence of any default or event of default (after giving
effect to any applicable grace or cure period) under any of the other Loan
Documents, or any of the other Loan Documents ceases to be valid, binding and
enforceable in accordance with its terms;

 

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(i)            the occurrence of any default or event of default (after giving
effect to any applicable grace or cure period) under any instrument or agreement
evidencing or governing (i) the Subordinated Debt or (ii) other Indebtedness of
the Company having a principal amount in excess of $250,000;

 

(j)            the Company shall modify the terms or provisions of any
agreement, instrument or other document relating to any Subordinated Debt
without CIT’s prior written consent, unless such modification is permitted by
the applicable Subordination Agreement;

 

(k)           a Change of Control shall occur;

 

(1)           a final judgment for the payment of money in excess of $250,000
shall be rendered against the Company or any Guarantor (other than a judgment as
to which a financially sound and reputable insurance company has acknowledged
coverage of such claim in writing), and either (i) within thirty (30) days after
the entry of such judgment, shall not have been discharged or stayed pending (or
if stayed pending appeal, shall not have been discharged within thirty (30) days
after the entry of a final order of affirmance on appeal), or (ii) enforcement
proceedings shall be commenced by any holder of such judgment; or

 

(m)          any Guarantor who is a natural person shall die, or any Guarantor
shall attempt to terminate its Guaranty or deny that such Guarantor has any
liability thereunder, or any Guaranty shall be declared null and void and of no
further force and effect.

 

10.2        Remedies With Respect to Outstanding Loans. Upon the occurrence and
during the continuation of a Default or an Event of Default, at the option of
CIT, all loans, advances and extensions of credit provided for in Sections 3 and
5 of this Financing Agreement shall be made in CIT’s sole discretion, and the
obligation of CIT to make Revolving Loans and to assist the Company in opening
Letters of Credit shall cease unless such Default is cured to CIT’s satisfaction
or such Event of Default is waived in accordance herewith. In addition, upon the
occurrence of an Event of Default, CIT may, at its option (a) declare all
Obligations immediately due and payable, (b) charge the Company the Default Rate
of Interest on all then outstanding or thereafter incurred Obligations in lieu
of the interest provided for in Sections 8.1 of this Financing Agreement,
provided that CIT has given the Company written notice of such Event of Default
if required by Section 8.2. and (c) immediately terminate this Financing
Agreement upon notice to the Company. Notwithstanding the foregoing, (x) CIT’s
commitment to make loans, advances and extensions of credit provided for in
Sections 3 and 5 of this Financing Agreement automatically shall terminate
without any declaration, notice or demand by CIT upon the commencement of any
proceeding described in clause (ii) of Section 10.1(c), and (y) this Financing
Agreement automatically shall terminate and all Obligations shall become due and
payable immediately without any declaration, notice or demand by CIT, upon the
commencement of any proceeding described in clause (i) of Section 10.1(c) or the
occurrence of an Event of Default described in clause (ii) of Section 10.1 (c).
The exercise of any option is not exclusive of any other option that may be
exercised at any time by CIT.

 

10.3        Remedies With Respect to Collateral.  Immediately after the
occurrence and during the continuation of an Event of Default, CIT may, at its
option, to the extent permitted by applicable

 

