LOAN AND SECURITY AGREEMENT

 

supplemented from time to time in connection with the making of any Loan, together with all cash and non-cash proceeds thereof, whether in the form of accounts, general intangibles, instruments, investment property, chattel paper or otherwise.

 

“ Default ” means any event specified in Section 8.01 hereof, which with the giving of notice or the lapse of time, or both, would result in an Event of Default.

 

“ Default Rate of Interest ” has the meaning provided in the applicable Note.

 

“ Documentation Fee ” has the meaning provided in Section 7.01 .

 

“ Event of Default ” has the meaning provided in Section 8.01 .

 

“ Event of Loss ” has the meaning provided in Section 6.02 .

 

“ GAAP ” means generally accepted accounting principles in the United States of America as in effect from time to time and for the period as to which such accounting principles are to apply.

 

“ Indebtedness ” means, 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 or assets, or (b) obligations with respect to capital leases.

 

“ Indemnified Party ” has the meaning provided in Section 7.02 .

 

“ Late Fee ” has the meaning provided in Section 7.01 .

 

“ Loan Documents ” means this Agreement, the Notes, the other closing documents executed by Debtor, and any other ancillary agreements executed by Debtor from time to time in connection with this Agreement, all as may be amended, restated or supplemented from time to time.

 

“ Loan ” means each advance of credit to Debtor made under this Agreement, and “ Loans ” means, collectively, all such advances of credit.

 

“ Material Adverse Change”, “Material Adverse Effect ” means a material adverse change in or material adverse effect on any of (a) the business, condition (financial or otherwise), operations, performance, properties or prospects of Debtor, (b) the ability of Debtor to perform its obligations under this Agreement or any other Loan Document, (c) the value of the Collateral or (d) the ability of CIT to enforce the Obligations or its rights and remedies under this Agreement or any of the other Loan Documents.

 

“ Maximum Loan Amount ” means an amount equal to the “Principal Amount” as defined in each Note, and allowance for certain amounts such as accrued interest, sales taxes and overages, which amount shall not exceed, in the aggregate, $2,000,000.00.

 

“ Notes ” means each promissory note executed in connection with a Loan and, collectively, “ Notes ” means all such promissory notes.

 

“ Obligations ” means all now existing or hereafter arising debts, obligations, covenants, and duties of payment or performance of every kind, matured or un-matured, direct or contingent, owing, arising, due or payable to CIT or any affiliate or direct or indirect subsidiary of CIT, by or from Debtor whether arising out of this Agreement or any other Loan Document or otherwise, including, without

 

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limitation, the obligation of Debtor: (a) to pay the principal of, and interest on, each Loan in accordance with the terms of this Agreement, and to pay and satisfy all other indebtedness, liabilities and monetary obligations owed by Debtor to CIT under the Loan Documents; (b) to perform all of Debtor’s other obligations under this Agreement and the other Loan Documents; and (c) to pay all costs, fees and expenses incurred by CIT in connection with this Agreement and the other Loan Documents, including, without limitation, (i) recording fees and taxes imposed in connection with the execution of any Note or the filing of any financing statements or other personal property security documents, (ii) all costs that CIT may incur to obtain or maintain the insurance coverage required under Section 6.01 , and (iii) all reasonable costs, fees, expenses and disbursements of inside or outside counsel hired by CIT in connection with the preparation, negotiation, amendment, modification, administration and enforcement of the Loan Documents or CIT’s security interests in the Collateral, including any proceeding brought by CIT to enforce payment of any of the foregoing obligations, or the representation of CIT in any bankruptcy proceeding filed by or against Debtor.

 

“ Origination Fee ” has the meaning provided in Section 7.01 .

 

“ Payment Date ” means the due date of any payment of principal or interest on any Loan, as set forth in the Note evidencing such Loan.

 

“Permitted Liens” means (i) liens created pursuant to the Loan Documents, (ii) liens imposed by law for taxes that are not yet due or are being contested in good faith if adequate reserves with respect thereto are maintained on the books of the Borrower in accordance with GAAP, (iii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like liens imposed by law, arising in the ordinary course of business provided that such liens secure only amounts not yet due and payable, or if due and payable, (a) are unfiled and no other action has been taken to enforce the same, or (b) are being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established, and (iii) judgment liens in respect of judgments that do not constitute an Event of Default hereunder.

