Document:

EX-10.1

 1

Template
--  2009 Revisions

CHANGE OF CONTROL SEVERANCE AGREEMENT

AS AMENDED

[TIERS I, II & III1]

          This Agreement (“Agreement”) is dated as of                     , 20[09], by and between SUPERVALU INC., a
Delaware corporation (the “Company”), and                                          (the “Executive”).

          WHEREAS, the Company’s Board of Directors (the “Board”) considers the continued services of
key executives of the Company to be in the best interests of the Company and its stockholders; and

          WHEREAS, the Board desires to assure and has determined that it is appropriate and in the best
interests of the Company and its stockholders to reinforce and encourage the continued attention
and dedication of key executives of the Company to their duties of employment without personal
distraction or conflict of interest in circumstances arising from the possibility or occurrence of
a Change of Control of the Company; and

          WHEREAS, the Board has authorized the Company to enter into continuity agreements with those
key executives of the Company who are designated by the Executive Personnel and Compensation
Committee of the Board of Directors (the “Committee”), such agreements to set forth the severance
compensation which the Company agrees under certain circumstances to pay such executives; and

          WHEREAS, Executive is a key executive of the Company and has been designated by the Committee
as an executive to be offered such a continuity compensation agreement with the Company.

          NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company and Executive agree as follows:

	1)	 	General Principles. This Agreement is effective on the first date that it has been signed by
both the Company and Executive. Words and phrases used with initial capital letters shall
have the meaning assigned to them in Section 17 and in other Sections of this Agreement
unless, in the context in which used, it would be unreasonable to do so. The captions given
to Sections of this Agreement are solely for convenience of reference and shall not be
considered in construing this Agreement.
	 
	2)	 	Employment following Change of Control.

	 	a)	 	Employment Continued. If a Change of Control occurs, Executive’s employment shall be
continued hereunder for the Employment Period, subject to Executive’s Separation from
Service as described hereinafter. Any existing employment agreement between Executive and
the Company shall continue to be effective following the Change of Control, but severance
amounts under this Agreement shall be reduced by amounts payable under any such employment
agreement.
	 
	 	b)	 	Terms of Continued Employment. During the Employment Period, the following shall
apply.

 

			
	1	 	Tier I - the CEO; Tier II – the EVPs; Tier III –
those remaining corporate officers who are offered this form of Agreement.

 

 

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	 	i)	 	Executive shall have at least the same titles and responsibilities as those in
effect immediately prior to the Change of Control unless mutually agreed otherwise.
	 
	 	ii)	 	Executive shall receive an annual base salary which is not less than the
highest base salary in effect for Executive at any time in the twelve (12) months
preceding the Change of Control, and the Company shall review the salary annually with
a view to increasing it; provided any such increase shall be in the sole discretion of
the Board. Once increased, base salary cannot be decreased.
	 
	 	iii)	 	If Executive has not been terminated, for the year of the Change of Control and
for each year thereafter during which Executive is employed, Executive shall be paid an
annual bonus which shall be no less than the highest of (A) the bonus which Executive
would have received under the Company’s bonus plans as they were in effect prior to the
Change of Control (based upon actual performance in the year up to the Change of
Control), (B) the average of the annual bonuses paid or payable in respect of the three
years prior to the Change of Control, or (C) Executive’s Target Bonus immediately prior
to the Change of Control. In addition, Executive shall be afforded long term incentive
opportunities that are not less than the level in effect prior to the Change of
Control.
	 
	 	iv)	 	Executive shall be provided with, pension, general insurance, vacation, fringe
benefits, perquisites (including an automobile allowance, if any), the use of an office
and support staff that are commensurate with the pension, general insurance, vacation,
fringe benefits, perquisites (including an automobile allowance, if any), the use of an
office and support staff provided to Executive immediately prior to the Change of
Control or, if more favorable to Executive, at the level made available to other
similarly situated executive officers of the Company after the Change of Control.
	 
	 	v)	 	Executive’s place of employment following a Change of Control shall be no
farther than forty-five (45) miles from Executive’s place of employment prior to the
Change of Control.

	3)	 	Payment upon Separation from Service Incident to a COC.

	 	a)	 	Payment Triggers. Executive shall be entitled to the severance benefits provided in
Section 4 hereof if, and only if, Executive has a Separation from Service and that
Separation from Service occurs either:

	 	i)	 	prior to a Change of Control, as a result of an Anticipatory Separation, or
	 
	 	ii)	 	within two (2) years following a Change of Control:

	 	(1)	 	by the Company without Cause, or
	 
	 	(2)	 	by Executive for Good Reason.

	 	b)	 	Excluded Separations. Without limiting the generality of the foregoing, if Executive
has a Separation from Service prior to a Change of Control for any reason other than an
Anticipatory Separation, this Agreement (excluding the covenants in Section 11) shall
terminate and have no effect and Executive shall receive only such severance payments, if
any, as are provided in any other existing agreement between Executive and the Company. If
Executive has a Separation from Service after a Change of Control other than by the Company
without Cause or by Executive for Good Reason, this Agreement (excluding the covenants in
Section 11) shall terminate and have no effect and Executive shall receive only such
severance payments, if any, as are provided in any other existing agreement between
Executive and the Company.

 

 

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	 	c)	 	Death & Disability. Notwithstanding the foregoing, Executive shall not be entitled to
severance benefits under this Agreement if Executive’s Separation from Service is on
account of Executive’s death or Disability. Executive’s death or Disability subsequent to
a Separation from Service which would otherwise give rise to severance benefits under this
Agreement will not disqualify Executive’s estate or Executive from receiving the severance
benefits.
	 
	 	d)	 	Notice of Termination by Company. Any purported Separation from Service of Executive
by the Company (whether for Cause or without Cause) shall be communicated by a Notice of
Termination to Executive. No purported Separation from Service of Executive by the Company
shall be effective without a Notice of Termination having been given.
	 
	 	e)	 	Good Reason Notice by Executive. Any purported Separation from Service by Executive
for Good Reason shall be communicated by a Notice of Termination to the Company. An
Executive’s Separation from Service will not be for Good Reason unless (i) Executive gives
the Company written notice of the event or circumstance which Executive claims is the basis
for Good Reason within six (6) months of such event or circumstance first occurring, and
(ii) the Company is given thirty (30) days from its receipt of such notice within which to
cure or resolve the event or circumstance so noticed. If the circumstance is cured or
resolved within said 30 days, Executive’s Separation from Service will not be for Good
Reason.

	4)	 	Compensation Upon Separation from Service Incident to a Change of Control. If, pursuant to
Section 3, Executive has a Separation from Service that qualifies Executive for benefits under
this Section 4, and upon Executive’s timely execution and non-rescission of a Release of
Claims, as further described in Section 12(c) below, Executive shall be entitled to the
following payments and benefits.

	 	a)	 	Lump Sum Severance. On the tenth (10th)business day following such
Separation from Service (or at such later time as may be provided under Section 4(h)), the
Company shall pay or cause to be paid to Executive a lump sum cash amount equal to
[                    2] times the sum of (i) Executive’s annual Base Salary , and
(ii) Executive’s Target Bonus.
	 
	 	b)	 	Other Remuneration.

	 	i)	 	Salary and Vacation Pay. In addition, at the time of the payment under
Section 4(a), Executive shall be entitled to an additional lump sum cash payment equal
to the sum of (A) Executive’s earned but unpaid salary through the date of Separation
from Service, and (B) an amount, if any, of accrued vacation pay, in each case, in full
satisfaction of Executive’s rights thereto. In addition, Executive shall be entitled
to payment of annual bonus plan and long term incentive plan amounts, if any, due but
not yet paid as of the Separation from Service with respect to years or cycles that
were completed before the Separation from Service.
	 
	 	ii)	 	Interrupted Annual Bonus. In addition, Executive shall receive a pro-rated
payment of such bonus as would have been earned based on actual performance for the
annual bonus cycle that includes the Separation from Service. This pro-rated annual
bonus will be determined on the basis of actual performance through the Separation from
Service. Except to the extent Executive has elected to defer payment of such amount
pursuant to a deferred compensation plan, the pro-rated amount shall paid at the same
time other bonuses are paid under the annual bonus plan. In all events, however, this
payment under the annual bonus plan shall be paid not later than the later of (A)
March 15 following the end of the calendar year in

 

			
	2	 	For Tier I – “three (3).” For Tier II – “two (2).”
For Tier III – “one (1).”

 

 

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	 	 	 	which the Separation from Service occurs, or (B) May 15 following the end of the
Company’s fiscal year in which the Separation from Service occurs.

	 	c)	 	No Effect on Other Agreements. Except as expressly provided in this Agreement, nothing
in this Agreement shall be interpreted or relied upon as a basis to amend, modify,
accelerate or defer, or otherwise change any contributions to or payments that may be due
from any other plan or arrangement that are deferred compensation subject to section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”).
	 
	 	d)	 	Continued Welfare Benefits.