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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 electronic records, contracts and signatures
pertaining thereto), documents, instruments and files, and any receptacles or
cabinets containing same, relating to the Accounts, and CIT may use, at the
Company’s expense, such of the Company’s personnel, supplies or space at the
Company’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 Company or CIT, and
generally shall have all other rights respecting the Accounts, including,
without limitation, the right to (i) accelerate or extend the time of payment,
(ii) settle, compromise, release in whole or in pan any amounts owing on any
Accounts and (iii) issue credits in the name of the Company or CIT; (c) sell,
assign and deliver the Collateral and any returned, reclaimed or repossessed
merchandise, with or without advertisement, at public or private sale, for cash,
on credit or otherwise, at ClT’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 Company; (d) foreclose ClT’s security
interests in the Collateral by any available judicial procedure, or take
possession of any or all of the Collateral without judicial process, and to
enter any premises where any 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. To the extent not
prohibited by applicable law, CIT shall have the right, without notice or
advertisement, 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 Company 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 (including, without limitation, warranties of title, possession,
quiet enjoyment and the like), 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 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 in
such saleable form as CIT shall deem appropriate. The Company agrees, at the
request of CIT, to assemble the Inventory, and to make it available to CIT at
premises of the Company or elsewhere and to make available to CIT the premises
and facilities of the Company for the purpose of CIT s taking possession of,
removing or putting the Inventory 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 ClT’s exercise of any of the
foregoing rights (after deducting all Out-of-Pocket Expenses relating thereto)
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 Company shall remain liable
to CIT for any deficiencies, and CIT in turn agrees to remit to the Company 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 right of CIT under applicable
law or the other Loan Documents, all of which shall be cumulative.

 

10.4        General Indemnity.  In addition to the Company’s agreement to
reimburse CIT for Out-of-Pocket Expenses, but without duplication, the Company
hereby agrees to indemnify CIT and its officers, directors, employees, attorneys
and agents (each, an “Indemnified Party”) from, and to defend and hold each
Indemnified Party harmless against, any and all losses, liabilities,
obligations,

 

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claims, actions, judgments, suits, damages, penalties, costs, fees, expenses
(including reasonable attorney’s fees) of any kind or nature which at any time
may be imposed on, incurred by, or asserted against, any Indemnified Party:

 

(a)           as a result of CIT’s exercise of (or failure to exercise) any of
CIT’s rights and remedies hereunder, including, without limitation, (i) any sale
or transfer of the Collateral, (ii) the preservation, repair, maintenance,
preparation for sale or securing of any Collateral, and (iii) the defense of
CIT’s interests in the Collateral (including the defense of claims brought by
the Company, as a debtor-in-possession or otherwise, any secured or unsecured
creditors of the Company, or any trustee or receiver in bankruptcy);

 

(b)           as a result of any environmental pollution, hazardous material or
environmental clean-up relating to the Real Estate, the Company’s operation and
use of the Real Estate, and the Company’s off-site disposal practices;

 

(c)           arising from or relating to (i) the maintenance and operation of
any Depository Account, (ii) any Depository Account Control Agreements and (iii)
any action taken (or failure to act) by any Indemnified Party with respect
thereto;

 

(d)           in connection with any regulatory investigation or proceeding by
any regulatory authority or agency having jurisdiction over the Company; and

 

(e)           otherwise relating to or arising out of the transactions
contemplated by this Financing Agreement and the other Loan Documents, or any
action taken (or failure to act) by any Indemnified Party with respect thereto;

 

provided that an Indemnified Party’s conduct in connection with the any of the
foregoing matters does not constitute gross negligence or willful misconduct, as
finally determined by a court of competent jurisdiction. This indemnification
shall survive the termination of this Financing Agreement and the payment and
satisfaction of the Obligations. CIT may from time to time establish
Availability Reserves with respect to claims asserted which are covered by this
indemnity as CIT may deem advisable in the exercise of its reasonable business
judgment, and upon termination of this Financing Agreement, CIT may hold such
reserves as cash reserves as security for claims asserted which are covered by
this indemnity.

 

SECTION 11.   Termination

 

Except as otherwise provided in Section 10.2 hereof, CIT may terminate this
Financing Agreement and the Revolving Line of Credit only as of the initial or
any subsequent Termination Date, and then only by giving the Company at least
sixty (60) days prior written notice of termination. The Company may terminate
this Financing Agreement at any time prior to any Termination Date upon thirty
(30) days prior written notice to CIT. THIS FINANCING AGREEMENT, UNLESS
TERMINATED AS HEREIN PROVIDED, SHALL AUTOMATICALLY CONTINUE FROM TERMINATION
DATE TO TERMINATION DATE. All Obligations shall become due and payable in full
on the date of any termination

 

50

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hereunder and, pending a final accounting of the Obligations, CIT may withhold
any credit balances in the Revolving Loan Account (unless supplied with an
indemnity satisfactory to CIT) as a cash reserve to the extent necessary to
cover any contingent Obligation then outstanding, including, but not limited to,
an amount equal to 110% of the face amount of any outstanding Letters of Credit
All of ClT’s rights, liens and security interests granted pursuant to the Loan
Documents shall continue after any termination of this Financing Agreement until
all Obligations have been fully and finally paid and satisfied.

