Exhibit 10.16





EXHIBIT 10.16




*Certain portions of this exhibit have been omitted pursuant to a request for confidential

treatment which has been filed separately with the SEC.





FIFTH AMENDED AND RESTATED

LOAN AGREEMENT




August 2, 2011




by and between




CUMBERLAND PHARMACEUTICALS INC.,

as the Borrower




and




BANK OF AMERICA, N.A.,

as the Bank






$10,000,000





 












 







TABLE OF CONTENTS




	 	 	 	 	 
	1. FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS
	 	 	1	 
	1.1 Line of Credit Amount
	 	 	1	 
	1.2 Availability Period
	 	 	1	 
	1.3 Interest Rate
	 	 	1	 
	1.4 Repayment Terms
	 	 	2	 
	1.5 Prepayments
	 	 	2	 
	1.6 Increase in Facility No. 1 Commitment
	 	 	2	 
	 
	 	 	 	 
	2. FACILITY NO. 2: TERM LOAN AMOUNT AND TERMS
	 	 	3	 
	 
	 	 	 	 
	3. FEES AND EXPENSES
	 	 	3	 
	3.1 Fees
	 	 	3	 
	3.2 Expenses
	 	 	3	 
	3.3 Reimbursement Costs
	 	 	4	 
	 
	 	 	 	 
	4. COLLATERAL
	 	 	4	 
	4.1 Personal Property
	 	 	4	 
	 
	 	 	 	 
	5. DISBURSEMENTS, PAYMENTS AND COSTS
	 	 	5	 
	5.1 Disbursements and Payments
	 	 	5	 
	5.2 Telephone and Telefax Authorization
	 	 	5	 
	5.3 Direct Debit (Pre-Billing)
	 	 	5	 
	5.4 Banking Days
	 	 	6	 
	5.5 Interest Calculation
	 	 	6	 
	5.6 Default Rate
	 	 	6	 
	 
	 	 	 	 
	6. CONDITIONS
	 	 	6	 
	6.1 Authorizations and Incumbency
	 	 	6	 
	6.2 Governing Documents
	 	 	7	 
	6.3 CET Intercompany Debt
	 	 	7	 
	6.4 Loan Documents
	 	 	7	 
	6.5 Perfection and Evidence of Priority
	 	 	7	 
	6.6 Payment of Fees, Etc.
	 	 	7	 
	6.7 Good Standing
	 	 	7	 
	6.8 Legal Opinion
	 	 	7	 
	6.9 Financial Statements
	 	 	7	 
	6.10 Insurance
	 	 	8	 
	6.11 Consents, Licenses, Permits, Assignments
	 	 	8	 
	6.12 Representations, Warranties and No Default
	 	 	8	 
	6.13 Other Required Documentation
	 	 	8	 
	 
	 	 	 	 
	7. REPRESENTATIONS AND WARRANTIES
	 	 	8	 
	7.1 Formation
	 	 	8	 
	7.2 Authorization
	 	 	8	 
	7.3 Enforceable Agreements
	 	 	8	 
	7.4 Good Standing
	 	 	9	 
	7.5 No Conflicts
	 	 	9	 
	7.6 Financial Information
	 	 	9	 
	7.7 Lawsuits
	 	 	9	 
	7.8 Collateral
	 	 	9	 
	7.9 Permits, Franchises
	 	 	9	 
	7.10 Other Obligations
	 	 	9	 






 












 





	 	 	 	 	 
	7.11 Tax Matters
	 	 	9	 
	7.12 No Event of Default
	 	 	9	 
	7.13 Insurance
	 	 	10	 
	7.14 Location of Borrower
	 	 	10	 
	7.15 Capitalization
	 	 	10	 
	7.16 Material Adverse Change
	 	 	10	 
	7.17 Subsidiaries
	 	 	10	 
	 
	 	 	 	 
	8. COVENANTS
	 	 	11	 
	8.1 Use of Proceeds
	 	 	11	 
	8.2 Financial Information
	 	 	11	 
	8.3 Leverage Ratio
	 	 	12	 
	8.4 Interest Coverage Ratio
	 	 	13	 
	8.5 [Reserved.]
	 	 	13	 
	8.6 Capital Expenditures
	 	 	13	 
	8.7 Lease Expenditures
	 	 	13	 
	8.8 Restricted Payments
	 	 	13	 
	8.9 Bank as Principal Depository
	 	 	14	 
	8.10 Other Debts
	 	 	14	 
	8.11 Other Liens
	 	 	15	 
	8.12 Maintenance of Assets
	 	 	15	 
	8.13 Investments
	 	 	15	 
	8.14 Loans
	 	 	15	 
	8.15 Additional Negative Covenants.
	 	 	16	 
	8.16 Notices to Bank
	 	 	16	 
	8.17 Insurance
	 	 	16	 
	8.18 Compliance with Laws
	 	 	17	 
	8.19 ERISA Plans
	 	 	17	 
	8.20 Books and Records
	 	 	17	 
	8.21 Visits, Inspections and Audits
	 	 	17	 
	8.22 Perfection of Liens
	 	 	17	 
	8.23 Cooperation
	 	 	17	 
	8.24 Collateral Account Notification and Acknowledgement
	 	 	17	 
	8.25 Subsidiaries
	 	 	18	 
	 
	 	 	 	 
	9. HAZARDOUS SUBSTANCES
	 	 	18	 
	9.1 Indemnity Regarding Hazardous Substances
	 	 	18	 
	9.2 Compliance Regarding Hazardous Substances
	 	 	18	 
	9.3 Notices Regarding Hazardous Substances
	 	 	18	 
	9.4 Site Visits, Observations and Testing
	 	 	18	 
	9.5 Definition of Hazardous Substances
	 	 	19	 
	9.6 Continuing Obligation
	 	 	19	 
	 
	 	 	 	 
	10. DEFAULT AND REMEDIES
	 	 	19	 
	10.1 Failure to Pay
	 	 	19	 
	10.2 Other Bank Agreements
	 	 	19	 
	10.3 Cross-Default
	 	 	19	 
	10.4 False Information
	 	 	20	 
	10.5 Bankruptcy
	 	 	20	 
	10.6 Receivers
	 	 	20	 
	10.7 Lien Priority
	 	 	20	 
	10.8 Lawsuits
	 	 	20	 
	10.9 Judgments
	 	 	20	 
	10.10 [Reserved.]
	 	 	20	 
	10.11 Material Adverse Change
	 	 	20	 
	10.12 Government Action
	 	 	20	 






 












 





	 	 	 	 	 
	10.13 Default Under Related Documents
	 	 	21	 
	10.14 Other Breach Under Agreement
	 	 	21	 
	10.15 Change in Control
	 	 	21	 
	 
	 	 	 	 
	11. ENFORCING THIS AGREEMENT; MISCELLANEOUS
	 	 	21	 
	11.1 GAAP
	 	 	21	 
	11.2 Tennessee Law
	 	 	21	 
	11.3 Successors and Assigns
	 	 	21	 
	11.4 Interest and Loan Charges Not to Exceed Maximum Amounts Allowed by Law
	 	 	22	 
	11.5 Arbitration and Waiver of Jury Trial
	 	 	22	 
	11.6 Severability; Waivers
	 	 	23	 
	11.7 Costs and Attorneys’ Fees
	 	 	23	 
	11.8 Individual Liability
	 	 	23	 
	11.9 One Agreement
	 	 	23	 
	11.10 Indemnification
	 	 	24	 
	11.11 Notices
	 	 	24	 
	11.12 Headings; Terminology, Etc.
	 	 	24	 
	11.13 Counterparts
	 	 	25	 
	11.14 Existing Loan Agreement and Existing Loan Documents
	 	 	25	 
	 
	 	 	 	 
	Schedules
	 
	 	 	 	 
	Schedule 1        Existing Loan Documents
	Schedule 7.7     Litigation
	Schedule 8.10   Liabilities
	Schedule 8.11   Liens
	Schedule 8.14   Loans/Extensions of Credit
	 
	 	 	 	 
	Exhibits
	 
	 	 	 	 
	Exhibit A
         
Compliance Certificate







 


iii









 







FIFTH AMENDED AND RESTATED LOAN AGREEMENT




THIS FIFTH AMENDED AND RESTATED LOAN AGREEMENT (the “Agreement”) dated as of August 2,
2011, is between BANK OF AMERICA, N.A., a national banking association (the “Bank”) and
CUMBERLAND PHARMACEUTICALS INC., a Tennessee corporation (the “Borrower”).



WHEREAS, the Borrower and the Bank are parties to a certain Fourth Amended and Restated Loan
Agreement dated as of July 22, 2009, between the Borrower and the Bank (as heretofore amended,
modified or supplemented from time to time, the “Existing Loan Agreement”) and certain of
the loan documents listed on Schedule 1 hereto (as heretofore amended, modified or
supplemented from time to time, the “Existing Loan Documents”);



WHEREAS, at the Borrower’s request and in reliance upon the representations and inducements of
the Borrower set forth herein, the Bank has agreed to modify the terms and conditions of the
Existing Loan Agreement and to amend and restate the Existing Loan Agreement in its entirety as
more particularly hereinafter set forth; and



WHEREAS, the Borrower and the Bank have agreed to amend or to amend and restate certain of the
Existing Loan Documents pursuant to the Loan Documents (as hereinafter defined);



NOW, THEREFORE, in consideration of the Facility No. 1 Commitment and the Facility No. 2
Commitment described below (collectively, the “Facilities”), the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, the Bank and the Borrower
agree as follows:




	1.	 	FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS
	 
	1.1	 	Line of Credit Amount.
	 
	(a)	 	Subject to and upon the terms, conditions and provisions of this Agreement, including
Section 1.2 below, the Bank will provide a line of credit to the Borrower in a
principal amount not to exceed Ten Million Dollars ($10,000,000) outstanding at any one time
(the “Facility No. 1 Commitment”).
	 
	(b)	 	This is a revolving line of credit. During the availability period, the Borrower may repay
principal amounts and reborrow them.
	 
	(c)	 	The Borrower agrees not to permit the principal balance outstanding to exceed the amount of
the Facility No. 1 Commitment. If the Borrower exceeds this limit, the Borrower will
immediately pay the excess to the Bank upon the Bank’s demand.
	 