 

“ Prepayment Fee ” has the meaning provided in the applicable Note.

 

“ Uniform Commercial Code ” means the Uniform Commercial Code as adopted and in effect from time to time in the State of New York, or any other applicable state.

 

“ Use of Proceeds ” means the proceeds and use of the Loans, and shall be used by Debtor solely for the acquisition of equipment, provided that up to $500,000 of the proceeds of the Loans may be used for soft costs, such as freight, taxes and installation associated with the acquisition of such equipment or for general corporate working purposes (collectively, “Softcosts”).

 

1.02                            Accounting Terms .  Accounting terms used and not otherwise defined in this Agreement, have the meanings determined by, and all calculations with respect to accounting or financial matters shall be computed in accordance with, GAAP.

 

SECTION II.                                        THE LOANS

 

2.01                            Commitment to Make Loans .  Subject to the satisfaction of the applicable conditions precedent, CIT agrees to make Loans to Debtor, on or before September 25, 2009 up to the Maximum Loan Amount for the purchase of equipment, which equipment must be approved and deemed acceptable by CIT;  provided that up to $500,000 of the proceeds of the Loans may be used for Softcosts.  All Loans requested by Debtor shall be in increments of $100,000 and shall be due and payable on or before September 25, 2013.

 

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2.02                            Loans Evidenced by the Notes .  Whenever Debtor desires that CIT make a Loan, Debtor shall notify CIT of the date on which Debtor desires CIT to make such Loan and provide CIT with a completed and signed Note to evidence the Loan, in form and substance satisfactory to CIT, a completed and signed Funding Certificate in the form set forth on Exhibit B hereto, a supplement to Exhibit A hereto setting forth the Collateral being purchased (or reimbursed, as the case may be) with the proceeds of such Loan.  With respect to equipment purchased by Debtor prior to the date hereof, or acquired after the date hereof by the Debtor using funds other than the proceeds of a Loan, and subject to Section 2.06 hereof, in order to request a loan to reimburse the cost of such equipment, Debtor shall provide CIT with a copy of the original invoice and proof of payment for such equipment.

 

2.03                            Payments of Principal and Interest .  The principal amount of each Loan and all interest thereon shall be due and payable to CIT, in immediately available funds, without defense, setoff, claim, counterclaim or right of recoupment, in accordance with the terms of the Note evidencing such Loan.

 

2.04                            Interest on Loans; Default Rate .  The rate of interest on each Loan shall be calculated at a rate equal to the per annum rate of interest published in the Federal Reserve Statistical Release H.15 as the five-year treasury note rate (as determined two (2) business days prior to the issuance of the applicable Loan), plus 9.10%, provided that the five-year treasury note rate shall not be lower than 2.90%.  Notwithstanding the foregoing, the rate of interest on each Loan shall be capped at 12.95%.  Upon the occurrence of an Event of Default, all Loans may, at the election of CIT, bear interest at the applicable Default Rate of Interest set forth in the Note evidencing such Loans until such Event of Default is waived.  Debtor may elect an interest-only period of up to six (6) months with respect to each of the Loans.

 

2.05                            Other Terms and Conditions of Loans .  Each Loan shall be subject to such other terms and conditions as are set forth in the applicable Note.

 

2.06                            Equipment Acquired Prior to the Date Hereof .  With respect to equipment acquired by Debtor prior to the date of this Agreement, the Debtor may request Loans for the following percentage of the actual cost of such equipment: (a) with respect to equipment purchased within six (6) months prior to the date hereof, 100% of the actual cost, and (b) with respect to equipment purchased more than six (6) months, but less than twelve (12) months prior to the date hereof, 70% of the actual cost, and (c) with respect to equipment purchased more than twelve (12) months but less than twenty-four (24) months prior to the date hereof, 60% of the actual cost, and (d) with respect to equipment purchased more than twenty-four (24) months prior to the date hereof, 0% of the actual cost.  Notwithstanding the foregoing, the $500,000 of Loans which relate to Softcosts shall not be subject to the percentage restrictions set forth above.