	 	i)	 	In General. Executive shall be entitled to continued medical, dental and life
insurance coverage for Executive and Executive’s eligible dependents on the same basis
as in effect prior to the Change of Control or Executive’s Separation from Service,
whichever is deemed to provide for more substantial benefits, until the earlier of
(A) the end of the Separation Period, or (B) the commencement of comparable coverage
with a subsequent employer or under a plan of Executive’s spouse’s employer.
	 
	 	ii)	 	Impossibility. If the Company determines that it is not able to provide the
coverage required above under the general terms and provisions of the Company’s welfare
benefit plans consistent with the underwriting, regulatory and tax treatment intended
for those plans, then the Company shall reimburse Executive for the cost of obtaining
substantially similar benefits (the “Benefit Payment”) and shall pay Executive an
additional amount, such that after payment of all applicable federal, state and local
income and payroll taxes imposed upon Executive as a result of the Benefit Payment,
Executive retains an amount equal to the amount of the Benefit Payment.

	 	e)	 	Outplacement. If so requested by Executive, outplacement services shall be provided by
a professional outplacement provider mutually acceptable to Executive and the Company at a
cost to the Company of not more than Twenty-Five Thousand Dollars ($25,000). Such services
may be provided by direct payment to the outplacement provider (and not by reimbursement to
Executive). However, services shall be paid or reimbursed only if the services are
provided during the period beginning with the Separation from Service and ending on the
December 31 of the second calendar year following the calendar year in which the Separation
from Service occurred.
	 
	 	f)	 	Indemnification; Liability Insurance. The Company shall maintain, for a period not
less than six years following Executive’s Separation from Service, indemnification policies
and liability insurance coverage for Executive’s benefit comparable to those
indemnification policies and liability insurance coverage provided by the Company for
Executive’s benefit prior to the Change of Control.
	 
	 	g)	 	Withholding. Payments and benefits provided pursuant to this Section 4 or any other
provision of this Agreement shall be subject to any applicable income, payroll and other
taxes required to be withheld.
	 
	 	h)	 	Limitations on Payment of Deferred Compensation. To the extent that any payments or
benefits to be provided to Executive under this Agreement would be considered deferred
compensation under section 409A of the Code and Executive is, as of Separation from
Service, a “specified employee” as defined in regulations issued under section 409A of the
Code, then any such payments that would otherwise be due and payable during the first six
(6) months following and on account of a Separation from Service shall instead be paid to
Executive upon the earlier of (i) six months and one day after the date of Executive’s
Separation from Service or (ii) any other date permitted under section 409A(a)(2) and
section 409A(a)(3). To the extent that any

 

 

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	 	 	 	payments or benefits to be provided to Executive under this Agreement would be considered
deferred compensation under section 409A of the Code, the provisions of this Agreement
pertaining thereto shall be construed and administered to comply with section 409A. Neither
the Company nor any of its officers, directors, agents or affiliates shall be obligated,
directly or indirectly, to Executive or any other person for any taxes, penalties, interest
or like amounts that may be imposed on Executive or other person on account of any amounts
paid or payable under this Agreement or on account of any failure to comply with
section 409A.

	5)	 	280G Best Net.

	 	a)	 	Reduction Alternative. Anything in this Agreement to the contrary notwithstanding, if
it is determined (as hereafter provided) that any payment or distribution by the Company to
or for the benefit of Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including without limitation any stock
option, stock appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing (a “Payment”),
would be subject to the excise tax imposed by section 4999 of the Code (or any successor
provision thereto) by reason of being “contingent on a change in ownership or control” of
the Company, within the meaning of section 280G of the Code (or any successor provision
thereto) or to any similar tax imposed by state or local law, or any interest or penalties
with respect to such excise tax (such tax or taxes, together with any such interest and
penalties, are hereafter collectively referred to as the “Excise Tax”), then if a reduction
in the amount of payments under Section 4(a) of this Agreement sufficient to avoid the
excise tax would result in an increase in the total amount of all Payments that would be
retained by Executive, net of all applicable taxes, then and only then, the payments due
under Section 4(a) shall be reduced to the amount that, when considered with all Payments
taken into account under section 280G is One Dollar ($1.00) less than the smallest sum that
would subject Executive to the excise tax.
	 
	 	b)	 	Determinations. If at any time Executive disagrees with any part of the Company’s
determinations as to the application of Section 5(a), the disputed matter shall be referred
to the nationally recognized firm of certified public accountants (the “Accounting Firm”)
used by the Company prior to the Change of Control (or, if such Accounting Firm declines to
serve, the Accounting Firm shall be a nationally recognized firm of certified public
accountants selected by Executive). The Accounting Firm shall be directed by the Company
or Executive to submit its determination and detailed supporting calculations to both the
Company and Executive within fifteen (15) calendar days after the Separation from Service,
if applicable, and any other such time or times as may be requested by the Company or
Executive. In connection with making determinations under this Section 5, the Accounting
Firm shall take into account the value of any reasonable compensation for services to be
rendered by Executive before or after the Change of Control, including any restrictive
covenants that may apply to Executive and the Company shall cooperate in the valuation of
any such services, including any restrictive covenants.
	 
	 	c)	 	Process. The Company and Executive shall each provide the Accounting Firm access to
and copies of any books, records and documents in the possession of the Company or
Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise
cooperate with the Accounting Firm in connection with the preparation and issuance of the
determination contemplated by Section 5(b) hereof.
	 
	 	d)	 	Fees and Expenses. The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Section 5 hereof shall
be borne by the Company. If such fees and expenses are initially advanced by Executive,
the Company shall reimburse Executive the full amount of such fees and expenses on the
fifth business day after receipt from Executive of a statement therefore and reasonable
evidence of Executive’s payment thereof.

 

 

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	6)	 	Obligations Absolute; No Mitigation; No Effect On Other Rights.

	 	a)	 	Absolute. The obligations of the Company to make the payment to Executive, and to make
the arrangements, provided for herein are absolute and unconditional and may not be reduced
by any circumstances, including without limitation any set-off, counterclaim (including
without limitation, pursuant to Section 11), recoupment, defense or other right which the
Company may have against Executive or any third party at any time.
	 
	 	b)	 	No Mitigation. Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, and no such
payment shall be offset or reduced by the amount of any compensation or benefits provided
to Executive in any subsequent employment.
	 
	 	c)	 	Other Agreements. The provisions of this Agreement, and any payment provided for
herein, shall not supersede or in any way limit the rights, benefits, duties or obligations
which Executive may now or in the future have under any benefit, incentive or other plan or
arrangement of the Company or any other agreement with the Company.

	7)	 	Not an Employment Agreement. Subject to the terms of this or any other agreement or
arrangement between the Company and Executive that may then be in effect, nothing herein shall
prevent the Company from terminating Executive’s employment.
	 
	8)	 	Successors; Binding Agreement; Assignment.

	 	a)	 	Company’s Successors. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of
the business of the Company, by agreement to expressly, absolutely and unconditionally
assume and agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken place. Failure
of the Company to obtain such agreement prior to the effectiveness of any such succession
shall be a material breach of this Agreement and shall entitle Executive to terminate
Executive’s employment with the Company or such successor for Good Reason immediately prior
to or at any time after such succession. As used in this Agreement, “Company” shall mean
(i) the Company as hereinbefore defined, and (ii) any successor to all or substantially all
of the Company’s business or assets which executes and delivers an agreement provided for
in this Section 8(a) or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law, including any parent or subsidiary of such a successor.
	 
	 	b)	 	Executive’s Successors. This Agreement shall inure to the benefit of and be
enforceable by Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die while any
amount would be payable to Executive hereunder if Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Executive’s estate or designated beneficiary. Neither this Agreement nor
any right arising hereunder may be assigned or pledged by Executive.

	9)	 	Notice. For purpose of this Agreement, notices and all other communications provided for in
this Agreement or contemplated hereby shall be in writing and shall be deemed to have been
duly given when personally delivered or when mailed United States certified or registered
mail, return receipt requested, postage prepaid, and addressed, in the case of the Company, to
the Company at:

P.O. Box 990

Minneapolis, MN 55440

Attention: Corporate Secretary

 

 

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	 	 	and in the case of Executive, to Executive at the most current address shown on Executive’s
employment records. Either party may designate a different address by giving notice of change
of address in the manner provided above, except that notices of change of address shall be
effective only upon receipt.
	 
	10)	 	Expenses. In addition to all other amounts payable to Executive under this Agreement, the
Company shall pay or reimburse Executive for legal fees (including without limitation, any and
all court costs and attorneys’ fees and expenses) incurred by Executive in connection with or
as a result of any claim, action or proceeding brought by the Company or Executive with
respect to or arising out of this Agreement or any provision hereof; unless (i) in the case of
an action brought by Executive, it is determined by an arbitrator or by a court of competent
jurisdiction that such action was frivolous and was not brought in good faith, or (ii) in the
case of a claim arising under Section 11 hereof, the Company prevails on the merits of such
claim.
	 
