Prepared by MERRILL CORPORATION www.edgaradvantage.com QuickLinks CREDIT AND SECURITY AGREEMENT Dated as of July 14, 1999
Prepared by XXXXXXX CORPORATION xxx.xxxxxxxxxxxxxx.xxxQuickLinks
Dated as of July 14, 1999 CIMA LABS, INC., a Delaware corporation (the "Borrower"), and XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), hereby agree as follows:
Definitions Section 1.1 Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: "Accounts" means the aggregate unpaid obligations of customers and other account debtors to the Borrower arising out of the sale or lease of goods or rendition of services by the Borrower on an open account or deferred payment basis, whether now existing or hereafter arising. "Advance" has the meaning given in Section 2.1. "Book Net Income" or "Book Net Loss" means the Borrower's year-to-date net income or loss, as the case may be, determined in accordance with GAAP except excluding extraordinary items. "Borrowing Base" means, at any time and subject to change from time to time in the Lender's sole discretion, the lesser of:
-
(a)the
Maximum Line; or
(b)80%
of Eligible Accounts.
"Collateral"
has the meaning given in Section 3.1.
"Default
Rate" means an annual rate equal to 3% over the Floating Rate, which rate shall change when and as the Floating Rate changes.
"Disclosure"
means that certain Disclosure dated of even date herewith.
"Eligible
Accounts" means all unpaid Accounts, net of any credits, except the following shall not in any event be deemed Eligible Accounts:
(1) That
portion of Accounts over 90 days past invoice date;
(2) That
portion of Accounts that are disputed or subject to a claim of offset or a contra account;
(3) That
portion of Accounts not yet earned by final delivery of goods or rendition of services, as applicable, by the Borrower to the customer;
(4) Accounts
owed by any unit of government, whether foreign or domestic (provided, however, that there shall be included in Eligible Accounts that portion of Accounts
owed by such units of government for which the Borrower has provided evidence satisfactory to the Lender that (A) the Lender has a first priority perfected security interest and (B) such
Accounts may be enforced by the Lender directly against such unit of government under all applicable laws);
(5) Accounts
owed by an account debtor located outside the United States which are not backed by a bank letter of credit assigned to the Lender, in the possession of
the Lender and acceptable to the Lender in all respects, in its sole discretion;
(6) Accounts
owed by an account debtor that is the subject of bankruptcy proceedings, has gone out of business or has poor credit;
(7) Accounts
owed by a shareholder, subsidiary, affiliate, officer or employee of the Borrower;
(8) Accounts
not subject to a duly perfected security interest in favor of the Lender or which are subject to any lien, security interest or claim in favor of any
Person other than the Lender;
(9) That
portion of Accounts that have been restructured, extended, amended or modified;
(10) That
portion of Accounts that constitutes finance charges, service charges or sales or excise taxes;
(11) Accounts
owed by an account debtor, regardless of whether otherwise eligible, if 10% or more of the total amount due under Accounts from such debtor is ineligible
under clauses (1), (2) or (9) above; and
(12) Accounts,
or portions thereof, otherwise deemed ineligible by the Lender in its sole discretion.
"Event
of Default" has the meaning specified in Section 7.1.
"Floating
Rate" means an annual rate equal to the sum of the Prime Rate plus two percent (2.0%) which annual rate shall change when and as the Prime Rate changes.
"GAAP"
means generally accepted accounting principles, applied on a basis consistent with the accounting practices applied in the financial statements described in Section 5.2.
"Guarantor"
means any person executing any liquidation support agreement in favor of the Lenders.
"Inventory"
means all of the Borrower's inventory, as such term is defined in the UCC, whether now owned or hereafter acquired.
"Loan
Documents" means this Agreement, the Note, the Disclosure, the Security Documents and any and all other related instruments, agreements and documents executed by the Borrower,
any Guarantor or any other party and delivered to the Lender.
"Maximum
Line" means $2,000,000.
"Note"
means the Borrower's revolving promissory note, payable to the order of the Lender in form and content satisfactory to Lender.
"Obligations"
means each and every debt, liability and obligation of every type and description which the Borrower may now or at any time hereafter owe to the Lender, including all
indebtedness arising under this Agreement, the Note or any other loan or credit agreement or guaranty between the Borrower and the Lender, whether now in effect or hereafter entered into.
"Person"
means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization or government
or any agency or political subdivision thereof.
"Prime
Rate" means the rate of interest publicly announced from time to time by Xxxxx Fargo Bank, N.A. as its 'prime rate' or, if such bank ceases to announce a rate so designated,
any similar successor rate designated by the Lender.
"Security
Documents" means the Collateral Account Agreement and the Lockbox Agreement, each of even date herewith and by and among the Borrower, the Lender and Norwest Bank Minnesota,
National Association, and any and all other documents, instruments and agreements executed by the Borrower or any other party and delivered to the Lender as amended from time to time, as security for
the Obligations.
"Security
Interest" has the meaning given in Section 3.1.
"Termination
Date" has the meaning given in Section 2.4.