 

2.07          Conditions Precedent to Initial Funding .  The obligation of CIT to make the Loans to the Debtor is subject to the satisfaction or waiver in writing by CIT of the following conditions precedent:

 

2.07.1           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, will have, a first priority security interest in the Collateral.

 

2.07.2           Insurance .  Debtor shall have delivered to CIT evidence satisfactory to CIT that all required insurance is in full force and effect in accordance with Section 6.

 

2.07.3           UCC Filings .  All Uniform Commercial Code financing statements and similar documents required to be filed in order to create in favor of CIT, a first priority

 

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perfected security interest in the Collateral, shall have been properly filed in each office in each jurisdiction required.

 

2.07.4           Secretary’s Certificate .  CIT shall have received an executed certificate of the corporate secretary of the Debtor, satisfactory in form and substance to CIT, certifying that the representations and warranties contained herein are true and correct in all material respects and that Debtor is in compliance with all of the terms and provisions set forth herein; attesting to the signature of the person executing the Loan Documents and no Default or Event of Default has occurred.

 

2.07.5           Organizational Documents .  CIT shall have received a copy of the Certificate of Incorporation of Debtor, certified by the applicable authority in Delaware, and copies of the by-laws (as amended through the date hereof) of Debtor.

 

2.07.6           No Material Adverse Effect .  CIT shall have completed and be satisfied with an updated examination and verification of the books and records of the Debtor, and such examination shall indicate that (i) no material adverse change has occurred in the financial condition, business, prospects, profits, operations or assets of the Debtor or  the Debtors’ subsidiaries over the last ninety (90) days.

 

2.07.7           Background Checks .  CIT shall have received and be satisfied with background checks on key managers and stockholders of Debtor, if requested.

 

2.07.8           Landlord Waivers .  CIT shall have received a fully executed landlord waiver with respect to each leased location where the Collateral will be located.  Each such location is listed on Exhibit A .

 

2.07.9           Other Documents .  Such other documents and completion of such other matters, as CIT may reasonably deem necessary or appropriate.

 

2.08              Conditions Precedent to Making Loans .

 

2.08.1           No Default .  No Default or Event of Default shall have occurred and be continuing or would result from the making of the Loan.

 

2.08.2           Material Adverse Effect .  CIT has determined in CIT’s sole discretion that nothing has occurred that has had a Material Adverse Effect.

 

SECTION III.             COLLATERAL SECURITY

 

3.01          Grant of Security Interest .  To secure Debtor’s payment and performance of all of the Obligations, Debtor hereby grants to CIT a general, continuing and valid, first priority security interest in and perfected lien upon the Collateral.

 

3.02          Accessions .  All additions and upgrades acquired by Debtor which are or become attached to or part of the Collateral, which are not removable without in any way affecting or impairing the originally intended function or use of such Collateral, shall become Collateral subject to the terms of this Agreement.

 

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3.03          Financing Statements and Evidence of Security Interests .  Debtor hereby authorizes CIT to file such Uniform Commercial Code financing statements in form satisfactory to CIT as CIT reasonably deems necessary in order to perfect CIT’s security interest in the Collateral.  In addition, Debtor agrees to take such other steps as CIT from time to time reasonably may request in order to perfect CIT’s security interests in the Collateral, including noting of CIT’s lien on the Collateral and delivering to CIT any of the Collateral evidenced by an Instrument or a certificate.

 

SECTION IV.            REPRESENTATIONS AND WARRANTIES

 

4.01          Representations and Warranties .  Debtor hereby represents and warrants to CIT as follows:

 

(a)            Existence and Power .  Debtor is duly organized, validly existing, and in good standing under the laws of the State of Delaware. Debtor has the power to own its properties and to engage in its business as currently conducted.

 

(b)            Financial Condition .  All financial information and financial statements of Debtor previously furnished to CIT present fairly, in all material respects, the financial condition of Debtor as of the date of such financial information or financial statements, as applicable.