	11)	 	Employee Covenants. In consideration of this Agreement, and in recognition of the fact that,
as a result of Executive’s employment with the Company or any of its affiliates, Executive has
had or will have access to and gain knowledge of highly confidential or proprietary
information or trade secrets pertaining to the Company or its affiliates, as well as the
customers, suppliers, joint ventures, licensors, licensees, distributors or other persons and
entities with whom the Company or any of its affiliates does business (“Confidential
Information”), which the Company or its affiliates have expended time, resources and money to
obtain or develop and which have significant value to the Company and its affiliates,
Executive agrees for the benefit of the Company and its affiliates, and as a material
condition to Executive’s receipt of benefits described in this Agreement, as follows.

	 	a)	 	Non-Disclosure of Confidential Information. Executive acknowledges that Executive will
receive access or have received access to Confidential Information about the Company or its
affiliates, that this information was obtained or developed by the Company or its
affiliates at great expense and is zealously guarded by the Company and its affiliates from
unauthorized disclosure and that Executive’s possession of this special knowledge is due
solely to Executive’s employment with the Company or one or more of its affiliates. In
recognition of the foregoing, Executive will not at any time during employment or following
termination of employment for any reason, disclose, use or otherwise make available to any
third party any Confidential Information relating to the Company’s or any affiliate’s
business, products, services, customers, vendors or suppliers; trade secrets, data,
specifications, developments, inventions and research activity; marketing and sales
strategies, information and techniques; long and short term plans; existing and prospective
client, vendor, supplier and employee lists, contacts and information; financial, personnel
and information system information and applications; and any other information concerning
the business of the Company or its affiliates which is not disclosed to the general public
or known in the industry, except for disclosure necessary in the course of Executive’s
duties or with the express written consent of the Company. All Confidential Information,
including all copies, notes regarding, and replications of such Confidential Information
will remain the sole property of the Company or its affiliate, as applicable, and must be
returned to the Company or such affiliate immediately upon termination of Executive’s
employment.
	 
	 	b)	 	Return of Property. Upon termination of employment with the Company or any of its
affiliates, or at any other time at the request of the Company, Executive shall deliver to
a designated Company representative all records, documents, hardware, software and all
other property of the Company or its affiliates and all copies of such property in
Executive’s possession. Executive acknowledges and agrees that all such materials are the
sole property of the Company or its affiliates and that Executive will certify in writing
to the Company at the time of delivery, whether upon termination or otherwise, that
Executive has complied with this obligation.

 

 

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	 	c)	 	Non-Solicitation of Existing or Prospective Customers, Vendors and Suppliers.
Executive specifically acknowledges that the Confidential Information described in
Section 11(a) includes confidential data pertaining to existing and prospective customers,
vendors and suppliers of the Company or its affiliates; that such data is a valuable and
unique asset of the business of the Company or its affiliates; and that the success or
failure of their businesses depends upon the their ability to establish and maintain close
and continuing personal contacts and working relationships with such existing and
prospective customers, vendors, and suppliers and to develop proposals which are specific
to such existing and prospective customers, vendors, and suppliers. Therefore, during
Executive’s employment with the Company or any of its affiliates and for the twelve (12)
months following termination of employment for any reason, Executive agrees that Executive
will not, except on behalf of the Company or its affiliates, or with the Company’s express
written consent, solicit, approach, contact or attempt to solicit, approach or contact,
either directly or indirectly, on Executive’s own behalf or on behalf of any other person
or entity, any existing or prospective customers, vendors, or suppliers of the Company or
its affiliates with whom Executive had contact or about whom Executive gained Confidential
Information during Executive’s employment with the Company or its affiliates for the
purpose of obtaining business or engaging in any commercial relationship that would be
competitive with the “Business of the Company” (as defined below in Section 11(e)(i)) or
cause such customer, supplier, or vendor to materially change or terminate its business or
commercial relationship with the Company or its affiliates.
	 
	 	d)	 	Non-Solicitation of Employees. Executive specifically acknowledges that the
Confidential Information described in Section 11 also includes confidential data pertaining
to employees and agents of the Company or its affiliates, and Executive further agrees that
during Executive’s employment with the Company or its affiliates and for the twelve (12)
months following termination of employment for any reason, Executive will not, directly or
indirectly, on Executive’s own behalf or on behalf of any other person or entity, solicit,
contact, approach, encourage, induce or attempt to solicit, contact, approach, encourage or
induce any of the employees or agents of the Company or its affiliates to terminate their
employment or agency with the Company or any of its affiliates.
	 
	 	e)	 	Non-Competition. Executive covenants and agrees that during Executive’s employment
with the Company or any of its affiliates and for the twelve (12) months following
termination of employment for any reason, Executive will not, in any geographic market in
which Executive worked on behalf of the Company or any of its affiliates, or for which
Executive had any sales, marketing, operational, logistical or other management or
oversight responsibility, engage in or carry on, directly or indirectly, as an owner,
employee, agent, associate, consultant, partner or in any other capacity, a business
competitive with the Business of the Company. This Section 11(e) shall not apply following
a Change in Control.

	 	i)	 	The “Business of the Company” shall mean any business or activity involved in
grocery or general merchandise retailing and supply chain logistics, including but not
limited to grocery distribution, business-to-business portal, retail support services,
and third-party logistics, of the type provided by the Company or its affiliates, or
presented in concept to Executive by the Company or its affiliates at any time during
Executive’s employment with the Company or any of its affiliates.
	 
	 	ii)	 	To “engage in or carry on” shall mean to have ownership in such business
(excluding ownership of up to 1% of the outstanding shares of a publicly-traded
company) or to consult, work in, direct or have responsibility for any area of such
business, including but not limited to operations, logistics, sales, marketing,
finance, recruiting, sourcing, purchasing, information technology or customer service.

 

 

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	 	f)	 	No Disparaging Statements. Executive agrees that Executive will not make any
disparaging statements about the Company, its affiliates, directors, officers, agents,
employees, products, pricing policies or services.
	 
	 	g)	 	Remedies for Breach of These Covenants. Any breach of the covenants in this Section 11
likely will cause irreparable harm to the Company or its affiliates for which money damages
could not reasonably or adequately compensate the Company or its affiliates. Accordingly,
the Company or any of its affiliates shall be entitled to all forms of injunctive relief
(whether temporary, emergency, preliminary, prospective or permanent) to enforce such
covenants, in addition to damages and other available remedies, and Executive consents to
the issuance of such an injunction without the necessity of the Company or any such
affiliate posting a bond or, if a court requires a bond to be posted, with a bond of no
greater than Five Hundred Dollars ($500) in principal amount. In the event that injunctive
relief or damages are awarded to the Company or any of its affiliates for any breach by
Executive of this Section 11, Executive further agrees that the Company or such affiliate
shall be entitled to recover its costs and attorneys’ fees necessary to obtain such
recovery. In addition, Executive agrees that upon Executive’s breach of any covenant in
this Section 11, all unexercised options issued under any stock option plans of the Company
will immediately terminate and the Company shall have the right to exercise any and all of
the rights described above.
	 
	 	h)	 	Enforceability of These Covenants. It is further agreed and understood by Executive
and the Company that if any part, term or provision of these terms and conditions should be
held to be unenforceable, invalid or illegal under any applicable law or rule, the
offending term or provision shall be applied to the fullest extent enforceable, valid or
lawful under such law or rule or, if that is not possible, the offending term or provision
shall be struck and the remaining provisions of these Terms and Conditions shall not be
affected or impaired in any way.

	12)	 	Miscellaneous. No provision of this Agreement may be amended, altered, modified, waived or
discharged unless such amendment, alteration, modification, waiver or discharge is agreed to
in writing signed by Executive and such officer of the Company as shall be specifically
designated by the Committee or by the Board.

	 	a)	 	409A Amendments. Notwithstanding the foregoing, if the Company determines from time to
time in good faith that any provision of this Agreement is not or may not be in compliance
with section 409A of the Code and that such provisions can be amended to comply with
section 409A without causing any violation of any other provision of law, the Company may,
but shall not be obligated to, amend such provision without the consent of Executive for
the purpose of eliminating or modifying the provision in such manner as the Company
determines to be necessary and appropriate to comply with section 409A of the Code. In
effecting any such amendment, the Company shall replace any benefits that may be lost with
economic consideration of its choosing that is of equal cost or of equal value, as
determined in its reasonable discretion. Unless under the circumstances it is
impracticable to do so, Executive shall be given reasonable advance notice of the Company’s
intention to amend. Any such amendment shall be applied on a reasonably uniform basis to
all similar agreements and shall be evidenced in writing. Executive shall receive such
written notice as soon as practicable after its effective date.
	 
	 	b)	 	No Waivers. No waiver by either party, at any time, of any breach by the other party
of, or of compliance by the other party with, any condition or provision of this Agreement
to be performed or complied with by such other party shall be deemed a waiver of any
similar or dissimilar provision or condition of this Agreement or any other breach of or
failure to comply with the same condition or provision at the same time or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which are not
expressly set forth in this Agreement. The validity,

