Opinion ID: 612629
Heading Depth: 3
Heading Rank: 1

Heading: The Credit Agreement

Text: In 2006, Interpharm, a manufacturer of generic drugs, sought credit to support the expansion of its business. In the February 2006 Credit Agreement that is the basis for this action, Wells Fargo agreed to provide Interpharm with a revolving line of credit up to $22.5 million through February 10, 2010. Interpharm secured this credit line with various assets, including its accounts receivable, inventory, and equipment. The amount available to Interpharm at any particular time under the line of credit varied, depending on the values of its eligible inventory and accounts receivable. Specifically, the Credit Agreement indicated that the borrowing base would be calculated based on 50% of Interpharm's eligible inventory and 85% of its eligible accounts receivable, but the agreement also permitted Wells Fargo, in its reasonable discretion or commercially reasonable discretion, both to reduce those percentages and to deem particular receivables or inventory ineligible for credit calculation. Credit Agreement § 1.1 (definitions of: Accounts Advance Rate; Borrowing Base; Eligible Accounts; and Eligible Inventory). The Credit Agreement also contained financial covenants and performance standards that Interpharm was required to satisfy. In the event of any default, the Agreement afforded Wells Fargo a range of remedies, including termination of the line of credit, acceleration of Interpharm's obligations to be due and payable forthwith, and liquidation of collateral.