	1.2	 	Availability Period.




The Facility No. 1 Commitment is available between the date of this Agreement and December 31,
2014, or such earlier date as the availability may terminate as provided in this Agreement (the
“Facility No. 1 Expiration Date”).





	1.3	 	Interest Rate.
	 
	(a)	 	The interest rate is a rate per year equal to the BBA LIBOR Daily Floating Rate plus the
Applicable Margin; provided, however, that in no event shall the interest payable in respect
of amounts advanced pursuant to the Facility No. 1 Commitment exceed the maximum amounts
collectible under applicable law from time to time.




 












 





	(b)	 	The “BBA LIBOR Daily Floating Rate” is a fluctuating rate of interest equal to the
rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as
published by Reuters (or other commercially available source providing quotations of BBA LIBOR
as selected by the Bank
from time to time) as determined for each banking day at approximately 11:00 a.m. London
time two (2) London Banking Days prior to the date in question, for U.S. Dollar deposits
(for delivery on the first day of such interest period) with a one month term, as adjusted
from time to time in the Bank’s sole discretion for reserve requirements, deposit insurance
assessment rates and other regulatory costs. If such rate is not available at such time for
any reason, then the rate for that interest period will be determined by such alternate
method as reasonably selected by the Bank. A “London Banking Day” is a day on which
banks in London are open for business and dealing in offshore dollars.
	 
	(c)	 	The “Applicable Margin” means and refers to the following percentages per annum,
based upon the Borrower’s Leverage Ratio as set forth in the most recent compliance
certificate received by the Bank pursuant to Section 8.2(c):





	 	 	 	 	 
	Pricing Level	 	Leverage Ratio	 	Applicable Margin
	1

	 	< 1.50
	 	2.00%
	2
	 	≥ 1.50
	 	3.00%







	 	 	Any increase or decrease in the Applicable Margin resulting from a change in the
Borrower’s Leverage Ratio shall become effective as of the first banking day following
the date a compliance certificate is delivered pursuant to Section 8.2(c);
provided, however, that if a compliance certificate is not delivered when due in
accordance with Section 8.2(c), then Pricing Level 2 shall apply as of the
first banking day after the date on which such compliance certificate was required to
have been delivered until the first banking day after the date on which such
certificate is delivered.
	 
	1.4	 	Repayment Terms.
	 
	(a)	 	The Borrower will pay interest on September 30, 2011 and on the last day of each December,
March, June and September thereafter until payment in full of any principal outstanding under
this facility.
	 
	(b)	 	The Borrower will repay in full any principal, interest or other charges outstanding under
this facility no later than the Facility No. 1 Expiration Date.
	 
	1.5	 	Prepayments.





The Borrower may prepay this loan in full or in part at any time and from time to time, without
premium or penalty.




	1.6	 	Increase in Facility No. 1 Commitment.
	 
	(a)	 	The Borrower may from time to time request an increase in the Facility No. 1 Commitment by an
amount (for all such requests) not exceeding $10,000,000; provided that (i) any such request
for an increase shall be in a minimum amount of $5,000,000, (ii) the Borrower may make a
maximum of two (2) such requests, and (iii) no such request may be made after the day that is
one hundred eighty (180) days prior to the Facility No. 1 Expiration Date or if an event of
default exists hereunder.
	 
	(b)	 	Not later than thirty (30) days after the Lender’s receipt of such request, the Lender shall
notify the Borrower whether it will consent to such increase (which consent may be given or
withheld in the Lender’s sole and absolute discretion) and shall indicate in such notice any
terms and conditions to be included as a part of such increase or to be met or satisfied for
such increase to
be effective. If the Lender fails to respond within the above time period, it shall be
deemed not to have consented to such increase.




 


-2-









 











	(c)	 	If the Lender consents to such increase and any conditions specified by the Lender for the
effectiveness of such increase have been met or satisfied, the approved increase shall occur
effective as of the date specified by the Lender, which date shall not be more than fifteen
(15) days after such conditions have been met or satisfied (the “Increase Effective
Date”). As one of the conditions precedent to such increase, the Borrower shall deliver
to the Lender a certificate of the Borrower and each Obligor (as hereinafter defined), dated
as of the Increase Effective Date and signed by an authorized officer of the Borrower or such
Obligor, as applicable, (i) certifying and attaching the resolutions or other authorizing
actions adopted by or on behalf of the Borrower or such Obligor approving or consenting to
such increase, and (ii) in the case of the Borrower, certifying that, before and after giving
effect to such increase, (A) the representations and warranties contained in Section 7 and the
other Loan Documents are true and correct on and as of the Increase Effective Date, except to
the extent that such representations and warranties specifically refer to an earlier date, in
which case they are true and correct as of such earlier date, and (B) no event of default
exists hereunder.






	2.	 	FACILITY NO. 2: TERM LOAN AMOUNT AND TERMS




There is no Facility No. 2; accordingly, provisions of this Agreement relating to the Facility No.
2 Commitment shall be disregarded as to such term.





	3.	 	FEES AND EXPENSES
	 
	3.1	 	Fees.
	 
	(a)	 	Fee Letter. The Borrower agrees to pay to the Bank fees and other compensation as
provided in the fee letter dated July 22, 2009, by and between the Bank and the Borrower, as
amended by Amendment to Fee Letter dated September 29, 2010, by and between the Bank and the
Borrower, and as the same has been or may be further supplemented, amended, modified or
amended and restated from time to time pursuant to agreement of the Borrower and the Bank (as
so supplemented, amended, modified or amended and restated, the “Fee Letter”).
	 
	(b)	 	Unused Commitment Fee.






	 	(i)	 	Facility No. 1 Commitment. The Borrower agrees to pay a fee on any
difference between the Facility No. 1 Commitment and the amount of credit it actually
uses, determined by the daily amount of credit outstanding during the specified period.
The fee will be calculated at the Applicable Facility No. 1 Commitment Fee Rate. The
fee is due and payable on September 30, 2011 and on the last day of each December,
March, June and September thereafter until the expiration of the availability period.
As used herein:
	 
	 	 	 	“Applicable Facility No. 1 Commitment Fee Rate” means one-quarter of one
percent (0.25%) per year.
	 
	 	(ii)	 	Facility No. 2 Commitment. Not applicable.






	3.2	 	Expenses.




Promptly, and in any event within ten (10) banking days after any demand by the Bank therefor, the
Borrower will repay the Bank for expenses including filing, recording and search fees, appraisal
fees, title report fees and documentation fees.




 


-3-









 








	3.3	 	Reimbursement Costs.
	 
	(a)	 	Promptly, and in any event within ten (10) banking days after any demand by the Bank
therefor, the Borrower will reimburse the Bank for any expenses it incurs in the preparation
of this Agreement and any agreement or instrument required by this Agreement. Expenses
include reasonable attorneys’ fees, including any allocated costs of the Bank’s in-house
counsel to the extent permitted by applicable law.
	 
	(b)	 	Promptly, and in any event within ten (10) banking days after any demand by the Bank
therefor, the Borrower will reimburse the Bank for the cost of periodic field examinations of
the Borrower’s books, records and Collateral, and appraisals of the Collateral, at such
intervals as the Bank may reasonably require, but no less frequently than annually. The
actions described in this paragraph may be performed by employees of the Bank or by
independent appraisers.
	 
	4.	 	COLLATERAL
	 
	4.1	 	Personal Property.





The personal property listed below now owned or owned in the future by the parties listed below
will secure the Borrower’s obligations to the Bank under this Agreement as indicated and further
defined in the security agreement(s) executed by the owners of the collateral. In addition, all
personal property collateral owned by the Borrower securing this Agreement shall also secure all
other present and future obligations of the Borrower to the Bank (excluding any consumer credit
covered by the federal Truth in Lending law, unless the Borrower has otherwise agreed in writing or
received written notice thereof). All personal property collateral securing any other present or
future obligations of the Borrower to the Bank shall also secure this Agreement.




	(a)	 	Equipment and fixtures owned by the Borrower or any Obligor (as hereinafter defined).
	 
	(b)	 	Inventory owned by the Borrower or any Obligor.
	 
	(c)	 	Accounts, contract rights, chattel paper, instruments, deposit accounts, letter of credit
rights, general intangibles and documents of title owned by the Borrower or any Obligor.
	 
	(d)	 	Securities or other investment property owned by the Borrower or any Obligor as described in
one or more pledge agreements required by the Bank (including equity interests in Subsidiaries
of the Borrower).
	 
	 	 	Regulation U of the Board of Governors of the Federal Reserve System places certain
restrictions on loans secured by margin stock (as defined in the Regulation). The Bank and
the Borrower shall comply with Regulation U. If any of the collateral is margin stock, the
Borrower shall provide to the Bank a Form U-1 Purpose Statement.
	 
	(e)	 	Deposit accounts with the Bank and owned by the Borrower or any Obligor.
	 
	(f)	 	Patents, trademarks and other general intangibles owned by the Borrower or any Obligor.
	 
	(g)	 	The Amended and Restated Promissory Note dated December 30, 2008, in the principal amount not
exceeding $1,500,000, made and executed by Cumberland Emerging Technologies, Inc., a Tennessee
corporation (“CET”), payable to the order of the Borrower, evidencing the now existing
and hereafter arising indebtedness of CET to the Borrower (together with any and all
extensions, modifications, renewals and replacements thereof, the “CET Pledged Note”),
and the Security Agreement dated April 6, 2006, between CET and the Borrower, as amended by
First Amendment to Security Agreement dated December 30, 2008 and as further amended by
Second Amendment to Security Agreement dated July 22, 2009 (as the same has been or may be
amended, restated, supplemented, extended, modified, restructured, renewed or replaced from
time to time, the “CET Security Agreement”), together with any related instruments,
documents and agreements.




 


-4-









 










As used herein, “Collateral” shall mean and refer to all property and interests in property
of the Borrower or any Obligor now or hereafter securing the indebtedness and other obligations of
the Borrower to the Bank in connection with the Facilities.




	5.	 	DISBURSEMENTS, PAYMENTS AND COSTS
	 
	5.1	 	Disbursements and Payments.
	 
	(a)	 	Each payment by the Borrower will be made in U.S. Dollars and immediately available funds by
direct debit to a deposit account as specified below or, for payments not required to be made
by direct debit, by mail to the address shown on the Borrower’s statement or at one of the
Bank’s banking centers in the United States.
	 