 

 

 10

	 	 	 	interpretation, construction and performance of this Agreement shall be governed by the laws
of the State of Delaware without giving effect to its conflict of laws rules. Any action
brought by Executive or the Company shall be brought and maintained in a court of competent
jurisdiction in the State of Minnesota.
	 
	 	c)	 	Release of Claims Required.

	 	i)	 	Notwithstanding any other provision of this Agreement, no benefits shall be
paid pursuant to Section 4(a) if Executive:

	 	(1)	 	fails to execute and deliver to the Company a release of claims (the
“Release of Claims”) in the form and manner prescribed by the Company, within the
time set forth in the Release of Claims, or
	 
	 	(2)	 	revokes or rescinds such Release of Claims and Agreement during the
revocation or rescission period set forth in such Release of Claims.

	 	ii)	 	The Release of Claims will include Executive’s agreements related to
confidentiality, non-competition, non-solicitation, non-disparagement and arbitration.
	 
	 	iii)	 	It is the responsibility of the Company to deliver to Executive the Company’s
form of Release of Claims sufficiently before the date specified in Section 4(a) for
payment (including, if applicable, such later date as is specified under Section 4(h)),
such that Executive is afforded such period as may be required by applicable statute or
regulation to consider whether to sign the Release of Claims and whether to revoke or
rescind such Release of Claims. If the Company shall fail to do so, Executive’s
obligation to execute and deliver a Release of Claims is waived.

	13)	 	Severability. If any one or more of the provisions of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining
provisions of this Agreement shall not be affected thereby. To the extent permitted by
applicable law, each party hereto waives any provision of law which renders any provision of
this Agreement invalid, illegal or unenforceable in any respect.
	 
	14)	 	Counterparts. This Agreement may be executed in two or more counterparts, each of which
shall be an original and all of which shall be deemed to constitute one and the same
instrument.
	 
	15)	 	Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior oral or written agreements,
commitments or understandings with respect to the matters provided for herein (except that any
other non-disclosure, non-competition or non-solicitation agreements or provisions the parties
hereto have entered into shall continue to be in effect). [Without limiting the generality of
the foregoing, this Agreement completely supersedes the prior Change of Control Severance
Agreement, As Amended, between the Company and Executive dated as of                                         ,                     .
]3
	 
	16)	 	Grantor Trust. Immediately prior to a Change of Control, the Company shall contribute to a
grantor trust an amount equal to one hundred twenty-five percent (125%) of the payments
Executive would receive from the Company, pursuant to Section 4 hereof, if Executive were
Separated from Service

 

			
	3       If this is a new agreement, this sentence is not
needed. If this agreement replaces a prior COC Agreement, this sentence should
be included with the accurate title of that prior agreement and the date of
that prior agreement inserted.

 

 

11

	 	 	without Cause by the Company or if Executive were to Separate from Service for Good Reason, in
either case, immediately following the Change of Control.
	 
	17)	 	Definitions. The following terms, and terms derived from the following terms, shall have the
following meanings when used in the Agreement with initial capital letters unless, in the
context, it would be unreasonable to do so.

	 	a)	 	Anticipatory Separation shall mean a Separation from Service that occurs before a
Change of Control:

	 	i)	 	if either:

	 	(1)	 	the Separation from Service follows any event or condition described in
clauses (i) through (iv) of the Good Reason definition, or
	 
	 	(2)	 	it is a Separation from Service without Cause, and

	 	ii)	 	Executive reasonably demonstrates:

	 	(1)	 	the Separation from Service was at the request of a third party who has
indicated an intention or taken steps reasonably calculated to effect a Change of
Control, or
	 
	 	(2)	 	otherwise arose in connection with or in anticipation of a Change of
Control.

	 	b)	 	Base Salary shall mean the highest annual base salary in effect for Executive at any
time in the 12 months preceding the COC Date.
	 
	 	c)	 	Cause shall mean:

	 	i)	 	the continued failure of Executive to perform Executive’s duties with the
Company (other than any such failure resulting from incapacity due to physical or
mental illness), after a written demand for substantial performance is delivered to
Executive by the Board or an officer of the Company which specifically identifies the
manner in which the Board or the officer believes that Executive has not substantially
performed Executive’s duties;
	 
	 	ii)	 	the conviction of, or plea of guilty or nolo contendere to, a felony or the
willful engaging by Executive in conduct which is materially and demonstrably injurious
to the Company;
	 
	 	iii)	 	Executive’s commission of a material act or material acts of personal
dishonesty intended to result in substantial personal enrichment of Executive at the
expense of the Company; or
	 
	 	iv)	 	Executive’s material violation of Company policies relating to Code of Business
Conduct, Equal Employment Opportunities and Harassment or Workplace Violence.

	 	 	 	Provided, however, that in no event shall Cause exist by virtue of any action taken by
Executive (A) in compliance with express written directions of the Board, [the Company’s
Chief Executive Officer or the officer to whom Executive reports,4] or (B) in
reliance upon the express written consent of the Company’s counsel.

 

			
	4	 	Bracketed material included only in Tier II and Tier
III agreements.

 

 

 12

	 	 	 	In each case above, for a Separation from Service to be for Cause: (A) Executive must be
provided with a Notice of Termination (as described in Section 3(e)) within six (6) months
after the Company has actual knowledge of the act or omission constituting Cause;
(B) Executive must be provided with an opportunity to be heard by the Board no earlier than
thirty (30) days following the Notice of Termination (during which notice period Executive
has failed to cure or resolve the behavior in question); and (C) there must be a good faith
determination of Cause by at least 2/3rds of the non-employee outside directors of the
Company.
	 
	 	 	 	Whether a Separation from Service is for Cause as provided above will be determined by the
Company in its sole discretion based on all the facts and circumstances.
	 
	 	d)	 	Change of Control shall be deemed to have occurred upon any of the following events:

	 	i)	 	the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (A) the then outstanding shares of
common stock of the Company, or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors; provided, however, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control: (A) any acquisition directly
from the Company, or (B) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by the
Company; or
	 
	 	ii)	 	the consummation of any merger or other business combination of the Company,
sale or lease of all or substantially all of the Company’s assets or combination of the
foregoing transactions (the “Transactions”) other than a Transaction immediately
following which the shareholders of the Company and any trustee or fiduciary of any
Company employee benefit plan immediately prior to the Transaction own at least 60% of
the voting power, directly or indirectly, of (A) the surviving corporation in any such
merger or other business combination; (B) the purchaser or lessee of the Company’s
assets, or (C) both the surviving corporation and the purchaser or lessee in the event
of any combination of Transactions; or
	 
	 	iii)	 	within any 24-month period, the persons who were directors immediately before
the beginning of such period (the “Incumbent Directors”) shall cease (for any reason
other than death) to constitute at least a majority of the Board or the board of
directors of a successor to the Company. For this purpose, any director who was not a
director at the beginning of such period shall be deemed to be an Incumbent Director if
such director was elected to the Board by, or on the recommendation of or with the
approval of, at least three-fourths of the directors who then qualified as Incumbent
Directors (so long as such director was not nominated by a person who has expressed an
intent to effect a Change of Control or engage in a proxy or other control contest); or
	 
	 	iv)	 	such other event or transaction as the Board shall determine constitutes a
Change of Control.

	 	e)	 	COC Date shall mean the date on which a Change of Control occurs. However, if
Executive has a Separation from Service prior to a Change of Control by reason of an
Anticipatory Separation, the COC Date for Executive shall be the date immediately preceding
the occurrence of that Anticipatory Separation.
	 
	 	f)	 	Disability shall have the same meaning as in the Company’s long term disability plan.
	 
	 	g)	 	Employment Period shall mean the period commencing on the COC Date and ending on the
second anniversary of the COC Date.