 

(c)            Debtor Information .  The signature block on the signature page hereof sets forth Debtor’s exact and complete legal name.  In addition, set forth under Debtor’s signature block is Debtor’s (i) type of organization, (ii) the State in which Debtor is organized or formed, (iii) Debtor’s organizational identification number (or, if no such identification number has been assigned by Debtor’s State of organization, an indication that no such number has been assigned), (iv) the exact address of its chief executive office, and (v) Debtor’s federal employer identification number.

 

(d)            Past Changes .  Except as set forth on Schedule 4.01(d) or on the signature block on the signature page hereof, Debtor has not within the past five (5) years (i) changed its name, (ii) been the surviving entity in any merger, or (iii) been known by, or included in a Uniform Commercial Code financing statement relating to Debtor under, any name other than Debtor’s name set forth on the signature page hereof.

 

(e)            No Violations .  The making and performance of this Agreement, the Notes and the other Loan Documents will not (i) violate Debtor’s organizational documents, (ii) violate any applicable laws or (iii) result in a breach of or default under any material contract, agreement, or instrument to which Debtor is a party or by which Debtor or its property is bound, including, without limitation, any shareholder agreements and convertible note documentation.

 

(f)             Consents .  All necessary consents, approvals or authorizations of, or filing, registration or qualification with, any person, entity or governmental authority, required to be obtained by Debtor in connection with the execution and delivery of this Agreement or the undertaking or performance of any obligation hereunder has been obtained.

 

(g)            Pending Disputes .  Except as previously disclosed by Debtor to CIT in writing, there exist no actions, suits or proceedings of any kind by or against Debtor 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.

 

(h)            Authority and Enforceability .  Debtor (i) has the power and authority to enter into this Agreement, the Notes and the other Loan Documents, and to incur and perform the Obligations, and (ii) 

 

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has taken all actions necessary to authorize the execution, delivery, and performance of this Agreement, the Notes and the other Loan Documents to which Debtor is a party.  This Agreement, the Notes the other Loan Documents to which Debtor is a party are valid, binding, and enforceable against Debtor in accordance with their respective terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or law.

 

(i)             Collateral Matters .  Debtor is the absolute owner of all Collateral, free and clear of all liens, claims and encumbrances other than the Permitted Liens.

 

(j)             Environmental and Health Care Issues .  Debtor represents and warrants that it: (i) possesses and will maintain at all times during the term of this Agreement environmental, health and safety licenses, healthcare and other permits, authorizations, registrations, FDA and other approvals and similar rights (“Approvals”) necessary under all environmental and health laws, rules and regulations for Debtor to conduct its operations as now being conducted and (ii) each Approval and similar rights is and will remain during the term of this Agreement valid and subsisting, in full force and effect and enforceable by Debtor in all material respects.  Except as disclosed in this Agreement, Debtor has received no written notices of any violation or noncompliance with, or remedial obligation under, any environmental or health care laws and there are no writs, injunctions, decrees, orders, lawsuits, claims, proceedings or judgments outstanding under or, to the knowledge of Debtor, investigations or inquiries pending or threatened relating to the ownership, use, condition, maintenance or operation of, or conduct of business related to, any Collateral, any real estate where the Collateral is located or other Collateral covered by this Agreement.

 

4.02          Remaking of Representations and Warranties .  All representations and warranties made by Debtor in Section 4.01 shall be deemed to be remade by Debtor each time that CIT makes a Loan to Debtor and each time that CIT makes a disbursement under any Loan to Debtor.

 

SECTION V.              COVENANTS OF DEBTOR

 

5.01          Affirmative Covenants .  Until the full and final payment and satisfaction of the Obligations and the termination of CIT’s commitments to make Loans hereunder, Debtor agrees to comply, at all times, with the following agreements and covenants:

 

(a)            Liens .  Debtor agrees to keep the Collateral free and clear of all liens, claims and encumbrances (other than Permitted Liens), and to forever warrant and defend the Collateral from any and all claims and demands of any other person or entity.

 

(b)            Maintenance of Collateral .  Debtor agrees to (i) maintain the Collateral in good and substantial repair and condition, reasonable wear and tear excepted, (ii) make any and all repairs and replacements to the Collateral when and where reasonably necessary, and (iii) safeguard, protect and hold all Collateral in accordance with the terms hereof and subject to CIT’s security interest.