	(b)	 	Each disbursement by the Bank and each payment by the Borrower will be evidenced by records
kept by the Bank. In addition, the Bank may, at its discretion, require the Borrower to sign
one or more promissory notes.
	 
	5.2	 	Telephone and Telefax Authorization.
	 
	(a)	 	The Bank may honor telephone or telefax instructions for advances or repayments given, or
purported to be given, by any one of the individuals authorized to sign loan agreements on
behalf of the Borrower or any other individual designated by any one of such authorized
signers.
	 
	(b)	 	Advances will be deposited in and repayments will be withdrawn from the primary operating
account of the Borrower maintained with the Bank or such other of the Borrower’s accounts with
the Bank as is designated in writing from time to time by the Borrower and approved for such
purposes by the Bank (the “Designated Account”).
	 
	(c)	 	The Borrower will indemnify and hold the Bank harmless from all liability, loss, and costs in
connection with any act resulting from telephone or telefax instructions the Bank reasonably
believes are made by any individual authorized by the Borrower to give such instructions.
This paragraph will survive this Agreement’s termination, and will benefit the Bank and its
officers, employees, and agents.
	 
	5.3	 	Direct Debit (Pre-Billing).
	 
	(a)	 	The Borrower agrees that the Bank will debit the Designated Account on the date each payment
of principal and interest and any fees from the Borrower becomes due (the “Due Date”).
	 
	(b)	 	Prior to each Due Date, the Bank will mail to the Borrower a statement of the amounts that
will be due on that Due Date (the “Billed Amount”). The bill will be mailed a
specified number of calendar days prior to the Due Date, which number of days will be mutually
agreed from time to time by the Bank and the Borrower. The calculations in the bill will be
made on the assumption that no new extensions of credit or payments will be made between the
date of the billing statement and the Due Date, and that there will be no changes in the
applicable interest rate.




 


-5-









 





	(c)	 	The Bank will debit the Designated Account for the Billed Amount, regardless of the actual
amount due on that date (the “Accrued Amount”). If the Billed Amount debited to the
Designated Account differs from the Accrued Amount, the discrepancy will be treated as
follows:






	 	(i)	 	If the Billed Amount is less than the Accrued Amount, the Billed Amount for the
following Due Date will be increased by the amount of the discrepancy. The Borrower
will not be in default by reason of any such discrepancy.
	 
	 	(ii)	 	If the Billed Amount is more than the Accrued Amount, the Billed Amount for the
following Due Date will be decreased by the amount of the discrepancy.






	 	 	Regardless of any such discrepancy, interest will continue to accrue based on the actual
amount of principal outstanding without compounding. The Bank will not pay the Borrower
interest on any overpayment.
	 
	(d)	 	The Borrower will maintain sufficient funds in the Designated Account to cover each debit.
If there are insufficient funds in the Designated Account on the date the Bank enters any
debit authorized by this Agreement, the Bank may reverse the debit.
	 
	5.4	 	Banking Days.





Unless otherwise provided in this Agreement, a banking day is a day other than a Saturday, Sunday
or other day on which commercial banks are authorized to close, or are in fact closed, in the state
where the Bank’s lending office is located, and, if such day relates to amounts bearing interest at
an offshore rate (if any), means any such day on which dealings in dollar deposits are conducted
among banks in the offshore dollar interbank market. All payments and disbursements that would be
due on a day that is not a banking day will be due on the next banking day. All payments received
on a day that is not a banking day will be applied to the credit on the next banking day.




	5.5	 	Interest Calculation.





Except as otherwise stated in this Agreement, all interest and fees, if any, will be computed on
the basis of a 360-day year and the actual number of days elapsed. This results in more interest
or a higher fee than if a 365-day year is used. Installments of principal that are not paid when
due under this Agreement shall continue to bear interest until paid.




	5.6	 	Default Rate.





Upon the occurrence of any default or after maturity or after judgment has been rendered on any
obligation under this Agreement, all amounts outstanding under this Agreement, including any
interest, fees, or costs that are not paid when due, will at the option of the Bank bear interest
at a rate that is four percentage points (4.00%) higher than the rate of interest otherwise
provided under this Agreement. This may result in compounding of interest. This will not
constitute a waiver of any default.




	6.	 	CONDITIONS





Before the Bank is required to extend any credit to the Borrower under this Agreement, it must
receive any documents and other items it may reasonably require, in form and content acceptable to
the Bank, including any items specifically listed below.




	6.1	 	Authorizations and Incumbency.





If the Borrower or any Obligor is anything other than a natural person, evidence that the
execution, delivery and performance by the Borrower and each such Obligor of this Agreement and any
instrument or agreement required under this Agreement have been duly authorized.


 


-6-









 





A certificate of the secretary of the Borrower and each Obligor as to the incumbency and signature
of all officers of the Borrower or such Obligor, as applicable, authorized to execute or attest to
any instrument or agreement required under this Agreement.




	6.2	 	Governing Documents.




If required by the Bank, copies of the organizational documents of the Borrower and each Obligor.





	6.3	 	CET Intercompany Debt.





Such amendments or modifications of the CET Pledged Note and the CET Security Agreement as the Bank
reasonably may request, in form and substance satisfactory to the Bank, including confirmation of
the assignment to the Bank of, and grant to the Bank of a security interest in, all of the
Borrower’s right, title and interest in and to the CET Pledged Note and the CET Security Agreement,
in form and substance satisfactory to the Bank.




	6.4	 	Loan Documents.





Signed originals of such security agreements (including intellectual property security agreements)
covering the Collateral, promissory notes, warrants, fee letters and other instruments, documents
and agreements as the Bank from time to time shall require to evidence or secure the Facility No. 1
Commitment and the Facility No. 2 Commitment or otherwise in connection therewith (collectively,
the “Loan Documents”).




	6.5	 	Perfection and Evidence of Priority.





Evidence that the security interests and liens in favor of the Bank are valid, enforceable,
properly perfected in a manner acceptable to the Bank and prior to all others’ rights and
interests, except those the Bank consents to in writing.




	6.6	 	Payment of Fees, Etc.





Such instruments and documents as are required by the Fee Letter, together with payment of all fees
and other amounts due and owing to the Bank, including payment of all accrued and unpaid expenses
incurred by the Bank as required by the paragraph entitled “Reimbursement Costs.”




	6.7	 	Good Standing.





Certificates of good standing for the Borrower and each Obligor from the state of formation and
from any other state in which the Borrower or any such Obligor is required to qualify to conduct
its business.




	6.8	 	Legal Opinion.





A written opinion from the Borrower’s legal counsel, covering such matters as the Bank may require.
The legal counsel and the terms of the opinion must be acceptable to the Bank.




	6.9	 	Financial Statements.





Detailed consolidated projections (including balance sheet, profit and loss statement and statement
of cash flow) by product line on an annual basis for fiscal years 2012, 2013 and 2014 (which
projections shall be delivered as soon after the date of this Agreement as is reasonably
practicable, but in no event more than 30 days after the date of this Agreement).


 


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	6.10	 	Insurance.




Evidence of insurance coverage, as required in the “Covenants” section of this Agreement.





	6.11	 	Consents, Licenses, Permits, Assignments.
	 
	(a)	 	Evidence satisfactory to the Bank that the Borrower and each Obligor have obtained all
requisite consents and approvals required to be obtained from any person to permit the
transactions contemplated by this Agreement and the other Loan Documents executed in
connection herewith to be consummated in accordance with their respective terms and
conditions.
	 
	(b)	 	Evidence satisfactory to the Bank that Borrower, the Obligors and the Collateral are in
compliance with all applicable governmental requirements and that all permits, and any
necessary licenses and approvals have been obtained.
	 
	6.12	 	Representations, Warranties and No Default.





Receipt by the Bank of a certificate of a properly authorized officer of the Borrower, stating that
(a) each of the representations and warranties contained herein is true and correct at and as of
the date hereof with the same force and effect as if made on such date and (b) no default hereunder
or under any of the other Loan Documents executed in connection therewith has occurred and is
continuing.




	6.13	 	Other Required Documentation.





All other documents, instruments, agreements, opinions, certificates, insurance policies, consents
and evidences of other legal matters, in form and substance satisfactory to the Bank and its
counsel, that are required by the terms of any term sheet or commitment of the Bank relating to the
credit that is the subject of this Agreement or that the Bank otherwise may reasonable request.




	7.	 	REPRESENTATIONS AND WARRANTIES





When the Borrower signs this Agreement, and until the Bank is repaid in full, the Borrower makes
the following representations and warranties. Each request for an extension of credit constitutes
a renewal of these representations and warranties as of the date of the request:




	7.1	 	Formation.





If the Borrower or any Subsidiary is anything other than a natural person, it is duly formed and
existing under the laws of the state or other jurisdiction where organized.




	7.2	 	Authorization.





This Agreement, and any instrument or agreement required hereunder, are within the powers of the
Borrower or the applicable Obligor, have been duly authorized, and do not conflict with any of its
organizational papers.




	7.3	 	Enforceable Agreements.





This Agreement is a legal, valid and binding agreement of the Borrower, enforceable against the
Borrower in accordance with its terms, and any instrument or agreement required hereunder, when
executed and delivered by the Borrower or the applicable Obligor(s), will be similarly legal,
valid, binding and enforceable.


 


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	7.4	 	Good Standing.





Each of the Borrower and its Subsidiaries is properly licensed, in good standing and, where
required, in compliance with fictitious name statutes in each jurisdiction in which it does
business.




	7.5	 	No Conflicts.





This Agreement does not conflict with any law, agreement, or obligation by which the Borrower or
any of its Subsidiaries is bound.




	7.6	 	Financial Information.





All financial and other information that has been or will be supplied to the Bank is sufficiently
complete to give the Bank accurate knowledge of the financial condition of the Borrower and its
Subsidiaries, including all material contingent liabilities. Since the date of the most recent
financial statement provided to the Bank, there has been no material adverse change in the business
condition (financial or otherwise), operations, properties or prospects of the Borrower or any of
its Subsidiaries.