 

 

 13

	 	h)	 	Good Reason shall mean any one or more of the following events occurring during the
two-year period following the COC Date:

	 	i)	 	Executive’s annual base salary is reduced below the higher of (A) the amount in
effect on the COC Date, or (B) the highest amount in effect at any time thereafter;
	 
	 	ii)	 	Executive’s Target Bonus is reduced below the Target Bonus as it existed before
the COC Date;
	 
	 	iii)	 	Executive’s duties and responsibilities or the program of incentive
compensation (including without limitation long term incentive plans and equity
incentive programs), vacation, fringe benefits, perquisites, retirement and general
insurance benefits offered to Executive are materially and adversely diminished in
comparison to the duties and responsibilities or the program of such benefits enjoyed
by Executive on the COC Date;
	 
	 	iv)	 	Executive is required to be based at a location more than 45 miles from the
location where Executive was based and performed services on the COC Date or
Executive’s business travel obligations are significantly increased over those in
effect immediately prior to the COC Date;
	 
	 	v)	 	failure by the Company to provide for the assumption of this Agreement by any
successor entity; or
	 
	 	vi)	 	a material breach by the Company of the terms of this Agreement;

	 	 	 	provided, however, that any diminution of duties or responsibilities that occurs solely as a
result of the fact that the Company ceases to be a public company shall not, in and of
itself, constitute Good Reason.
	 
	 	i)	 	Notice of Termination shall mean a written notice which shall indicate the specific
provision in this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for Executive’s Separation from Service under
the provisions so indicated.
	 
	 	j)	 	Separation from Service shall mean a severance of Executive’s employment for reasons
other than death under circumstances that would qualify as a separation from service as
that term is used and defined under section 409A of the Code.

	 	i)	 	Whether a Separation from Service has occurred is determined based on whether
the facts and circumstances indicate that the Company and Executive both reasonably
anticipated that no further services would be performed after a certain date or that
the level of bona fide services Executive would perform after such date (whether as an
employee or as an independent contractor) would permanently decrease to no more than
twenty percent (20%) of the average level of bona fide services performed (whether as
an employee or an independent contractor) over the immediately preceding thirty six
(36) month period (or the full period of services to the Company if Executive has been
providing services to the Company less than thirty six months).
	 
	 	ii)	 	A transfer from employment with the Company to employment with an affiliate of
the Company shall not constitute a Separation from Service.
	 
	 	iii)	 	A Separation from Service shall not be deemed to occur while Executive is on
military leave, sick leave or other bona fide leave of absence if the period does not
exceed six (6) months or, if longer, so long as Executive retains a right to
reemployment with the Company or an

 

 

 14

	 	 	 	affiliate under an applicable statute or by contract. For this purpose, a leave is bona
fide only if, and so long as, there is a reasonable expectation that Executive will
return to perform services for the Company or an affiliate.
	 
	 	iv)	 	Notwithstanding the foregoing, a twenty nine (29) month period of absence will
be substituted for such six (6) month period if the leave is due to any medically
determinable physical or mental impairment that can be expected to result in death or
can be expected to last for a continuous period of no less than six (6) months and that
causes Executive to be unable to perform the duties of his or her position of
employment.

	 	k)	 	Separation from Service Date shall mean the date on which a Separation from Service
occurs.
	 
	 	l)	 	Separation Period shall mean the period of [                    ] months beginning with the
Separation from Service Date.5
	 
	 	m)	 	Target Bonus shall mean the target amount of bonus established under the annual bonus
plan for Executive for the year in which the Separation from Service occurs. When the
context requires, it shall also mean the target amount of bonus established for any earlier
or later year.

	18)	 	Dispute Resolution.

	 	a)	 	ERISA §503 Procedure. Executive and the Company agree that any controversy, claim or
dispute arising out of or relating to this Agreement (including, but not necessarily being
limited to, the manner of giving the Notice of Termination, the reasons or cause for
Executive’s Separation from Service or the amount of compensation due to Executive
subsequent to Executive’s Separation from Service) shall be subject to a claims
adjudication process analogous to the ERISA §503 process set forth in the SUPERVALU INC.
Executive & Officer Severance Pay Plan. Notwithstanding the foregoing, in any litigation
or arbitration regarding such matter, deference shall not be afforded to any determination
that is made in whole or in part under that process subsequent to a COC Date.
	 
	 	b)	 	Arbitration Process. Any such claims (excluding, however, claims by the Company
relating to Executive’s breach of any of the employee covenants set forth in Section 11
above) not resolved after exhausting that process shall be resolved by binding arbitration
before a neutral arbitrator under rules set forth in the Federal Arbitration Act.
Executive and the Company agree that such claims may be brought in an appropriate
administrative forum, but at the point at which Executive or the Company seeks a judicial
forum to resolve the matter, the agreement for binding arbitration becomes effective, and
Executive and the Company hereby knowingly and voluntarily waive any right to have any such
dispute tried and adjudicated by a judge or jury. During any period in which an
Executive’s claim for any benefit under this Agreement is pending (whether under Section
18(a) or Section 18(b)), Executive shall continue to receive Executive’s salary (including
any bonus) and benefits as if Executive’s employment with the Company had continued through
the date of the arbiters’ determination, and any such payments or benefits shall not be
offset against any severance, either under this Agreement or otherwise, to which Executive
may be entitled.
	 
	 	c)	 	Judicial Enforcement. The foregoing not to the contrary, the Company may seek to
enforce the employee covenants set forth in Section 11 above, in any court of competent
jurisdiction. The agreement to arbitrate shall continue in full force and effect despite
the expiration or termination of Executive’s employment relationship with the Company or
any of its affiliates. Executive and

 

			
	5	 	For Tier I – 36 months (three years). For Tier II – 24
months (two years). For Tier III – 12 months (one year)

 

 

 15

	 	 	 	the Company agree that any award rendered by the arbitrator shall be final and binding and
that judgment upon the final award may be entered in any court having jurisdiction thereof.
The arbitrator may grant any remedy or relief that the arbitrator deems just and equitable,
including any remedy or relief that would have been available to Executive, the Company or
any of its affiliates had the matter been heard in court. All expenses of the arbitration,
including the required travel and other expenses of the arbitrator and any witnesses, and
the costs relating to any proof produced at the direction of the arbitrator, shall be borne
equally by Executive and the Company unless otherwise mutually agreed or unless the
arbitrator directs otherwise in the award. The arbitrator’s compensation shall be borne
equally by Executive and the Company unless otherwise mutually agreed or unless the law
provides otherwise.
	 
	 	d)	 	Injunction and Finality. Executive agrees that any breach of the covenants contained
in Section 11 would irreparably injure the Company. Accordingly, Executive agrees that the
Company may, in addition to pursuing any other remedies it may have in law or in equity,
cease making any payments otherwise required by this Agreement and obtain an injunction
against Executive from any court having jurisdiction over the matter restraining any
further violation of this Agreement by Executive; provided, however, that the Company may
not cease making any payments required by this Agreement until a court or arbitrator(s)
having jurisdiction over the matter has made a final non-appealable determination on the
merits of such action in the Company’s favor.

                         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.

	 	 	 	 	 	 	 
	Witnesses:	 	SUPERVALU INC.  
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 	 	ExecutiveEX-10.16

EXHIBIT
10.16

 

 

FOURTH AMENDED AND RESTATED

LOAN AGREEMENT

July 22, 2009

by and between

CUMBERLAND PHARMACEUTICALS INC.,

as the Borrower

and

BANK OF AMERICA, N.A.,

as the Bank

 

$ 22,000,000

 

 

 

 

 

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
	 
	 	 	 	 	 	 
	2.	 	FACILITY NO. 2: TERM LOAN AMOUNT AND TERMS	 	3
	 
	 	2.1	 	Loan Amount	 	3
	 
	 	2.2	 	Availability Period	 	3
	 
	 	2.3	 	Interest Rate	 	3
	 
	 	2.4	 	Repayment Terms	 	3
	 
	 	2.5	 	Prepayments	 	3
	 
	 	 	 	 	 	 
	3.	 	FEES AND EXPENSES	 	4
	 
	 	3.1	 	Fees	 	4
	 
	 	3.2	 	Expenses	 	5
	 
	 	3.3	 	Reimbursement Costs	 	5
	 
	 	 	 	 	 	 
	4.	 	COLLATERAL	 	5
	 
	 	4.1	 	Personal Property	 	5
	 
	 	 	 	 	 	 
	5.	 	DISBURSEMENTS, PAYMENTS AND COSTS	 	6
	 
	 	5.1	 	Disbursements and Payments	 	6
	 
	 	5.2	 	Telephone and Telefax Authorization	 	6
	 
	 	5.3	 	Direct Debit (Pre-Billing)	 	7
	 
	 	5.4	 	Banking Days	 	7
	 
	 	5.5	 	Interest Calculation	 	7
	 
	 	5.6	 	Default Rate	 	7
	 
	 	 	 	 	 	 
	6.	 	CONDITIONS	 	8
	 
	 	6.1	 	Authorizations and Incumbency	 	8
	 
	 	6.2	 	Governing Documents	 	8
	 
	 	6.3	 	CET Intercompany Debt	 	8
	 
	 	6.4	 	Loan Documents	 	8
	 
	 	6.5	 	Perfection and Evidence of Priority	 	8
	 
	 	6.6	 	Payment of Fees, Etc.	 	8
	 
	 	6.7	 	Good Standing	 	8
	 
	 	6.8	 	Legal Opinion	 	9
	 
	 	6.9	 	Financial Statements	 	9
	 
	 	6.10	 	Insurance	 	9
	 
	 	6.11	 	Consents, Licenses, Permits, Assignments	 	9
	 
	 	6.12	 	Liquidity	 	9
	 
	 	6.13	 	Representations, Warranties and No Default	 	9
	 
	 	6.14	 	Other Required Documentation	 	9
	 
	 	 	 	 	 	 
	7.	 	REPRESENTATIONS AND WARRANTIES	 	9
	 
	 	7.1	 	Formation	 	10
	 
	 	7.2	 	Authorization	 	10
	 
	 	7.3	 	Enforceable Agreements	 	10
	 
	 	7.4	 	Good Standing	 	10
	 
	 	7.5	 	No Conflicts	 	10

i

 