"UCC"
means the Uniform Commercial Code as in effect from time to time in the State of Minnesota.
Amount and Terms of the Credit Facility Section 2.1 Revolving Advances. The Lender may, in its sole discretion, make advances to the Borrower from time to time from the date this Agreement is signed and delivered to the Termination Date, on the terms and subject to the conditions herein set forth (each an "Advance"). The Lender shall not consider any request for an Advance if, after giving effect to such requested Advance, the sum of the outstanding and unpaid Advances would exceed the Borrowing Base. The Borrower's obligation to pay the Advances shall be evidenced by the Note. Within the limits set forth in this Section 2.1, the Borrower may request Advances, prepay, and request additional Advances. The Borrower shall make each request for an Advance to the Lender before 11:00 a.m. (Minneapolis time) of the day of the requested Advance. Requests may be made in writing or by telephone. Section 2.2 Interest; Default Interest. (a) Revolving Note. Except as set forth in Sections 2.2(b) and 2.2(c) the outstanding principal balance of the Advances shall bear interest at the Floating Rate. All interest shall be payable monthly in arrears on the first day of the month and on demand. (b) Minimum Interest Charge. Notwithstanding the interest payable pursuant to Section 2.2(a) and 2.2(c) and subject to Section 2.2(d), the Borrower shall pay to the Lender interest of not less than $7,166 per month during the term of this Agreement (prorated for less than a full month) and on the first day of each month the Borrower shall pay any deficiency between such minimum interest charge and the amount of interest otherwise calculated under Sections 2.2(a) and 2.2(c). (c) Default Interest Rate. From the first day of any month during which Borrower is not in compliance with its agreements set forth in this Agreement or the Note, in the Lender's discretion and without waiving any of its other rights and remedies, the outstanding principal balance of the Advances shall bear interest at the Default Rate. (d) Unused Fee/Deactivation. The Borrower may from time to time (but no more than once during any 30-day period) by giving notice to the Lender in the same manner as set forth in Section 2.1, deactivate the revolving line of credit; and during each month thereafter in which the balance of the Advances is Zero for each day of such period, the Borrower shall pay a monthly unused fee of $1,500 (prorated for less than a full month of this Agreement) on the first day of each calendar month in lieu of the minimum interest otherwise payable pursuant to Section 2.2(b). The Borrower may reactivate the revolving line of credit upon giving notice to the Lender in the same manner as set forth in Section 2.1; provided a collateral audit satisfactory to Lender has been performed within the previous 90 days. Section 2.3 Fees. (a) Closing Fee. The Borrower agrees to pay the Lender a closing fee of $15,000 upon the execution of this Agreement. (b) Monitoring Fees. The Borrower agrees to pay the Lender collateral monitoring fees for the expense of auditors (not to exceed the then current standard applicable rate, which on the date of this Agreement is $62.50 per hour per auditor, plus out-of-pocket expenses). Section 2.4 Discretionary Nature of Credit Facility; Automatic Renewal. THE LENDER MAY AT ANY TIME AND FOR ANY REASON REFUSE TO MAKE AN ADVANCE AND/OR DEMAND PAYMENT OF THE ADVANCES AND TERMINATE THIS AGREEMENT WHETHER BORROWER IS OR IS NOT IN COMPLIANCE WITH THIS AGREEMENT. The Lender need not show that an adverse change has occurred in the Borrower's condition, financial or otherwise, in order to refuse to make any requested Advance or to demand payment of the Advances. Unless terminated by the Lender at any time or by the Borrower pursuant to Section 2.5, this Agreement shall remain in effect until the one year anniversary of the date of this Agreement and, thereafter, shall automatically renew for successive one year periods. Each such anniversary date is herein referred to as a "Termination Date". Section 2.5 Termination by Borrower. (a) Termination by Borrower. The Borrower may terminate this Agreement at any time subject to payment and performance of all Obligations, may obtain any release or termination of the Security Interest to which the Borrower is otherwise entitled by law by (1) giving at least 30 days' prior written notice to the Lender o the Borrower's intention to terminate this Agreement, and (2) paying the Lender a prepayment fee in accordance with Section 2.5 (b) if the Borrower terminates this Agreement effective as of any date other than a Termination Date. (b) Prepayment Fee. If the Borrower desires to terminate this Agreement as of a Termination Date but without giving at least 30 days' prior written notice thereof, or if the Borrower desires to terminate this Agreement as of any date other than a Termination Date upon giving at least 30 days' prior written notice to the Lender of the Borrower's intention to do so, Borrower shall pay to the Lender a prepayment fee of the greater of (i) prior to the first anniversary of this Agreement, 2% of the Maximum Line or following the first anniversary of this Agreement, 1% of the Maximum Line or (ii) the monthly Minimum Interest Charge pursuant to subsection 2.2(b) above multiplied by the number of months remaining in the term of this Agreement; provided that (i) no prepayment fee shall be due if the Borrower shall prepay the Obligations solely from cash flow generated from the Borrower's operations in the ordinary course and (ii) no prepayment fee shall be required if the prepayment is wholly made pursuant to a refinancing with another "Norwest" or "Xxxxx Fargo" affiliated entity. Section 2.6 Mandatory Prepayment. Without notice or demand, if the outstanding principal balance of the Advances shall at any time exceed the Borrowing Base, the Borrower shall immediately prepay the Advances to the extent necessary to eliminate such excess. Section 2.7 Advances Without Request. The Borrower hereby authorizes the Lender, in its discretion, at any time or from time to time without the Borrower's request, to make Advances to pay accrued interest, fees, uncollected items that have been applied to the Obligations, and other Obligations due and payable from time to time. Section 2.8 Use of Proceeds. The Borrower shall use the proceeds of Advances for ordinary working capital purposes.