	7.7	 	Lawsuits.





Except as disclosed in Schedule 7.7, there is no lawsuit, tax claim or other dispute
pending or threatened against the Borrower or any of its Subsidiaries that, if lost, would impair
the Borrower’s or any Obligor’s financial condition or ability to repay the Facilities.




	7.8	 	Collateral.





All Collateral required in this Agreement is owned by the grantor of the security interest free of
any title defects or any liens or interests of others, except (a) liens in existence on the date of
this Agreement and disclosed in Schedule 8.11 and (b) liens securing purchase money debt or
indebtedness arising under capitalized lease obligations permitted by this Agreement; provided,
however, that in each case any such liens shall attach only to the specific item(s) of property or
asset(s) financed with such purchase money debt or capitalized lease.




	7.9	 	Permits, Franchises.





Each of the Borrower and its Subsidiaries possesses all permits, memberships, franchises,
contracts, licenses required and all trademark rights, trade name rights, patent rights,
copyrights, and fictitious name rights necessary to enable it to conduct the business in which it
is now engaged.




	7.10	 	Other Obligations.





Neither the Borrower nor any Subsidiary is in default on any obligation for borrowed money, any
purchase money obligation or any other material lease, commitment, contract, instrument or
obligation, except as have been disclosed in writing to the Bank.




	7.11	 	Tax Matters.





The Borrower has no knowledge of any pending assessments or adjustments of its or any Subsidiary’s
income tax for any year and all taxes due have been paid, except as have been disclosed in writing
to the Bank.




	7.12	 	No Event of Default.





There is no event that is, or with notice or lapse of time or both would be, a default under this
Agreement.


 


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	7.13	 	Insurance.





The Borrower has obtained, and maintained in effect, the insurance coverage required in the
“Covenants” section of this Agreement.




	7.14	 	Location of Borrower.





The place of business of the Borrower and its Subsidiaries (or, if the Borrower and its
Subsidiaries have more than one place of business, their chief executive office) is located as
follows:




	 	 	Cumberland Pharmaceuticals Inc.

2525 West End Avenue, Suite 950

Nashville, Tennessee 37203
	 
	7.15	 	Capitalization.
	 
	(a)	 	As of June 30, 2011, the authorized capital stock of the Borrower consists of (1) 100,000,000
shares of common stock, no par value per share (“Common Shares”), of which 20,400,085
shares (the “Outstanding Common Shares”) are issued and outstanding, and (2)
23,000,000 shares of preferred stock, no par value per share, of which none are issued and
outstanding. All of the Outstanding Common Shares are duly authorized, validly issued and
outstanding and fully paid and nonassessable and free of preemptive rights.
	 
	(b)	 	The Borrower’s amended 1999 Stock Option Plan (the “1999 Plan”) has been replaced
with the Borrower’s 2007 Long-Term Incentive Compensation Plan and the Borrower’s 2007
Directors’ Incentive Plan (collectively, the “2007 Plans”). As of June 30, 2011, (i)
2,650,000 options to purchase Common Shares (“Options”) are authorized for issuance
under the 2007 Plans, and (ii) 1,652,658 Options are issued and outstanding under the 1999
Plan and the 2007 Plans, of which 1,297,797 Options are fully vested and exercisable.
	 
	7.16	 	Material Adverse Change.





Since December 31, 2010, no material adverse change has occurred on or in (a) the properties,
business, prospects, operations, management or financial condition of the Borrower and its
Subsidiaries, taken as a whole, or (b) the ability of the Borrower or any Obligor to perform any of
its obligations under this Agreement or the other Loan Documents to which it is a party.




	7.17	 	Subsidiaries.





As of the date of this Agreement, the Borrower has no Subsidiaries other than CET and Cumberland
Pharma Sales Corp., a Tennessee corporation (“CPSC”). As used herein, “Subsidiary”
of a person means a corporation, partnership, joint venture, limited liability company or other
business entity of which a majority of the shares of securities or other interests having ordinary
voting power for the election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency) are at the time
beneficially owned, or the management of which is otherwise controlled, directly, or indirectly
through one or more intermediaries, or both, by such person. Unless otherwise specified, all
references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or
Subsidiaries of the Borrower.


 


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	8.	 	COVENANTS





The Borrower agrees, so long as credit is available under this Agreement and until the Bank is
repaid in full:




	8.1	 	Use of Proceeds.






	(a)	 	To use the proceeds of the Facilities only (i) to refinance the credit facilities provided
pursuant to the Existing Credit Agreement and for general operating and working capital
expenses and (ii) to extend credit to CET as permitted by this Agreement.
	 
	(b)	 	[Reserved.]
	 
	(c)	 	In all events, the proceeds of the credit extended under this Loan Agreement may not be used
directly or indirectly to purchase or carry any “margin stock” as that term is defined in
Regulation U of the Board of Governors of the Federal Reserve System, or to extend credit to
or invest in other parties for the purpose of purchasing or carrying any such “margin stock,”
or to reduce or retire any indebtedness incurred for such purpose.






	8.2	 	Financial Information.





To provide the following financial information and statements in form and content acceptable to the
Bank, and such additional information as requested by the Bank from time to time:




	(a)	 	Within 150 days after the end of each fiscal year of the Borrower, the annual financial
statements of the Borrower, which shall include a balance sheet, profit and loss statement and
statement of cash flow, certified and dated by the chief executive or chief financial officer
of the Borrower. These financial statements must be audited (with an opinion satisfactory to
the Bank) by a certified public accountant acceptable to the Bank. The statements shall be
prepared on a consolidated basis and include unaudited statements on a consolidating basis.
	 
	(b)	 	Within 60 days after the beginning of each fiscal year of the Borrower, (i) a copy of the
Borrower’s operating and capital expenditure budget for such fiscal year, certified and dated
by the chief executive or chief financial officer of the Borrower, and (ii) detailed
consolidated projections (including balance sheet, profit and loss statement and statement of
cash flow) by product line on a quarterly basis for that fiscal year and on an annual basis
for next two fiscal years.
	 
	(c)	 	Within 45 days after the end of each fiscal quarter of the Borrower (including the last
quarter in each fiscal year), quarterly financial statements of the Borrower, which shall
include a balance sheet, profit and loss statement and statement of cash flow. The profit and
loss statement and the statement of cash flow to be submitted under this subsection shall be
presented on a quarterly and a year-to-date basis, and the financial statements to be
submitted under this subsection shall include comparisons with the same period for the prior
year. These financial statements may be company-prepared. The statements shall be prepared
on a consolidated and consolidating basis. Such financial statements shall be dated and
certified by the chief executive or chief financial officer of the Borrower and accompanied by
a compliance certificate setting forth (i) the information and computations (in sufficient
detail) to establish that the Borrower is in compliance with all financial covenants at the
end of the period covered by the financial statements then being furnished and (ii) whether
there existed as of the date of such financial statements, and whether there exists as of the
date of the certificate, any default under this Agreement and, if any such default exists,
specifying the nature thereof and the action the Borrower is taking and proposes to take with
respect thereto. The compliance certificate shall be substantially in the form attached
hereto as Exhibit A.




 


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	(d)	 	If requested by the Bank, within 30 days after the end of each month (including the last
month in each fiscal quarter and in each fiscal year), monthly financial statements of the
Borrower, which shall include a balance sheet, profit and loss statement and statement of cash
flow. The profit and loss statement and the statement of cash flow to be submitted under this
subsection shall be presented on a monthly and a year-to-date basis, and the financial
statements to be submitted under this subsection shall include comparisons with the same
period for the prior year. These financial statements may be company-prepared. Such
financial statements shall be dated and certified by the chief executive or chief financial
officer of the Borrower and accompanied by a compliance certificate setting forth (i) the
information and computations (in sufficient detail) to establish that the Borrower is in
compliance with all financial covenants at the end of the period covered by the financial
statements then being furnished and (ii) whether there existed as of the date of such
financial statements, and whether there exists as of the date of the certificate, any default
under this Agreement and, if any such default exists, specifying the nature thereof and the
action the Borrower is taking and proposes to take with respect thereto. The compliance
certificate shall be substantially in the form attached hereto as Exhibit A.
	 
	(e)	 	Within 10 days of receipt or dispatch by the Borrower, copies of any management letters and
correspondence relating to management letters sent or received by the Borrower to or from the
Borrower’s auditor. If no management letter is prepared, the Bank may, in its discretion,
request a letter from such auditor stating that no deficiencies were noted that would
otherwise be addressed in a management letter.
	 
	(f)	 	Such additional financial information regarding the Borrower, CET and any guarantor,
accommodation party, pledgor, grantor or other obligor with respect to the Facilities (each
such guarantor, accommodation party, pledgor, grantor or other obligor being sometimes herein
referred to as an “Obligor”) as the Bank shall request.
	 
	8.3	 	Leverage Ratio.





To maintain on a consolidated basis a ratio of Funded Debt to EBITDA (“Leverage Ratio”) not
exceeding the applicable Leverage Ratio Requirement, calculated as of the end of each
quarter-annual reporting period for which the Bank requires financial statements, using the results
of the twelve-month period ending with the end of that reporting period.



For purposes of this covenant:



“Funded Debt” means all outstanding liabilities for borrowed money and other
interest-bearing liabilities, including current and long term debt, capital lease obligations,
promissory notes, seller notes, letters of credit, if any, and any obligations guaranteed by the
Borrower.



“EBITDA” means net income before non-cash extraordinary losses and extraordinary gains,
minus income or plus loss from discontinued operations, plus interest
expense, income taxes, depreciation and amortization expense, plus non-cash charges for
equity-based compensation expense. EBITDA will be calculated for the twelve-month period ending
with the end of each reporting period.



“Leverage Ratio Requirement” means 1.50 to 1.00; provided, however, that for any
calculation date occurring after the Borrower has recorded EBITDA of at least $15,000,000 for each
of the twelve-month periods ending at the end of two consecutive fiscal quarters of the Borrower,
the Leverage Ratio Requirement shall be 2.00 to 1.00.



 


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	8.4	 	Interest Coverage Ratio.