	 	 	 	 	 	 	 
	 
	 	7.6	 	Financial Information	 	10
	 
	 	7.7	 	Lawsuits	 	10
	 
	 	7.8	 	Collateral	 	10
	 
	 	7.9	 	Permits, Franchises	 	11
	 
	 	7.10	 	Other Obligations	 	11
	 
	 	7.11	 	Tax Matters	 	11
	 
	 	7.12	 	No Event of Default	 	11
	 
	 	7.13	 	Insurance	 	11
	 
	 	7.14	 	Location of Borrower	 	11
	 
	 	7.15	 	Capitalization	 	11
	 
	 	7.16	 	Material Adverse Change	 	12
	 
	 	7.17	 	Subsidiaries	 	12
	 
	 	 	 	 	 	 
	8.	 	COVENANTS	 	12
	 
	 	8.1	 	Use of Proceeds	 	12
	 
	 	8.2	 	Financial Information	 	12
	 
	 	8.3	 	Leverage Ratio.	 	13
	 
	 	8.4	 	Fixed Charge Coverage Ratio	 	14
	 
	 	8.5	 	Liquidity	 	14
	 
	 	8.6	 	Capital Expenditures	 	14
	 
	 	8.7	 	Lease Expenditures	 	15
	 
	 	8.8	 	Restricted Payments	 	15
	 
	 	8.9	 	Bank as Principal Depository	 	16
	 
	 	8.10	 	Other Debts	 	16
	 
	 	8.11	 	Other Liens	 	16
	 
	 	8.12	 	Maintenance of Assets	 	17
	 
	 	8.13	 	Investments	 	17
	 
	 	8.14	 	Loans	 	17
	 
	 	8.15	 	Additional Negative Covenants	 	17
	 
	 	8.16	 	Notices to Bank	 	18
	 
	 	8.17	 	Insurance	 	18
	 
	 	8.18	 	Compliance with Laws	 	18
	 
	 	8.19	 	ERISA Plans	 	18
	 
	 	8.20	 	Books and Records	 	19
	 
	 	8.21	 	Visits, Inspections and Audits	 	19
	 
	 	8.22	 	Perfection of Liens	 	19
	 
	 	8.23	 	Cooperation	 	19
	 
	 	8.24	 	Collateral Account Notification and Acknowledgement	 	19
	 
	 	8.25	 	Subsidiaries	 	19
	 
	 	8.26	 	Change of Management	 	19
	 
	 	 	 	 	 	 
	9.	 	HAZARDOUS SUBSTANCES	 	20
	 
	 	9.1	 	Indemnity Regarding Hazardous Substances	 	20
	 
	 	9.2	 	Compliance Regarding Hazardous Substances	 	20
	 
	 	9.3	 	Notices Regarding Hazardous Substances	 	20
	 
	 	9.4	 	Site Visits, Observations and Testing	 	20
	 
	 	9.5	 	Definition of Hazardous Substances	 	20
	 
	 	9.6	 	Continuing Obligation	 	21
	 
	 	 	 	 	 	 
	10.	 	DEFAULT AND REMEDIES	 	21
	 
	 	10.1	 	Failure to Pay	 	21
	 
	 	10.2	 	Other Bank Agreements	 	21
	 
	 	10.3	 	Cross-Default	 	21
	 
	 	10.4	 	False Information	 	21

ii

 

	 	 	 	 	 	 	 
	 
	 	10.5	 	Bankruptcy	 	22
	 
	 	10.6	 	Receivers	 	22
	 
	 	10.7	 	Lien Priority	 	22
	 
	 	10.8	 	Lawsuits	 	22
	 
	 	10.9	 	Judgments	 	22
	 
	 	10.10	 	Death	 	22
	 
	 	10.11	 	Material Adverse Change	 	22
	 
	 	10.12	 	Government Action	 	22
	 
	 	10.13	 	Default Under Related Documents	 	22
	 
	 	10.14	 	Other Breach Under Agreement	 	23
	 
	 	10.15	 	Change in Control	 	23
	 
	 	 	 	 	 	 
	11.	 	ENFORCING THIS AGREEMENT; MISCELLANEOUS	 	23
	 
	 	11.1	 	GAAP	 	23
	 
	 	11.2	 	Tennessee Law	 	23
	 
	 	11.3	 	Successors and Assigns	 	23
	 
	 	11.4	 	Interest and Loan Charges Not to Exceed Maximum Amounts Allowed by Law	 	23
	 
	 	11.5	 	Arbitration and Waiver of Jury Trial	 	24
	 
	 	11.6	 	Severability; Waivers	 	25
	 
	 	11.7	 	Costs and Attorneys’ Fees	 	25
	 
	 	11.8	 	Individual Liability	 	25
	 
	 	11.9	 	One Agreement	 	25
	 
	 	11.10	 	Indemnification	 	26
	 
	 	11.11	 	Notices	 	26
	 
	 	11.12	 	Headings	 	26
	 
	 	11.13	 	Counterparts	 	26
	 
	 	11.14	 	Existing Loan Agreement and Existing Loan Documents	 	26

	 	 	 
	Schedules	 	 
	 
	 	 
	Schedule 7.7

	 	Litigation
	Schedule 1.1

	 	Use of Term Loan Proceeds and Related Restricted Payments
	Schedule 8.10

	 	Liabilities
	Schedule 8.11

	 	Liens
	Schedule 8.14

	 	Loans/Extensions of Credit

iii

 

FOURTH AMENDED AND RESTATED LOAN AGREEMENT

     THIS FOURTH AMENDED AND RESTATED LOAN AGREEMENT (the “Agreement”) dated as of July 22,
2009, 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 Third Amended and Restated Loan
Agreement dated as of December 30, 2008, 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 but not
limited to Section 1.2 below, the Bank will provide a line of credit to the Borrower
in a principal amount not to exceed Four Million Dollars ($4,000,000) 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,
2012, 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
	 	< 1.00	 	3.50%
	2
	 	3 1.00 but < 1.50	 	4.00%
	3
	 	3 1.50 but < 1.75	 	4.50%
	4
	 	3 1.75	 	5.50%

	 	 	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:

	 	(i)	 	from the date of this Agreement until the day on which the Term Loan Advance
(as hereinafter defined) is made, the Applicable Rate shall be determined based upon
Pricing Level 2,
	 
	 	(ii)	 	from the day on which the Term Loan Advance is made through the first banking
day following the next date that a compliance certificate is delivered pursuant to
Section 8.2(c), the Applicable Rate shall be determined based upon Pricing
Level 4, and
	 
	 	(iii)	 	if a compliance certificate is not delivered when due in accordance with the
preceding clause (ii) or Section 8.2(c), then Pricing Level 4 shall
apply as of the first banking day after the date on which such compliance certificate
was required to have been delivered.

	1.4	 	Repayment Terms.
	 
	(a)	 	The Borrower will pay interest on September 30, 2009 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; provided, however, that if the Borrower terminates the Facility No. 1
Commitment in whole or in part on or before December 31, 2010, the Borrower shall pay to the Lender
a commitment termination payment equal to four percent (4%) of the amount of the Facility No. 1
Commitment so terminated.

-2-

 

	2.	 	FACILITY NO. 2: TERM LOAN AMOUNT AND TERMS
	 
	2.1	 	Loan Amount.

Subject to and upon the terms, conditions and provisions of this Agreement, the Bank agrees to
provide a term loan to the Borrower in the amount of Eighteen Million Dollars ($18,000,000) (the
“Facility No. 2 Commitment”).

	2.2	 	Availability Period.

On and as of the date of this Agreement, the amount currently outstanding under the Facility No. 2
Commitment pursuant to the Existing Loan Agreement is $4,166,666. Prior to the date on which the
Term Loan Advance is made, the Borrower may prepay all or any portion of such amount and reborrow
the amount prepaid as a part of the Term Loan Advance. An amount not to exceed the amount by which
the Facility No. 2 Commitment as set forth in Section 2.1 exceeds the principal amount of
this loan outstanding on the day prior to the making of the Term Loan Advance is available in one
disbursement from the Bank (the “Term Loan Advance”) on a banking day that is on or after
the date of this Agreement and not later than September 15, 2009.

	2.3	 	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. 2 Commitment exceed the maximum amounts
collectible under applicable law from time to time.
	 
	(b)	 	The BBA LIBOR Daily Floating Rate and the Applicable Margin shall be determined as provided
in paragraphs (b) and (c) of Section 1.3.
	 
