Document:

Exhibit 10.1

 

FINANCING AGREEMENT

 

The CIT Group/Business Credit, Inc.

 

(as Lender)

 

and

 

Royster-Clark Nitrogen, Inc.

 

(as Borrower)

 

Dated: April 26, 2006

 

 

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

  

 

ii

 

	
  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

  

 

iii

 

	
   

  	
  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

  

 

iv

 

	
   

  	
  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

  	
   

  

 

v

 

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%.

 

 

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.

 

2

 

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

 

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.

 

4

 

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

 

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

 

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,

 

7

 

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.

 

8

 

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.

 

9

 

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.

 

10

 

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

 

11

 

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

 

12

 

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

 

13

 

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

 

14

 

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.

 

15

 

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

 

16

 

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.

 

17

 

(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.

 

18

 

(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.

 

19

 

(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

 

20

 

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.

 

21

 

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.

 

22

 

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

 

23

 

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

 

24

 

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

 

25

 

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.

 

26

 

(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.

 

27

 

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

 

28

 

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

 

29

 

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.

 

30

 

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

 

31

 

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.

 

32

 

(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;

 

33

 

(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

 

34

 

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:

 

35

 

“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

 

36

 

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

 

37

 

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

 

38

 

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

 

39

 

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.

 

40

 

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

 

41

 

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

 

42

 

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.

 

43

 

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

 

44

 

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.

 

45

 

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.

 

46

 

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;

 

47

 

(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

 

48

 

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,

 

49

 

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

 

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.

 

51

 

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

 

52

 

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

  
									

 

53

 

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]

 

 

Schedule 1.1(a) - Existing Indebtedness

 

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

 

 

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

 

 

Schedule
7.1(f) – Environmental Matters

 

None.Exhibit
10.1

 

	
  

  	
   

  
	
  Corporate Offices

  	
   

  
	
  1000 Bishops Gate Blvd,
  Suite 300

  	
   

  
	
  Mount Laurel, NJ 08054-4632

  	
   

  

 

April 26, 2006

 

Adele T. Barbato

Senior Vice President - Human Resources

c/o MedQuist Inc.

1000 Bishops Gate Boulevard

Mount Laurel, NJ 08054

 

Dear Adele:

 

This letter agreement
sets forth our agreement with respect to the relocation of your principal
residence from Harleysville, Pennsylvania to Huntingdon Valley, Pennsylvania in
connection with your continued employment by MedQuist Inc. (the “Company”).

 

As we have
agreed, the Company will reimburse you for (or provide an allowance, as
applicable) all reasonable and customary moving and other relocation expenses
to the extent set forth on Schedule A attached hereto. In addition to moving
costs incurred in connection with your relocation you are entitled to reimbursement
(or an allowance) for (i) expenses attendant to the sale of your former
residence; (ii) certain expenses incurred in the purchase of your new
residence; and (iii) incidental miscellaneous expenses.

 

The Company
will pay all covered expenses promptly following its receipt of appropriate
documentation for such expenses. All such expenses must be documented on the
appropriate expense voucher provided by the Company (and include supporting
documentation) and must be within the parameters set forth on Schedule A.
To the extent you voluntarily terminate your employment with the Company within
one year of your relocation, you must reimburse the Company for all Company-paid
expenses on a pro-rata basis as set forth on Schedule A. For purposes of
this letter agreement your relocation date shall be deemed to be the date of
the first to occur of (i) the sale of your Harleysville, Pennsylvania residence
or (ii) the purchase of your Huntingdon Valley, Pennsylvania.

 

Nothing
contained in this letter agreement is intended or shall be construed to confer
upon you any rights to employment or continued employment with the Company
beyond the provisions set forth in that certain letter agreement between you
and the Company dated February 8, 2005 (the “Employment Agreement”), and nothing
herein shall be construed as an amendment, modification or waiver of any
provision of the Employment Agreement. This letter agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof.

 

 

If the
foregoing accurately sets forth our understanding in regard to the matters set
forth herein, please acknowledge your agreement to and intention to be legally
bound by the terms and conditions of this letter agreement by signing below and
returning a copy of this letter agreement to me.

 

 

Sincerely,

 

 

Frank Lavelle

President, MedQuist Inc.

 

 

	
  AGREED AND ACCEPTED,

  
	
  This
        day of April, 2006

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Adele T. Barbato

  

 

 

SCHEDULE A

 

Moving and Other Relocation Expenses

 

1.     Moving Expenses.

 

You
are eligible for reimbursement of the following reasonable expenses:

 

A.            Transportation of household goods and
automobiles; and

B.            Packing, unpacking and storage of household
goods.  Insurance is provided based on the reasonable value of household
goods.

 

2.     Expenses attendant to the sale of a former
residence.

 

MedQuist
will reimburse you for the reasonable and customary closing costs incurred by
you in connection with the sale of your primary residence in Harleysville,
Pennsylvania including attorney fees, real estate transfer fees, title survey
costs, inspection fees required by law, real estate commission at prevailing
rate up to 6% maximum, or advertising costs, and mortgage prepayment penalty.

 

3.     Expenses attendant to purchase of new
residence.

 

MedQuist
will reimburse you, up to a maximum of $5,000, for reasonable and customary
costs incurred by you in connection with the purchase of your primary residence
in the Huntingdon Valley, Pennsylvania including home inspection fee, appraisal
fee, credit report and survey fee incurred due to requirement by law, mortgage,
or local custom; recording of mortgage and deed an applicable governmental
fees; title insurance or guarantees; tax and title search, attorney’s fees and
loan origination fees.

 

4.     Resignation within 12 months of relocation

 

In
the event you voluntarily resign from your employment with MedQuist within one
year of relocation, you must reimburse the company for all company-paid
relocation expenses on a pro rata basis (one-twelfth per month).

 

5.     Miscellaneous

 

MedQuist
will reimburse you for miscellaneous expenses, up to a maximum of $10,000, for
documented items with receipts to cover such items as, automobile(s) retagging/registration,
connecting appliances, telephone installation, etc.

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