To maintain on a consolidated basis an Interest Coverage Ratio of at least 1.50 to 1.00, calculated
as of the end of each quarter-annual reporting period for which the Bank requires financial
statements, using
the results of the twelve-month period ending with the end of that reporting period. For purposes
of this covenant:



“Interest Coverage Ratio” means the ratio of (a) EBITDAR minus maintenance capital
expenditures in the amount of $50,000 per annum, minus cash income taxes, minus
Restricted Payments (excluding Restricted Payments permitted by paragraph (d) of
Section 8.8), to (b) the sum (without duplication) of interest expense (including the
interest component of any capitalized lease obligations), lease expense and rent expense.



“EBITDAR” means the sum of EBITDA plus, without duplication, lease expense and rent
expense. EBITDAR will be calculated for the twelve-month period ending with the end of each
reporting period.




	8.5	 	[Reserved.]
	 
	8.6	 	Capital Expenditures.





Not to make or incur capital expenditures (excluding capital lease obligations) in an aggregate
amount in excess of $2,000,000 during any fiscal year.




	8.7	 	Lease Expenditures.





Not to incur obligations for operating leases of real or personal property requiring payments in an
aggregate amount in excess of $2,000,000 during any fiscal year.




	8.8	 	Restricted Payments.





Not to declare, make or pay, or to permit any Subsidiary to declare, make or pay, any dividend or
other distribution (whether in cash, securities or other property) with respect to any capital
stock or other equity interest of the Borrower or any Subsidiary, or any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit, on account of the
acquisition, purchase, redemption, retirement, cancellation or termination of any such capital
stock or other equity interest or of any option, warrant or other right to acquire any such capital
stock or other equity interest (“Restricted Payments”) except:




	(a)	 	each Subsidiary may make Restricted Payments to the Borrower and to wholly-owned Subsidiaries
(and, in the case of a Restricted Payment by a non-wholly-owned Subsidiary, to the Borrower
and any Subsidiary and to each other owner of capital stock or other equity interests of such
Subsidiary on a pro rata basis based on their relative ownership interests);
	 
	(b)	 	the Borrower may declare and make dividend payments or other distributions payable solely in
the common stock or other common equity interests of the Borrower;
	 
	(c)	 	the Borrower and each Subsidiary may purchase, redeem or otherwise acquire shares of its
common stock or other common equity interests or warrants or options to acquire any such
 shares with the proceeds received from the substantially concurrent issue of new shares of its
common stock or other common equity interests; and
	 
	(d)	 	the Borrower may purchase, redeem or otherwise acquire shares of its capital stock for cash
in an aggregate amount not to exceed $10,000,000 subsequent to the date of this Agreement;
provided that






	 	(i)	 	any such purchases, redemptions or other acquisitions of shares shall be made
using only the Borrower’s cash on hand (other than proceeds of the
Facility No. 1 Commitment), and




 


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	 	(ii)	 	such purchases, redemptions and other acquisitions of shares in each case shall
be made only if, after giving effect thereto, Borrower’s Cash Equivalents would exceed
the aggregate Funded Debt of the Borrower and its Subsidiaries on a consolidated basis
then outstanding.





As used herein, “Cash Equivalents” means, as at any date, (1) securities issued or directly
and fully guaranteed or insured by the United States or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in support thereof) having
maturities of not more than twelve months from the date of acquisition, (2) U.S. Dollar-denominated
time deposits and certificates of deposit of (A) the Bank, (B) any domestic commercial bank of
recognized standing having capital and surplus in excess of $500 million or (C) any bank whose
short-term commercial paper rating from Standard & Poor’s Ratings Services, a Standard & Poor’s
Financial Services LLC business, or its successor (“S&P”) is at least A-1 or the equivalent
thereof or from Moody’s Investors Service, Inc. or its successor (“Moody’s”) is at least
P-1 or the equivalent thereof (any such bank being an “Approved Bank”), in each case with
maturities of not more than 270 days from the date of acquisition, (3) commercial paper and
variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any
variable rate notes issued by, or guaranteed by, any domestic corporation rated A-1 (or the
equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody’s and
maturing within six months of the date of acquisition, (4) repurchase agreements entered into by
the Borrower with a bank or trust company (including the Bank) or recognized securities dealer
having capital and surplus in excess of $500 million for direct obligations issued by or fully
guaranteed by the United States in which the Borrower shall have a perfected first priority
security interest (subject to no other liens) and having, on the date of purchase thereof, a fair
market value of at least 100% of the amount of the repurchase obligations and (5) investments,
classified in accordance with GAAP as current assets, in money market investment programs
registered under the Investment Company Act of 1940 that are administered by reputable financial
institutions having capital of at least $500 million and the portfolios of which are limited to
Investments of the character described in the foregoing clauses (1) through (4).




	8.9	 	Bank as Principal Depository.





To maintain, and to cause each of its Subsidiaries to maintain, the Bank or one of its affiliates
as its principal depository bank, including for the maintenance of business, cash management,
operating, administrative and treasury management accounts.




	8.10	 	Other Debts.





Not to have, or permit its Subsidiaries to have, outstanding or incur any direct or contingent
liabilities or lease obligations (other than those to the Bank), or become liable for the
liabilities of others, without the Bank’s written consent. This does not prohibit:




	(a)	 	Acquiring services, goods, supplies or merchandise on normal trade terms, including by
invoice or by accrual in accordance with GAAP.
	 
	(b)	 	Endorsing negotiable instruments received in the usual course of business.
	 
	(c)	 	Obtaining surety bonds in the usual course of business.
	 
	(d)	 	Liabilities, lines of credit and leases in existence on the date of this Agreement and
disclosed in Schedule 8.10.
	 
	(e)	 	Purchase money debt and capitalized lease obligations financed by the Borrower through
specific research grants to the Borrower for the development of pharmaceutical products in
connection with such obligations, and other purchase money debt and capitalized lease
obligations in an aggregate principal amount not exceeding $250,000 outstanding at any one
time.




 


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	(f)	 	The indebtedness evidenced by the CET Pledged Note.
	 
	(g)	 	Other indebtedness in an aggregate amount not to exceed $500,000 outstanding at any one time.
	 
	8.11	 	Other Liens.





Not to create, assume, or allow any security interest or lien (including judicial liens) on
property the Borrower or any Subsidiary now or hereafter owns, except:




	(a)	 	Liens and security interests in favor of the Bank.
	 
	(b)	 	Liens for taxes not yet due.
	 
	(c)	 	Liens in existence on the date of this Agreement and disclosed in Schedule 8.11.
	 
	(d)	 	Liens securing purchase money debt or indebtedness arising under capitalized lease
obligations permitted by this Agreement; provided, however, that in each case any such liens
shall attach only to the specific item(s) of property or asset(s) financed with such purchase
money debt or capitalized lease.
	 
	(e)	 	Liens on property of CET pursuant to the CET Security Agreement.
	 
	8.12	 	Maintenance of Assets.





Not to sell, assign, lease, transfer or otherwise dispose of, or permit any Subsidiary to sell,
assign, lease, transfer or otherwise dispose of, any part of the Borrower’s or such Subsidiary’s
business or the Borrower’s or such Subsidiary’s assets except in the ordinary course of business of
the Borrower and its Subsidiaries.




	8.13	 	Investments.





Not to have or permit any Subsidiary to have any existing, or make or permit any Subsidiary to make
any new, investments in any individual or entity, or make or permit any Subsidiary to make any
capital contributions or other transfers of assets to any individual or entity, except for:




	(a)	 	Existing investments in CET (other than advances to CET described in subsection
8.14(c)) and CPSC disclosed to the Bank in writing.
	 
	(b)	 	Investments permitted by Section 8.14.
	 
	(c)	 	Cash Equivalents.
	 
	8.14	 	Loans.





Not to make any loans, advances or other extensions of credit to any individual or entity, except
for:




	(a)	 	Extensions of credit in existence on the date of this Agreement and disclosed in Schedule
8.14.
	 
	(b)	 	Extensions of credit in the nature of accounts receivable or notes receivable arising from
the sale or lease of goods or services in the ordinary course of business to non-affiliated
entities.
	 
	(c)	 	Extensions of credit to CET in an aggregate amount not exceeding $1,500,000 outstanding at
any one time, provided that (i) extensions of credit by the Borrower to CET from the Facility
No. 1
Commitment shall not exceed $500,000 outstanding at any one time and (ii) such extensions of
credit are evidenced by the CET Pledged Note and secured by the CET Security Agreement.




 


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	(d)	 	Advances to employees for business travel and other expenses incurred in the ordinary course
of business in an aggregate amount not exceeding $100,000 outstanding at any one time.
	 
	8.15	 	Additional Negative Covenants.




Not to, without the Bank’s written consent:





	(a)	 	Enter into any consolidation, merger, or other combination, or become a partner in a
partnership, a member of a joint venture, or a member of a limited liability company other
than CET.
	 
	(b)	 	Acquire or purchase a business or line of business or substantially all of the assets of a
business or line of business.
	 
	(c)	 	Change the general character of the business of the Borrower as conducted on the date of this
Agreement or engage in any business activities substantially different from the Borrower’s
present business.
	 
	(d)	 	Liquidate or dissolve the Borrower’s business.
	 
	8.16	 	Notices to Bank.




To promptly notify the Bank in writing of:





	(a)	 	Any lawsuit against the Borrower or any Subsidiary.
	 
	(b)	 	Any substantial dispute between any governmental authority on one hand and the Borrower or
any Subsidiary on the other hand.
	 
	(c)	 	Any event of default under this Agreement, or any event that, with notice or lapse of time or
both, would constitute an event of default.
	 
	(d)	 	Any material adverse change in the Borrower’s or any Subsidiary’s business condition
(financial or otherwise), operations, properties or prospects, or ability to repay the credit.
	 
	(e)	 	Any change in the Borrower’s or any Subsidiary’s name, legal structure, place of business, or
chief executive office if the Borrower or such Subsidiary has more than one place of business.
	 
	(f)	 	Any uninsured or partially uninsured loss of property of the Borrower or any Subsidiary
through fire, theft, liability or property damage in excess of $25,000.
	 
	8.17	 	Insurance.
	 
	(a)	 	General Business Insurance. To maintain insurance satisfactory to the Bank as to
amount, nature and carrier including property damage insurance (including loss of use and
occupancy) with respect to the Borrower’s or any Subsidiary’s properties, business
interruption insurance, public liability insurance including coverage for contractual
liability, product liability and workers’ compensation, and any other insurance that is usual
for the Borrower’s business. Each policy shall provide for at least thirty (30) days’ prior
notice to the Bank of any cancellation thereof.
	 