	2.4	 	Repayment Terms.
	 
	(a)	 	The Borrower will pay interest on September 30, 2009 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 principal in equal consecutive installments in the amount of One
Million Five Hundred Thousand and No/100ths Dollars ($1,500,000.00) each beginning on March
31, 2010 and continuing on the last day of each June, September, December and March thereafter
until December 31, 2012 (the “Repayment Period”). In any event, on the last day of
the Repayment Period, the Borrower will repay the entire remaining principal balance plus any
interest or other charges outstanding under this facility.
	 
	2.5	 	Prepayments.
	 
	(a)	 	Voluntary Prepayments. The Borrower may prepay this loan in full or in part at any
time and from time to time. Following the making of the Term Loan Advance, any prepayment of
this loan in whole or in part (other than mandatory payments in respect of Excess Cash Flow
pursuant to Section 2.5(b)) made on or before December 31, 2010 shall be accompanied
by a prepayment premium equal to four percent (4%) of the amount prepaid. Prepayments made
after December 31, 2010 may be made without premium or penalty. The Borrower will give the
Bank irrevocable written notice of the Borrower’s intention to make a prepayment, specifying
the date and amount of the prepayment. The notice must be received by the Bank at least five
(5) banking days in advance of the prepayment. The prepayment will be applied to the most
remote payment(s) of principal due under this Agreement in respect of the Facility No. 2
Commitment.

-3-

 

	(b)	 	Mandatory Prepayments — Excess Cash Flow. Within 120 days after the end of each
fiscal year of the Borrower ending after the date of this Agreement, the Borrower agrees to
make an additional principal payment equal to the Applicable ECF Percentage of its Excess Cash
Flow for the fiscal year then ended. The additional payment will be applied to the most
remote payment(s) of principal due under this Agreement in respect of the Facility No. 2
Commitment. As used herein:
	 
	 	 	“Applicable ECF Percentage” means, with respect to any fiscal year of the Borrower,
(a) fifty percent (50%), if (i) the Borrower’s Leverage Ratio as set forth in the compliance
certificate for the fourth fiscal quarter of such fiscal year delivered to the Bank pursuant
to Section 8.2(c) is equal to or greater than 1.75 to 1.00 or (ii) the Borrower has
failed to deliver such compliance certificate to the Bank, or (b) 0%, if the preceding
clause (a) does not apply.
	 
	 	 	“ECF Working Capital” means, for the Borrower and its Subsidiaries on a consolidated
basis, the difference between current assets (excluding cash and cash equivalents)
and current liabilities.
	 
	 	 	“ECF Working Capital Adjustment” means, with respect to any fiscal year of the
Borrower, the difference (which may be a negative number) between (a) ECF Working Capital as
of the end of such fiscal year and (b) ECF Working Capital as of the beginning of such
fiscal year.
	 
	 	 	“Excess Cash Flow” means, for any fiscal year of the Borrower, Borrower’s EBITDA,
minus the ECF Working Capital Adjustment, minus principal payments made
pursuant to Section 2.4(b), minus principal payments permanently reducing
the Facility No. 1 Commitment amount, minus scheduled payments of capital lease
obligations, minus capital expenditures (net of proceeds of related financings or
asset dispositions used to finance such expenditures), minus cash interest payments
minus cash taxes paid.
	 
	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 of even date herewith, by and between the Bank and the Borrower
(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, 2009 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, as of any date of
determination, (a) three-fourths of one percent (0.75%) per year, if (i) the
Borrower’s Leverage Ratio as set forth in the compliance certificate then most
recently delivered to the Bank pursuant to Section 8.2(c) is equal to or
greater than 1.75 to 1.00 or (ii) the Borrower is then in default of its obligation
to deliver a compliance certificate to the Bank as required by Section
8.2(c), or (b) one-half of one percent (0.50%) per year, if the preceding
clause (a) does not apply.
	 
	 	(ii)	 	Facility No. 2 Commitment. For the period from the date of this
Agreement through September 15, 2009 or such earlier date on which proceeds of the
Facility No. 2

-4-

 

	 	 	 	Commitment are advanced as provided in Section 2.2, the Borrower agrees to
pay a fee on any difference between the amount of the Facility No. 2 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 rate of
0.75% per year. The fee is due and payable on September 15, 2009 or, if earlier, on
the date on which proceeds of the Facility No. 2 Commitment are advanced as provided
in Section 2.2.

	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 that include, but are not limited to, filing, recording
and search fees, appraisal fees, title report fees and documentation fees.

	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, but are not limited to, 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

-5-

 

	 	 	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 (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.

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.

-6-

 

	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.
	 
	(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

-7-

 

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 is anything other than a natural person, evidence that the execution, delivery and
performance by the Borrower of this Agreement and any instrument or agreement required under this
Agreement have been duly authorized. A certificate of the secretary of the Borrower as to the
incumbency and signature of all officers of the Borrower authorized to execute or attest to any
instrument or agreement required under this Agreement.

	6.2	 	Governing Documents.

If required by the Bank, a copy of the Borrower’s organizational documents.

	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, together with an 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, such assignment to be
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 without limitation 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 CET from its state of formation and from any
other state in which the Borrower and CET is required to qualify to conduct its business.

-8-

 

	6.8	 	Legal Opinion.

A written opinion from the Borrower’s and CET’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 2010, 2011 and 2012.

	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 has 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 and the Collateral are in compliance with all
applicable governmental requirements and that all permits, and any necessary licenses and
approvals have been obtained.
	 
	(c)	 	Evidence satisfactory to the Bank that Leo Pavliv has assigned to the Borrower the patent
rights to the pharmaceutical composition of 2-(4-isobutylphenyl) propionic acid.
	 
	6.12	 	Liquidity.

Evidence satisfactory to the Bank that the Borrower has a minimum liquidity of $5,000,000 in either
cash or cash equivalents acceptable to the Bank.

	6.13	 	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.

	6.14	 	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:

-9-

 

	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.

	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.

-10-

 

	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.

	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, 2009, 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 10,465,693
shares (the “Outstanding Common Shares”) are issued and outstanding, and (2) 3,000,000
shares of preferred stock, no par value per share, of which 812,749 shares (the
“Outstanding Preferred Shares”) 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. All of the Outstanding Preferred Shares are duly
authorized, validly issued and outstanding and fully paid and nonassessable and are
convertible into Common Shares.
	 
	(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, 2009, (i)
2,650,000 options to purchase Common Shares (“Options”) are authorized for issuance
under the 2007 Plans, and (ii) 7,189,997 Options are issued and outstanding under the 1999
Plan and the 2007 Plans, of which 6,839,832 Options are fully vested and exercisable.

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	7.16	 	Material Adverse Change.

Since December 31, 2008, 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.

	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 Facility No. 1 Commitment 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)	 	To use the proceeds of the Facility No. 2 Commitment only (i) to refinance the credit
facilities provided pursuant to the Existing Credit Agreement and (ii) to make the Restricted
Payments described on attached Schedule 8.1.
	 
	(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

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	 	 	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.
	 
	(d)	 	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 ratio indicated in the table below, 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.

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	Quarterly Period(s) Ending	 	Leverage Ratio
	 
	 	 
	09-30-09
	 	3.00 to 1.00
	12-31-09
	 	2.75 to 1.00
	03-31-10 — 09-30-10
	 	2.50 to 1.00
	12-31-10 — 09-30-11
	 	1.75 to 1.00
	12-31-11 and thereafter
	 	1.00 to 1.00

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 after extraordinary losses and before 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.

	8.4	 	Fixed Charge Coverage Ratio.

To
maintain on a consolidated basis a Fixed Charge Coverage Ratio of at least 1.25 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:

“Fixed Charge 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 of interest expense, lease expense, rent expense and
scheduled principal payments on term debt and the current portion of capitalized lease obligations.

*“EBITDAR” means the sum of EBITDA plus, without duplication, lease expense and rent expense.

	8.5	 	Liquidity.

To maintain Liquidity equal to at least (i) $5,000,000 as of September 30, 2009, and (ii)
$2,000,000 as of December 31, 2009 and as of the end of each subsequent quarter-annual period of
the Borrower’s fiscal year; provided, however, that upon the delivery of a compliance certificate
pursuant to Section 8.2(c) demonstrating a Leverage Ratio of 1.75:1.00 or less and during
such time as Borrower maintains a Leverage Ratio of 1.75:1.00 or less, Borrower shall not be
required to maintain minimum Liquidity as required by this covenant. For purposes of this
covenant:

“Liquidity” means (a) cash on hand or in deposit in banks and fully insured by federal
deposit insurance and (b) cash equivalents approved by Bank.

	8.6	 	Capital Expenditures.

Not to make or incur capital expenditures (excluding capital lease obligations) in an aggregate
amount in excess of $1,000,000 during any fiscal year.

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	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 $1,000,000 during any fiscal year.