 

SECTION 12.  Miscellaneous

 

12.1        Waivers. The Company hereby waives diligence, demand, presentment,
protest and any notices thereof as well as notices of nonpayment, intent to
accelerate and acceleration. No waiver of an Event of Default by CIT shall be
effective unless such waiver is in writing and signed by CIT. No delay or
failure of CIT to exercise any right or remedy hereunder, whether before or
after the happening of any Event of Default, shall impair any such right or
remedy, or shall operate as a waiver of such right or remedy, or as a waiver of
such Event of Default. 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, 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        Entire Agreement; Amendments. This Financing Agreement and the other
Loan Documents; (a) constitute the entire agreement between the Company and CIT;
(b) supersede any prior agreements (including the agreements set forth in the
Proposal Letter); (c) may be amended only by a writing signed by the Company and
CIT; and (d) shall bind and benefit the Company and CIT and their respective
successors and assigns. Should the provisions of any other Loan Document
conflict with the provisions of this Financing Agreement, the provisions of this
Financing Agreement shall apply and govern. This Financing Agreement, any other
Loan Document and any subsequent amendment to any of them may be executed in
several counterparts, each of which shall be construed together as one original.
Facsimile signatures on this Financing Agreement, any other Loan Document and
any subsequent amendment to any of them shall be considered as original
signatures. This Financing Agreement, any other Loan Document and any subsequent
amendment to any of them may be executed in several counterparts, each of which
shall be construed together as one original. Facsimile signatures on this
Financing Agreement, any other Loan Document and any subsequent amendment to any
of them shall be considered as original signatures.

 

12.3        Usury Limit.  In no event shall the Company, 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, If as a result, the entire principal
amount of the Obligations is paid in full, any remaining excess shall be
refunded to the Company. This Section 12.3 shall control every other provision
of the Financing Agreement, the other Loan Documents and any other agreement
made in connection herewith.

 

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12.4        Severability.  If any provision hereof or of any other Loan Document
is held to be illegal or unenforceable, such provision shall be fully severable,
and the remaining 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        WAIVER OF JURY TRIAL: SERVICE OF PROCESS; CONSENT TO JURISDICTION.
THE COMPANY AND CIT EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO   THE   LOAN   DOCUMENTS   OR  
THE   TRANSACTIONS   CONTEMPLATED THEREUNDER.   THE COMPANY 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.     THE  
COMPANY  HEREBY  IRREVOCABLY  SUBMITS   TO  THE EXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
PLEDGOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT  AND IRREVOCABLY WAIVES
ANY  OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO  THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF CIT TO BRING
PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION. ANY
JUDICIAL PROCEEDING BY THE PLEDGOR AGAINST CIT OR ANY AFFILIATE OF CIT
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR  CONNECTED WITH THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW
YORK, NEW YORK.

 

12.6        Notices.  Except as otherwise herein provided, any notice or other
communication required hereunder shall be in writing (messages sent by e-mail or
other electronic transmission (other than by telecopier) shall not constitute a
writing, however any signature on a document or other writing that is
transmitted by e-mail or telecopier shall constitute a valid signature for
purposes hereof), and shall be deemed to have been validly served, given or
delivered when received by the recipient if hand delivered, sent by commercial
overnight courier or sent by facsimile, or three (3) Business Days after deposit
in the United States mail, with proper first class postage prepaid and addressed
to the party to be notified as follows:

 

(a)           if to CIT, at:

 

The CIT Group/Business Credit, Inc.