	(b)	 	Insurance Covering Collateral. To maintain all-risk property damage insurance
policies covering the tangible property comprising the Collateral. Each insurance policy must
be in an amount
acceptable to the Bank. The insurance must be issued by an insurance company acceptable to
the Bank and must include a lender’s loss payable endorsement in favor of the Bank in a form
acceptable to the Bank.




 


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	(c)	 	Evidence of Insurance. Upon the request of the Bank, to deliver to the Bank a copy
of each insurance policy, or, if permitted by the Bank, a certificate of insurance listing all
insurance in force and demonstrating compliance with the applicable provisions of this
Section.





8.18 Compliance with Laws.



To comply with the laws (including any fictitious or trade name statute), regulations, and orders
of any government body with authority over the Borrower’s business. The Bank shall have no
obligation to make any advance to the Borrower except in compliance with all applicable laws and
regulations and the Borrower shall fully cooperate with the Bank in complying with all such
applicable laws and regulations.



8.19 ERISA Plans.



Promptly during each year, to pay and cause any subsidiaries to pay contributions adequate to meet
at least the minimum funding standards under ERISA with respect to each and every Plan; file each
annual report required to be filed pursuant to ERISA in connection with each Plan for each year;
and notify the Bank within ten (10) days of the occurrence of any Reportable Event that might
constitute grounds for termination of any capital Plan by the Pension Benefit Guaranty Corporation
or for the appointment by the appropriate United States District Court of a trustee to administer
any Plan. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time. Capitalized terms in this paragraph shall have the meanings defined within
ERISA.




	8.20	 	Books and Records.




To maintain adequate books and records.





	8.21	 	Visits, Inspections and Audits.





To allow the Bank and its agents to visit and inspect the properties of the Borrower and its
Subsidiaries and examine, audit and make copies of books and records at any reasonable time. If
any of the properties, books or records of Borrower or a Subsidiary is in the possession of a third
party, the Borrower authorizes that third party to permit the Bank or its agents to have access to
perform inspections or audits and to respond to the Bank’s requests for information concerning such
properties, books and records.




	8.22	 	Perfection of Liens.





To help the Bank perfect and protect its security interests and liens, and reimburse it for related
costs it incurs to protect its security interests and liens.




	8.23	 	Cooperation.





To take, and cause its Subsidiaries to take, any action reasonably requested by the Bank to carry
out the intent of this Agreement.




	8.24	 	Collateral Account Notification and Acknowledgement.





To deliver to the Bank a signed original Collateral Account Notification and Acknowledgement
Agreement covering the Collateral in the account(s) described therein, in form and substance
acceptable to the Bank in its sole discretion, within a reasonable time following Bank’s request.




 


-17-











 




8.25 Subsidiaries.



Promptly (a) to cause any person that becomes a Subsidiary of the Borrower to become a guarantor of
the Facilities and to grant liens and security interests on its assets to secure the Facilities by
executing and delivering to the Bank such documents, instruments, agreements and certificates as
the Bank shall deem appropriate for such purposes and (b) to take such actions and execute and
deliver, or cause to be executed and delivered, such documents, instruments, agreements,
certificates and opinions as are necessary to confirm to the satisfaction of the Bank and its legal
counsel that such guaranty is valid and enforceable and that the security interests of the Bank in
the Collateral of such Subsidiary are valid and enforceable first-priority perfected security
interests. The provisions of this Section shall not apply to CET unless and until CET becomes a
direct or indirect wholly-owned Subsidiary of the Borrower.




9. HAZARDOUS SUBSTANCES




9.1 Indemnity Regarding Hazardous Substances.



The Borrower will indemnify and hold harmless the Bank from any loss or liability the Bank incurs
in connection with or as a result of this Agreement, that directly or indirectly arises out of the
use, generation, manufacture, production, storage, release, threatened release, discharge, disposal
or presence of a hazardous substance. This indemnity will apply whether the hazardous substance is
on, under or about the Borrower’s property or operations or property leased to the Borrower. The
indemnity includes attorneys’ fees (including the reasonable estimate of the allocated cost of
in-house counsel and staff). The indemnity extends to the Bank, its parent, subsidiaries and all
of their directors, officers, employees, agents, successors, attorneys and assigns.




9.2 Compliance Regarding Hazardous Substances.



The Borrower represents and warrants that the Borrower and its Subsidiaries have complied with all
current and future laws, regulations and ordinances or other requirements of any governmental
authority relating to or imposing liability or standards of conduct concerning protection of health
or the environment or hazardous substances.




9.3 Notices Regarding Hazardous Substances.



Until full repayment of the loans made pursuant to this Agreement, the Borrower will promptly
notify the Bank in writing of any threatened or pending investigation of the Borrower or any of its
Subsidiaries or any of their respective properties or operations by any governmental agency under
any current or future law, regulation or ordinance pertaining to any hazardous substance.




9.4 Site Visits, Observations and Testing.



The Bank and its agents and representatives will have the right at any reasonable time, after
giving reasonable notice to the Borrower, to enter and visit any locations where any Collateral is
located for the purposes of observing the Collateral, taking and removing environmental samples,
and conducting tests. The Borrower shall reimburse the Bank on demand for the costs of any such
environmental investigation and testing. The Bank will make reasonable efforts during any site
visit, observation or testing conducted pursuant this paragraph to avoid interfering with the
Borrower’s use of the Collateral. The Bank is under no duty to observe the Collateral or to
conduct tests, and any such acts by the Bank will be solely for the purposes of protecting the
Bank’s security and preserving the Bank’s rights under this Agreement. No site visit, observation
or testing or any report or findings made as a result thereof (“Environmental Report”) (i)
will result in a waiver of any default of the Borrower; (ii) impose any liability on the Bank; or
(iii) be a representation or warranty of any kind regarding the Collateral (including its condition
or value or compliance with any laws) or the Environmental Report (including its accuracy or
completeness). In the event the Bank has a duty or obligation under applicable laws, regulations
or other requirements to disclose an Environmental Report to the Borrower or any other party, the Borrower authorizes the
Bank to make such a disclosure. The Bank may also disclose an Environmental Report to any
regulatory authority, and to any other parties as necessary or appropriate in the Bank’s judgment.
The Borrower further understands and agrees that any Environmental Report or other information
regarding a site visit, observation or testing that is disclosed to the Borrower by the Bank or its
agents and representatives is to be evaluated (including any reporting or other disclosure
obligations of the Borrower) by the Borrower without advice or assistance from the Bank.



 


-18-









 






9.5 Definition of Hazardous Substances.



“Hazardous substances” means any substance, material or waste that is or becomes designated
or regulated as “toxic,” “hazardous,” “pollutant,” or “contaminant” or a similar designation or
regulation under any current or future federal, state or local law (whether under common law,
statute, regulation or otherwise) or judicial or administrative interpretation of such, including
petroleum or natural gas.




9.6 Continuing Obligation.



The Borrower’s obligations to the Bank under this Article, except the obligation to give notices to
the Bank, shall survive termination of this Agreement and repayment of the Borrower’s obligations
to the Bank under this Agreement.




10. DEFAULT AND REMEDIES



If any of the following events of default occurs, the Bank may do one or more of the following:
declare the Borrower in default, terminate the Facility No. 1 Commitment and the Facility No. 2
Commitment, stop making any additional credit available to the Borrower, and require the Borrower
to repay its entire debt immediately and without prior notice. If an event that, with notice or
the passage of time, will constitute an event of default has occurred and is continuing, the Bank
has no obligation to make advances or extend additional credit under this Agreement. In addition,
if any event of default occurs, the Bank shall have all rights, powers and remedies available under
any instruments and agreements required by or executed in connection with this Agreement, as well
as all rights and remedies available at law or in equity. If an event of default occurs under the
paragraph entitled “Bankruptcy,” below, with respect to the Borrower or any of its Subsidiaries,
then the entire debt outstanding under this Agreement will automatically be due immediately.




10.1 Failure to Pay.



The Borrower fails to make a payment under this Agreement when due, provided, however, that such
failure shall not constitute an event of default hereunder if no other default or event of default
has occurred and is continuing and such payment is received by the Bank within three (3) days of
the date such payment was due.




10.2 Other Bank Agreements.



Any other default occurs under any other Loan Document or any other agreement the Borrower or any
Obligor or any of the Borrower’s related entities or affiliates (including CET) has with the Bank
or any affiliate of the Bank.




10.3 Cross-Default.



Any default occurs under any agreement in connection with any credit (the aggregate outstanding
amount of which credit is in excess of $500,000) (i) the Borrower (or any Obligor) or any of the
Borrower’s related entities or affiliates has obtained from anyone else or (ii) that the Borrower
(or any Obligor) or any of the Borrower’s related entities or affiliates has guaranteed, provided,
however, that in the event that such default occurs in connection with payment of sums due under the distribution agreement relating to
the Borrower’s purchase of exclusive rights to distribute Kristalose® in North America, such
default shall not be a cross-default so long as (i) such payment is being contested in good faith
and by appropriate proceedings, for which adequate reserves in accordance with GAAP have been
established on the books of such Borrower and (ii) such refusal to pay could not reasonably be
expected to result in the termination of or the loss of any material rights under the distribution
agreement.







 


-19-









 








10.4 False Information.



The Borrower or any Obligor has given the Bank materially false or misleading information or
representations.




10.5 Bankruptcy.



The Borrower, any Subsidiary, any Obligor or any general partner of the Borrower or of any Obligor
files a bankruptcy petition, or a bankruptcy petition is filed against any of the foregoing
parties, or the Borrower, any Subsidiary, any Obligor or any general partner of the Borrower or of
any Obligor makes a general assignment for the benefit of creditors.




10.6 Receivers.



A receiver or similar official is appointed for a substantial portion of the Borrower’s or any
Subsidiary’s or Obligor’s business, or the business is terminated, or, if any Subsidiary or Obligor
is anything other than a natural person, such Subsidiary or Obligor is liquidated or dissolved.




10.7 Lien Priority.



The Bank fails to have an enforceable first lien (except for any prior liens to which the Bank has
consented in writing) on or security interest in any property given as security for this Agreement.