	8.8	 	Restricted Payments.

Not 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 such Person;
	 
	(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 make the Restricted Payments described on attached Schedule 8.1;
provided, however, that

	 	(i)	 	such payments shall be made using only the Borrower’s cash on hand and proceeds
of the Facility No. 2 Commitment;
	 
	 	(ii)	 	any such payments occurring more than five (5) banking days after the making of
the Term Loan Advance shall be made using only the Borrower’s cash on hand
(other than proceeds of the Facility No. 2 Commitment), and in addition
(A) the aggregate amount of such payments shall not exceed $2,500,000 less the
aggregate amount of Restricted Payments made pursuant to subsection 8.5(e)
below, and (B) such payments in each case shall be made only after delivery to the Bank
of an officer’s certificate signed by the chief executive officer or chief financial
officer of the Borrower that demonstrates and confirms that after giving effect to such
payment, the Borrower would be in compliance with Section 8.5 hereof as of the
end of the fiscal quarter of the Borrower then most recently ended.

	(e)	 	the Borrower may make the Restricted Payments of the types described on attached Schedule
8.1 with respect to other employees holding options to purchase common stock of the
Borrower; provided, however, that

	 	(i)	 	any such payments shall be made using only the Borrower’s cash on hand
(other than proceeds of the Facility No. 2 Commitment),
	 
	 	(ii)	 	the aggregate amount of such payments shall not exceed the lesser of (x) the
difference between the sum of $2,500,000 and the aggregate amount of Restricted
Payments made pursuant to paragraph (ii) of subsection 8.8(d), and (y)
$300,000, and

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	 	(iii)	 	such payments in each case shall be made only after delivery to the Bank of an
officer’s certificate signed by the chief executive officer or chief financial officer
of the Borrower that demonstrates and confirms that after giving effect to such
payment, the Borrower would be in compliance with Section 8.5 hereof as of the
end of the fiscal quarter of the Borrower then most recently ended.

	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, treasury management and investment 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.
	 
	(f)	 	The indebtedness evidenced by the CET Pledged Note.
	 
	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.

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	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)) disclosed to the Bank in writing.
	 
	(b)	 	Investments permitted by Section 8.14.
	 
	(c)	 	Investments in (i) U.S. treasury bills and other obligations of the federal government, (ii)
deposits maintained with Bank, (iii) deposits maintained with another bank and fully covered
by federal deposit insurance or otherwise fully insured by an agency or instrumentality of the
United States of America and backed by the full faith and credit of the United States of
America and (iv) cash equivalents approved by Bank.
	 
	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.
	 
	(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.

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	(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.
	 
	(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

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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.

	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.

	8.26	 	Change of Management.

Not to make any substantial change in its present executive or management personnel. A
“substantial change”, as used in this subsection, shall include, but not be limited to, the removal
or resignation of A.J. Kazimi as Chief Executive Officer.

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	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 but is not limited to 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.

	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

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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 without limitation
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 $250,000) (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.

	10.4	 	False Information.

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

-21-

 

	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	 	Death.

If the Borrower or any Obligor is a natural person, the Borrower or such Obligor dies or becomes
legally incompetent; or if the Borrower or any Obligor is a partnership, any general partner dies
or becomes legally incompetent.

	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.

	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.

-22-

 

	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,
without limitation, 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.

	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

-23-

 

 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 and/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 and/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 but not limited to 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.
	 
	(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

-24-

 

	 	 	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;
	 
	(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.

-25-

 

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. This indemnity includes but is not limited to
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.

Article and paragraph headings are for reference only and shall not affect the interpretation or
meaning of any provisions of this Agreement.

	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 and/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]

-26-

 

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

	 	 	 	 	 
	BANK OF AMERICA, N.A.
	 
	 	 	 	 
	 
	 	 	 	 
	By

	 	/s/ Suzanne B. Smith 	 	 
	 

	 	 	 	 

	 	 	 	 	 
	Name

	 	Suzanne B. Smith	 	 
	 

	 	 	 	 

	 	 	 	 	 
	Title

	 	Senior Vice President	 	 
	 

	 	 	 	 

	 	 	 	 	 
	CUMBERLAND PHARMACEUTICALS INC.
	 
	 	 	 	 
	 
	 	 	 	 
	By

	 	/s/ David L. Lowrance 	 	 
	 

	 	 	 	 

	 	 	 	 	 
	Name

	 	David L. Lowrance	 	 
	 

	 	 	 	 

	 	 	 	 	 
	Title

	 	CFO	 	 
	 

	 	 	 	 

	 	 	 
	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

	 	Cumberland Pharmaceuticals Inc.
	414 Union Street

	 	2525 West End Avenue, Suite 950
	Nashville, TN 37219-1697

	 	Nashville, Tennessee 37203
	Attn: Healthcare Banking Group (TN1-100-04-17)

	 	Attn: A.J. Kazimi, Chief Executive Officer
	Facsimile No. (615) 749-4951

	 	Facsimile No. (615) 255-0094

	 	 	 	 	 
	  
	CONSENTED TO AND APPROVED:	 	 
	 

	 	 	 	 
	CUMBERLAND PHARMA SALES CORP.	 	 
	 

	 	 	 	 
	 

	 	 	 	 
	By

	 	/s/ A.J. Kazimi 	 	 
	 

	 	 	 	 

	 	 	 	 	 
	Name

	 	A.J. Kazimi	 	 
	 

	 	 	 	 

	 	 	 	 	 
	Title

	 	Chief Executive Officer	 	 
	 

	 	 	 	 

	 	 	 	 	 
	ACKNOWLEDGED:	 	 
	 

	 	 	 	 
	CUMBERLAND EMERGING TECHNOLOGIES, INC.
	 

	 	 	 	 
	 

	 	 	 	 
	By

	 	/s/ A.J. Kazimi 	 	 
	 

	 	 	 	 

	 	 	 	 	 
	Name

	 	A.J. Kazimi	 	 
	 

	 	 	 	 

	 	 	 	 	 
	Title

	 	Chief Executive Officer	 	 
	 

	 	 	 	 

Credit
Agreement Signature Page

 

Schedule 1

Existing Loan Documents

	1.	 	Sixth Amended and Restated Promissory Note dated December 30, 2008, in the principal amount
not exceeding $7,500,000, made and executed by the Borrower and payable to the order of the
Bank.
	 
	2.	 	Amended and Restated Term Promissory Note dated December 30, 2008, in the principal amount of
$5,000,000, 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.
	 
	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, and as further amended by Third Amendment to Trademark and Patent Security
Agreement dated December 30, 2006, all between the Borrower and the Bank.
	 
	5.	 	Guaranty dated January 21, 2009, executed in favor of the Bank by CPSC.
	 
	6.	 	Security Agreement dated January 21, 2009, between CPSC and the Bank.

 

 

Schedule 7.7

Litigation

None.

 

 

Schedule 8.1

Use of Term Loan Proceeds and Related Restricted Payments

A.J. Kazimi is expected to exercise options to purchase 4,097,090 shares of the Borrower’s common
stock with an exercise price of $0.55 per share (the “Kazimi Option Exercise Transaction”),
and Jean W. Marstiller is expected to exercise options to purchase 280,000 shares of the Borrower’s
common stock with an exercise price of $0.50 per share (the “Marstiller Option Exercise
Transaction”; and, together with the Kazimi Option Exercise Transaction, the “Option
Exercise Transactions”). In the Kazimi Option Exercise Transaction, it is expected that the
options will be exercised using a net-share settlement feature that will enable Mr. Kazimi to use a
portion (expected to be not more than 1,452,321 shares) of the shares acquired upon exercise to
satisfy the applicable minimum statutory federal income tax withholding requirements associated the
Kazimi Option Exercise Transaction (expected to be not more than $29,000,000). In the Marstiller
Option Exercise Transaction, it is expected that during the first quarter of 2010 the Borrower will
repurchase from Ms. Marstiller a portion (valued at not more than $1,500,000) of the shares issued
to Ms. Marstiller to provide funds for the satisfaction of the tax liabilities associated the
Marstiller Option Exercise Transaction. Proceeds of the Facility No. 2 Commitment may be used to
fund the minimum statutory federal income tax withholding requirements in connection with the
Kazimi Option Exercise Transaction as aforesaid and to repurchase shares issued to Ms. Marstiller
in connection with the Marstiller Option Exercise Transaction as aforesaid.

The Borrower represents and warrants that in connection with these Option Exercise Transactions and
the related minimum statutory tax withholding, the Borrower expects to generate deferred tax assets
that will offset the Borrower’s future tax liabilities in an aggregate amount of approximately
$30,000,000.

 

 

Schedule 8.10

Liabilities

None.

 

 

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
Fourth Amended and Restated Loan Agreement dated as of July 22, 2008 (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 Fixed Charge 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 Liquidity as of the end of the most recent fiscal quarter covered by
such financial statements is $                    .

     6. 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 $                    .

     7. 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 $                    .

     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 and/or proposes
to take with respect to such default(s) are set forth below.]

 

 

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

	 	 	 	 	 	 	 
	 	 	CUMBERLAND PHARMACEUTICALS INC.	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 	 	 
	 

	 	Typed Name
	 	 	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 	 	 
	 

	 	Title

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