1211 Avenue of the Americas, 20th Floor

 

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New York, NY 10036

Attn: Regional Credit Manager

Telecopier No.: (212) 536-9379;

 

(b)           if to the Company at:

 

Rentech Development Corporation

1331 17th Street, Suite 720

Denver, Colorado 80202

Attn: General Counsel

Telecopier No.: (303) 298-8010;

 

(c)           with a copy to:

 

Latham & Watkins LLP,

633 W, 5th Street, Suite 4000

Los Angeles, California 90071

Attn: Mary Ruhl, Esq.

Telecopier No.: (213) 891-8763.

 

12.7        CHOICE OF LAW.  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, EXCEPT TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT
INCLUDES AN EXPRESS ELECTION TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION.

 

IN WITNESS WHEREOF, the parties hereto have caused this Financing Agreement to
be executed, accepted and delivered, by their proper and duly authorized
officers as of the date set forth above.

 

THE COMPANY:

CIT:

 

 

ROYSTER-CLARK NITROGEN, INC.

THE CIT GROUP/BUSINESS CREDIT, INC.

 

 

 

 

By:

/s/ Douglas M. Miller

 

By:

/s/ Alan V. Schuler

 

Title:

Vice President

 

Title:

Senior

Vice President

 

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EXHIBIT A

 

COMPLIANCE CERTIFICATE

 

[Date]

 

The CIT Group/Business Credit, Inc.
1211 Avenue of the Americas, 20th Floor
New York, NY 10036

 

RE:         Financing Agreement dated as of April 26, 2006 (the “Financing
Agreement”) between The CIT Group/Business Credit, Inc. (“CIT”) and
Royster-Clark Nitrogen, Inc. [now known as Rentech Energy Midwest Corporation]
(the “Company”)

 

Ladies and Gentlemen:

 

Reference is made to the Financing Agreement. Capitalized terms used herein and
not specifically defined shall have the meanings given to such terms in the
Financing Agreement.

 

Pursuant to Section 7.2(h) of the Financing Agreement, I enclose the Company’s
financial statements for the month ended                , 200    (the “Reporting
Month”) and the fiscal year-to-date period ended                , 200    . As
the                 of the Company, I hereby certify to CIT that: (a) the
financial statement(s) present fairly and accurately in all material respects
the Company’s financial condition at the end of the particular accounting
periods covered by such financial statements, as well as the Company’s operating
results during such accounting periods, subject to year-end audit adjustments;
(b) during the Reporting Month, (i) to my knowledge, there has occurred no
Default or Event of Default under the Financing Agreement, or, if I have
knowledge that any Default or Event of Default has occurred during such period,
a detailed description thereof is set forth on the Exhibit        attached
hereto, and (ii) die Company has not received any notice of cancellation with
respect to its property insurance policies; and (c) Exhibit       attached
hereto sets forth detailed calculations showing compliance with all financial
covenants contained in the Financing Agreement, for the periods of measurement
covered by or ending on the last day of the Reporting Month and required to be
met as of such date

 

Executed and delivered on behalf of the Company.

 

Very truly yours,

 

 

[attach appropriate exhibits]

 

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Schedule 1.1(a) - Existing Indebtedness

 

Intercompany Debt in the amount of $68,690,638.00, owing from Rentech
Development Corporation to Rentech, Inc.

 

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Schedule 7.1(b) – Company and Collateral Information

 

Exact Company Name in State of
Incorporation or Formation: Royster-Clark Nitrogen, Inc.

 

State of Incorporation or Formation: Delaware

 

F.E.I.N.: 36-3536929

 

State Organizational No.: 5478-090-7

 

Address of Chief Executive Office: 16675 Highway 20 West, East Dubuque, IL 61025

 

Collateral Locations: 16675 Highway 20 West, East Dubuque, IL 61025

 

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Schedule 7.1(f) – Environmental Matters

 

None.

 

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