10.8 Lawsuits.



Any lawsuit or lawsuits are filed on behalf of one or more trade creditors against the Borrower or
any Subsidiary or Obligor in excess of any insurance coverage.




10.9 Judgments.



Any judgments or arbitration awards are entered against the Borrower, any Subsidiary or any
Obligor, or the Borrower, any Subsidiary or any Obligor enters into any settlement agreements with
respect to any litigation or arbitration, in excess of any insurance coverage.




10.10 [Reserved.]




10.11 Material Adverse Change.



A material adverse change occurs, or is reasonably likely to occur, in the Borrower’s, any
Subsidiary’s or any Obligor’s business condition (financial or otherwise), operations, properties
or prospects, or ability to repay the credit; or the Bank determines that it is insecure for any
other reason.




10.12 Government Action.



Any government authority takes action that the Bank believes materially adversely affects the
Borrower’s, any Subsidiary’s or any Obligor’s financial condition or ability to repay.







 


-20-









 







10.13 Default Under Related Documents.



Any default occurs under any subordination agreement, security agreement, deed of trust, mortgage,
the CET Pledged Note, the CET Security Agreement or any other document required by or delivered in
connection with this Agreement or any such document is no longer in effect.




10.14 Other Breach Under Agreement.



A default occurs under any other term or condition of this Agreement not specifically referred to
in this Article. This includes any failure by the Borrower (or any other party named in the
Covenants section) to comply with any financial covenants set forth in this Agreement, whether such
failure is evidenced by financial statements delivered to the Bank or is otherwise known to the
Borrower or the Bank.




10.15 Change in Control.



Either:





	(a)	 	Any individual, entity or group (as defined in Section 13(d) of the Securities Exchange Act
of 1934) shall obtain beneficial ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange Commission under the Securities Exchange Act of 1934) or control, directly or
indirectly, in one or a series of transactions, of more than thirty (30%) of the common or
other voting stock or thirty (30%) of the voting power of the Borrower entitled to vote in the
election of members of the board of directors of the Borrower; or
	 
	(b)	 	during any period of 24 consecutive months commencing on or after the date of this Agreement,
individuals who at the beginning of such 24-month period were directors of the Borrower shall
cease for any reason (other than due to death or disability) to constitute a majority of the
board of directors of the Borrower (except to the extent that individuals who at the beginning
of such 24-month period were replaced by individuals (i) elected by a majority of the
remaining members of the board of directors of the Borrower or (ii) nominated for election by,
or whose election is recommended by, a majority of the remaining members of the board of
directors of the Borrower and thereafter elected as directors by the shareholders of the
Borrower).





11. ENFORCING THIS AGREEMENT; MISCELLANEOUS




11.1 GAAP.



Except as otherwise stated in this Agreement, all financial and accounting terms are used, all
financial information provided to the Bank will be prepared and all financial covenants will be
calculated in accordance with under generally accepted accounting principles consistently applied.




11.2 Tennessee Law.




This Agreement is governed by Tennessee law.



11.3 Successors and Assigns.



This Agreement is binding on the Borrower’s and the Bank’s successors and assignees. The Borrower
agrees that it may not assign this Agreement without the Bank’s prior consent. The Bank may sell
participations in or assign this loan, and may exchange information about the Borrower (including
any information regarding any hazardous substances) with actual or potential participants or
assignees. If a participation is sold or the loan is assigned, the purchaser will have the right
of set-off against the Borrower.







 


-21-









 







11.4 Interest and Loan Charges Not to Exceed Maximum Amounts Allowed by Law.



Anything in this Agreement or any of the other Loan Documents to the contrary notwithstanding, in
no event whatsoever, whether by reason of advancement of proceeds of the loans hereunder,
acceleration of the maturity of the unpaid balance of such loans or otherwise, shall the interest
and loan charges agreed to be paid to the Bank for the use of the money advanced or to be advanced
hereunder exceed the maximum amounts collectible under applicable laws in effect from time to time.
It is understood and agreed by the parties that, if for any reason whatsoever the interest or loan
charges paid or contracted to be paid by the Borrower in respect of the loans made hereunder shall
exceed the maximum amounts collectible under applicable laws in effect from time to time, then
ipso facto, the obligation to pay such interest or loan charges shall be reduced to
the maximum amounts collectible under applicable laws in effect from time to time, and any amounts
collected by the Bank that exceed such maximum amounts shall be applied to the reduction of the
principal balance of the loans or refunded to the Borrower so that at no time shall the interest or
loan charges paid or payable in respect of the loans hereunder exceed the maximum amounts permitted
from time to time by applicable law.




11.5 Arbitration and Waiver of Jury Trial.





	(a)	 	This paragraph concerns the resolution of any controversies or claims between the parties,
whether arising in contract, tort or by statute, including controversies or claims that arise
out of or relate to: (i) this agreement (including any renewals, extensions or modifications);
or (ii) any document related to this agreement (collectively a “Claim”). For the
purposes of this arbitration provision only, the term “parties” shall include any parent
corporation, subsidiary or affiliate of the Bank involved in the servicing, management or
administration of any obligation described or evidenced by this agreement.






	(b)	 	At the request of any party to this agreement, any Claim shall be resolved by binding
arbitration in accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the
“Act”). The Act will apply even though this agreement provides that it is governed by
the law of a specified state. The arbitration will take place on an individual basis without
resort to any form of class action.






	(c)	 	Arbitration proceedings will be determined in accordance with the Act, the then-current rules
and procedures for the arbitration of financial services disputes of the American Arbitration
Association or any successor thereof (“AAA”), and the terms of this paragraph. In the
event of any inconsistency, the terms of this paragraph shall control. If AAA is unwilling or
unable to (i) serve as the provider of arbitration or (ii) enforce any provision of this
arbitration clause, the Bank may designate another arbitration organization with similar
procedures to serve as the provider of arbitration.






	(d)	 	The arbitration shall be administered by AAA and conducted, unless otherwise required by law,
in any U.S. state where real or tangible personal property Collateral for this credit is
located or if there is no such Collateral, in the state specified in the governing law section
of this agreement. All Claims shall be determined by one arbitrator; however, if Claims
exceed Five Million Dollars ($5,000,000), upon the request of any party, the Claims shall be
decided by three arbitrators. All arbitration hearings shall commence within ninety (90) days
of the demand for arbitration and close within ninety (90) days of commencement and the award
of the arbitrator(s) shall be issued within thirty (30) days of the close of the hearing.
However, the arbitrator(s), upon a showing of good cause, may extend the commencement of
the hearing for up to an additional sixty (60) days. The arbitrator(s) shall provide a
concise written statement of reasons for the award. The arbitration award may be submitted to
any court having jurisdiction to be confirmed, judgment entered and enforced.






	(e)	 	The arbitrator(s) will give effect to statutes of limitation in determining any Claim and may
dismiss the arbitration on the basis that the Claim is barred. For purposes of the application
of the statute of limitations, the service on AAA under applicable AAA rules of a notice of
Claim is the equivalent of the filing of a lawsuit. Any dispute concerning this arbitration
provision or whether a Claim is arbitrable shall be determined by the arbitrator(s). The
arbitrator(s) shall have the power to award legal fees pursuant to the terms of this
agreement.




 


-22-









 











	(f)	 	This paragraph does not limit the right of any party to: (i) exercise self-help remedies,
such as but not limited to, setoff; (ii) initiate judicial or non-judicial foreclosure against
any real or personal property Collateral; (iii) exercise any judicial or power of sale rights,
or (iv) act in a court of law to obtain an interim remedy, such as but not limited to,
injunctive relief, writ of possession or appointment of a receiver, or additional or
supplementary remedies.






	(g)	 	The filing of a court action is not intended to constitute a waiver of the right of any
party, including the suing party, thereafter to require submittal of the Claim to arbitration.






	(h)	 	By agreeing to binding arbitration, the parties irrevocably and voluntarily waive any right
they may have to a trial by jury in respect of any Claim. Furthermore, without intending in
any way to limit this agreement to arbitrate, to the extent any Claim is not arbitrated, the
parties irrevocably and voluntarily waive any right they may have to a trial by jury in
respect of such Claim. This provision is a material inducement for the parties entering into
this agreement.





11.6 Severability; Waivers.



If any part of this Agreement is not enforceable, the rest of this Agreement may be enforced. The
Bank retains all rights, even if it makes a loan after default. If the Bank waives a default, it
may enforce a later default. Any consent or waiver under this Agreement must be in writing.




11.7 Costs and Attorneys’ Fees.



The Borrower shall reimburse the Bank for any reasonable costs and attorneys’ fees incurred by the
Bank in connection with the enforcement or preservation of any rights or remedies under this
Agreement and any other documents executed in connection with this Agreement, and in connection
with any amendment, waiver, “workout” or restructuring under this Agreement. In the event of a
lawsuit or arbitration proceeding, the prevailing party is entitled to recover costs and reasonable
attorneys’ fees incurred in connection with the lawsuit or arbitration proceeding, as determined by
the court or arbitrator. In the event that any case is commenced by or against the Borrower under
the Bankruptcy Code (Title 11, United States Code) or any similar or successor statute, the Bank is
entitled to recover costs and reasonable attorneys’ fees incurred by the Bank related to the
preservation, protection, or enforcement of any rights of the Bank in such a case. As used in this
paragraph, “attorneys’ fees” includes the allocated costs of the Bank’s in-house counsel.




11.8 Individual Liability.



If the Borrower is a natural person, the Bank may proceed against the Borrower’s business and
non-business property in enforcing this and other agreements relating to this loan. If the
Borrower is a partnership, the Bank may proceed against the business and non-business property of
each general partner of the Borrower in enforcing this and other agreements relating to this loan.




11.9 One Agreement.



This Agreement, the Loan Documents and any related security or other agreements required by this
Agreement, collectively:





	(a)	 	represent the sum of the understandings and agreements between the Bank and the Borrower
concerning this credit;




 


-23-









 





	(b)	 	replace any prior oral or written agreements between the Bank and the Borrower concerning
this credit; and
	 
	(c)	 	are intended by the Bank and the Borrower as the final, complete and exclusive statement of
the terms agreed to by them.




