The CIT
Group/Business Credit, Inc. T:
212 382-7000
1211 Avenue of the Americas
New York, NY 10036
August 20, 2004
Pharmaceutical Formulations, Inc.
460 Plainfield Avenue
Edison, New Jersey 08817
Konsyl Pharmaceuticals, Inc.
8050 Industrial Park Road
Easton, Maryland 21601
WAIVER AND
AMENDMENT
Ladies and Gentlemen:
We refer to the First Amended and Restated Financing Agreement
between The CIT Group/Business Credit ("Lender") and Pharmaceutical
Formulations, Inc. and Konsyl Pharmaceuticals, Inc., jointly and
severally as borrower (collectively herein referred to herein as
"you" or "your") dated May 15, 2003, as supplemented and amended
from time to time (the "Financing Agreement"). Capitalized terms
used and not otherwise defined herein shall have the same meanings
given them in the Financing Agreement.
You have advised us that you are, or may be, in violation of the
financial covenants set forth in Section 7.10, Paragraphs (c), (d)
and (e) of the Financing Agreement for the fiscal period ended July
3, 2004.
This letter is to confirm our agreement that, solely with
respect to said fiscal period the foregoing violations and/or
breaches of the Financing Agreement shall not be deemed to be
Defaults and/or Events of Default under the Financing Agreement. On
and after the date hereof you shall be in compliance with all of
the terms and provisions of the Financing Agreement, as amended
hereby (including, without limitation, the financial covenants
referred to above).
In addition, this is to confirm that pursuant to mutual consent
and understanding, effective as of even date herewith (except with
respect to paragraph 3 below, which shall be effective as of April
26, 2004) the Financing Agreement shall be, and hereby is, amended
as follows:
1. Section 1 shall be, and hereby
is, amended by the addition thereto of the following new
definitions in alphabetical order where they should appear:
|
|
"
EBITDA shall mean, in any period, all earnings of
Pharmaceutical Formulations and Konsyl Pharmaceuticals, Inc.
(collectively herein referred to as "Companies") before all (i)
interest and tax obligations, (ii) depreciation and (iii)
amortization for said period, all determined in accordance with
GAAP on a consistent basis with the latest audited financial
statements of the Companies, but excluding the effect of
extraordinary and/or non-reoccurring gains or losses for such
period."
|
|
|
" Fixed
Charge Coverage Ratio shall mean, for the relevant period,
the ratio determined by dividing the sum of EBITDA and cash
infusions from ICC Industries Inc. ("ICC") by the sum of (a) all
interest obligations paid or due, (b) the amount of principal
repaid or scheduled to be repaid on the Term Loan and Subordinated
Debt, (c) Capital Expenditures actually incurred, and (d) all
federal, state and local income tax expenses due and payable."
|
2. Section 7.10 shall be, and
hereby is, deleted in its entirety and replaced by the following
text:
|
|
"Until termination of the Financing Agreement
and payment and satisfaction in full of all Obligations
hereunder:
(a) Konsyl Pharmaceuticals, Inc. and Pharmaceutical Formulations,
Inc. shall maintain, on a consolidated basis, at the end of each
month set forth below a Tangible Net Worth of not less than the
amount set forth below for the applicable period:
|
Period
Tangible Net Worth
------
------------------
For the month ending July 31, 2004
$1,942,000
For the month ending August 30, 2004
$1,756,000
For the month ending September 30, 2004
$1,425,000
For the month ending October 31, 2004
$1,1