In the event of any conflict between this Agreement and any other agreements required by this
Agreement, this Agreement will prevail. Any reference in any related document to a “promissory
note” or a “note” executed by the Borrower and dated as of the date of this Agreement shall be
deemed to refer to this Agreement and any promissory note(s) that may be executed as additional
evidence of the debt hereunder, all as now in effect or as hereafter amended, modified, extended,
renewed or restated.




11.10 Indemnification.



The Borrower will indemnify and hold the Bank harmless from any loss, liability, damages,
judgments, and costs of any kind relating to or arising directly or indirectly out of (a) this
Agreement or any document required hereunder, (b) any credit extended or committed by the Bank to
the Borrower hereunder, and (c) any litigation or proceeding related to or arising out of this
Agreement, any such document, or any such credit; provided that such indemnity shall not, as to any
indemnitee, be available to the extent that such loss, liability, damages, judgment or related cost
is determined by a court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such indemnitee. This indemnity
includes attorneys’ fees (including the allocated cost of in-house counsel). This indemnity
extends to the Bank, its parent, subsidiaries and all of their directors, officers, employees,
agents, successors, attorneys, and assigns. This indemnity will survive repayment of the
Borrower’s obligations to the Bank. All sums due to the Bank hereunder shall be obligations of the
Borrower, due and payable immediately without demand.




11.11 Notices.



Unless otherwise provided in this Agreement or in another agreement between the Bank and the
Borrower, all notices required under this Agreement shall be personally delivered or sent by first
class mail, postage prepaid, or by overnight courier, to the addresses on the signature page of
this Agreement, or sent by facsimile to the fax numbers listed on the signature page, or to such
other addresses as the Bank and the Borrower may specify from time to time in writing. Notices and
other communications shall be effective (i) if mailed, upon the earlier of receipt or five (5) days
after deposit in the U.S. mail, first class, postage prepaid, (ii) if telecopied, when transmitted,
or (iii) if hand-delivered, by courier or otherwise (including telegram, lettergram or mailgram),
when delivered.




11.12 Headings; Terminology, Etc.



Article and paragraph headings are for reference only and shall not affect the interpretation or
meaning of any provisions of this Agreement. The use of defined terms herein is for convenience of
reference and shall not be deemed to be limiting or to have any other substantive effect with
respect to the persons or things to which reference is made through the use of such defined terms.
When used herein, (a) the singular shall include the plural, and vice versa, and the use of the
masculine, feminine or neuter gender shall include all other genders, as appropriate, (b)
“include”, “includes” and “including” shall be deemed to be followed by “without limitation”
regardless of whether such words or words of like import in fact follow same, and (c) unless the
context clearly indicates otherwise, the disjunctive “or” shall include the conjunctive “and”.







 


-24-









 







11.13 Counterparts.



This Agreement may be executed in as many counterparts as necessary or convenient, and by the
different parties on separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same agreement.




11.14 Existing Loan Agreement and Existing Loan Documents.



This Agreement amends, restates, supersedes and replaces the Existing Loan Agreement, and upon the
effectiveness hereof any credit outstanding thereunder shall be deemed to be outstanding under this
Agreement. Except as amended or amended and restated pursuant to this Agreement, the Existing Loan
Documents shall continue in full force and effect in all respects. References in any of the
Existing Loan Documents to the Existing Loan Agreement, by whatever terminology used, hereafter
shall be deemed to be references to this Agreement as the same may be supplemented, amended,
restated, extended, renewed, replaced or otherwise modified from time to time.




[This space left blank intentionally; signature page follows]






 


-25-









 






This Agreement is executed as of the date stated at the top of the first page.




	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	BANK OF AMERICA, N.A.	 	CUMBERLAND PHARMACEUTICALS INC.
	 
	 	 	 	 	 	 
	By

	 	/s/ Suzanne B. Smith
	 	By
	 	/s/ Jean W. Marstiller
	 

	 	 
	 	 	 	 
	 	 	Name Suzanne B. Smith	 	 	 	Name Jean W. Marstiller
	 	 	Title   Senior Vice President	 	 	 	Title    Senior Vice President and Corporate Secretary
	 
	 	 	 	 	 	 
	Address where notices to the Bank are to be sent:



	 	Address where notices to the Borrower are to be sent:




	Bank of America, N.A.

Bank of America Plaza

414 Union Street 

Nashville, TN 37219-1697

Attn: Healthcare Banking Group (TN1-100-04-17)

Facsimile No. (615) 749-4951	 	Cumberland
Pharmaceuticals Inc.

2525 West End Avenue, Suite 950

Nashville, Tennessee 37203

Attn: A.J. Kazimi, Chief Executive Officer

Facsimile No. (615) 255-0094
	 
	 	 	 	 	 	 
	CONSENTED TO AND APPROVED:	 	 	 	 
	 
	 	 	 	 	 	 
	CUMBERLAND PHARMA SALES CORP.	 	 	 	 
	 
	 	 	 	 	 	 
	By

	 	/s/ Jean W. Marstiller	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	Name Jean W. Marstiller	 	 	 	 
	 	 	Title    Corporate Secretary	 	 	 	 
	 
	 	 	 	 	 	 
	ACKNOWLEDGED:	 	 	 	 
	 
	 	 	 	 	 	 
	CUMBERLAND EMERGING TECHNOLOGIES, INC.	 	 	 	 
	 
	 	 	 	 	 	 
	By

	 	/s/ Jean W. Marstiller	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	Name Jean W. Marstiller	 	 	 	 
	 	 	Title    Corporate Secretary	 	 	 	 











 


-26-









 







Schedule 1



Existing Loan Documents





	1.	 	Eighth Amended and Restated Promissory Note dated September 29, 2010, in the principal amount
not exceeding $6,000,000, made and executed by the Borrower and payable to the order of the
Bank.
	 
	2.	 	Second Amended and Restated Term Promissory Note dated July 22, 2009, in the principal amount
of $18,000,000, made and executed by the Borrower and payable to the order of the Bank.
	 
	3.	 	Amended and Restated Security Agreement dated April 6, 2006, between the Borrower and the
Bank, as amended by First Amendment to Security Agreement dated December 30, 2008, between the
Borrower and the Bank, and as further amended by Second Amendment to Security Agreement dated
July 22, 2009, between the Borrower and the Bank.
	 
	4.	 	Trademark and Patent Security Agreement dated April 19, 2002, between the Borrower and the
Bank, as amended by First Amendment to Trademark and Patent Security Agreement dated August 1,
2002, as further amended by Second Amendment to Trademark and Patent Security Agreement dated
April 6, 2006, as further amended by Third Amendment to Trademark and Patent Security
Agreement dated December 30, 2006, as further amended by Fourth Amendment to Trademark and
Patent Security Agreement dated July 22, 2009, and as further amended by Fifth Amendment to
Trademark and Patent Security Agreement dated September 29, 2010, all between the Borrower
and the Bank.
	 
	5.	 	Pledge Agreement dated July 22, 2009, between the Borrower and the Bank.
	 
	6.	 	Guaranty dated January 21, 2009, executed in favor of the Bank by CPSC.
	 
	7.	 	Security Agreement dated January 21, 2009, between CPSC and the Bank.




 


 









 










Schedule 7.7



Litigation




None.






 


 









 







Schedule 8.10



Liabilities





	 	 	The Borrower leases office space at 2525 West End Avenue, Nashville, Tennessee. The lease expires
in October 2016 and has escalating rent payments ranging from $[***] per month in 2001 to $[***]
per month in 2016.




 


 









 










Schedule 8.11



Liens




None.






 


 









 







Schedule 8.14



Loans/Extensions of Credit




None.









 


 









 







EXHIBIT A



COMPLIANCE CERTIFICATE




This Compliance Certificate is delivered pursuant to Section 8.2 of that certain Fifth
Amended and Restated Loan Agreement dated as of August 2, 2011 (together with all amendments and
modifications, if any, from time to time made thereto, the “Loan Agreement”), between
Cumberland Pharmaceuticals Inc., a Tennessee corporation (the “Borrower”) and Bank of
America, N.A (the “Bank”). Unless otherwise defined, terms used herein (including the
attachments hereto) have the meanings provided in the Loan Agreement.



The undersigned, being the duly elected, qualified and acting ______________ of the Borrower,
on behalf of the Borrower and solely in his or her capacity as an officer of the Borrower, hereby
certifies and warrants that:




1. He or she is the _____________ of the Borrower and that, as such, he or she is
authorized to execute this certificate on behalf of the Borrower.




2. The financial statements being submitted to the Bank by the Borrower with this
Certificate are true and correct as of the date hereof.




3. The Borrower’s Leverage Ratio as of the end of the most recent fiscal quarter
covered by such financial statements is _____ to 1.00, calculated as follows:



[SHOW COMPLIANCE CALCULATION]





4. The Borrower’s Interest Coverage Ratio as of the end of the most recent fiscal
quarter covered by such financial statements is _____ to 1.00, calculated as follows:



[SHOW COMPLIANCE CALCULATION]





5. The Borrower’s capital expenditures from the beginning of the current fiscal year
through the end of the most recent [fiscal quarter] [month] covered by such financial
statements total $________.




6. The Borrower’s operating lease expenditures from the beginning of the current fiscal
year through the end of the most recent [fiscal quarter] [month] covered by the foregoing
financial statements total $________.




7. Since the date of the most recent previous Compliance Certificate delivered to the
Bank, Restricted Payments in an aggregate amount equal to $__________ have been made
pursuant to subsection 8.8(d) of the Loan Agreement. The total amount of Restricted
Payments made pursuant to subsection 8.8(d) of the Loan Agreement subsequent to the date of
the Loan Agreement is $__________, and all such Restricted Payments have been made in
compliance with the requirements of subsection 8.8(d) of the Loan Agreement.




8. As of the date of such financial statements and for the period(s) covered thereby,
and as of the date of this certificate, no default was or is in existence under this
Agreement[.] [except as described below. The actions the Borrower is taking or proposes to
take with respect to such default(s) are set forth below.]



[Signature page follows.]






 


 









 







IN WITNESS WHEREOF, the undersigned has executed and delivered this certificate, this
______ day of ______________, 20_.



	 	 	 
	 

	 	CUMBERLAND PHARMACEUTICALS INC.
	 
	 	 
	 

	 	By _______________________
	 

	 	Typed Name ________________________
	 

	 	Title _____________________





9723373.3