Security Interest Section 3.1 Grant of Security Interest. The Borrower hereby grants to the Lender a security interest (the "Security Interest") in the following collateral (the "Collateral"), as security for the payment and performance of the Obligations: INVENTORY: All inventory of Borrower, as such term is defined in the UCC, whether now owned or hereafter acquired, whether consisting of whole goods, spare parts or components, supplies or materials, whether acquired, held or furnished for sale, for lease or under service contracts or for manufacture or processing, and wherever located; and ACCOUNTS AND OTHER RIGHTS TO PAYMENT: Each and every right of Borrower to the payment of money, whether such right to payment now exists or hereafter arises, whether such right to payment arises out of a sale, lease or other disposition of goods or other property, out of a rendering of services, out of a loan, out of the overpayment of taxes or other liabilities, or otherwise arises under any contract or agreement, whether such right to payment is created, generated or earned by Borrower or by some other person who subsequently transfers such person's interest to Borrower, whether such right to payment is or is not already earned by performance, and howsoever such right to payment may be evidenced, together with all other rights and interests (including all liens and security interests) which Borrower may at any time have by law or agreement against any account debtor or other obligor obligated to make any such payment or against any property of such account debtor or other obligor; all including all of Borrower's rights to payment in the form of all present and future accounts contract rights, loans and obligations receivable, chattel papers, bonds, notes and other debt instruments, tax refunds and rights to payment in the nature of general intangibles; and EQUIPMENT: All of the Borrower's goods and equipment, as such term is defined in the UCC whether now or hereafter owned, including all present and future machinery, vehicles, furniture, fixtures, manufacturing equipment, shop equipment, office and recordkeeping equipment, parts, tools, supplies, and including specifically the goods described in any equipment schedule or list herewith or hereafter furnished to the Lender by the Borrower; INVESTMENT PROPERTY: All of the Borrower's investment property, as such term is defined in the UCC, including without limitation securities, securities accounts, securities entitlements, financial assets and certificates of deposit of the Borrower and all funds of the Borrower on deposit with and all property in the possession of the Lender or any depository institution, each whether now owned or hereafter acquired; and GENERAL INTANGIBLES: All of the Borrower's general intangibles, as such term is defined in the UCC, whether now owned or hereafter acquired, including all present and future contract rights, patents, patent applications, copyrights, trademarks, trade names, trade secrets, customer or supplier lists and contracts, manuals, operating instructions, permits, franchises, the right to use the Borrower's name, and the goodwill of the Borrower's business; and PROCEEDS: Together with all substitutions and replacements for and products of any of the foregoing property and together with proceeds of any and all of the foregoing property and, in the case of all tangible property, together with all accessions and together with (i) all accessories, attachments, parts, equipment and repairs now or hereafter attached or affixed to or used in connection with any such tangible property, and (ii) all warehouse receipts, bills of lading and other documents of title now or hereafter covering such tangible property. Section 3.2 Notification of Account Debtors and Other Obligors. The Lender may at any time after the occurrence of an Event of Default, or during any period when an Event of Default would occur through the passage of time, notify any account debtor or other person obligated to pay the amount due that such right to payment has been assigned or transferred to the Lender for the security and shall be paid directly to the Lender. The Borrower will join in giving such notice if the Lender so requests. At any such time after the occurrence of an Event of Default, or during any period when an Event of Default would occur through the passage of time, and after the occurrence of an Even of Default, or during any period when an Event of Default would occur through the passage of time, and after the Borrower of the Lender gives such notice to an account debtor or other obligor, the Lender may, but need not, as the Borrower's agent and attorney-in-fact, notify the United States Postal Service to change the address for delivery of the Borrower's mail to any address designated by the Lender, otherwise intercept the Borrower's mail, and receive, open and dispose of the Borrower's mail, applying all Collateral as permitted under this Agreement and holding all other mail for the Borrower's account or forwarding such mail to the Borrower's last known address. Section 3.3 Occupancy. (a) The Borrower hereby irrevocably grants to the Lender the right tot take possession of each premises where Borrower conducts its business and has any rights of possession (the "Premises") at any time after the occurrence and during the continuance of an Event of Default. (b) The Lender may use the Premises only to hold, process, manufacture, sell, use, store, liquidate, realize upon or otherwise dispose of goods that are Collateral and for other purposes that the Lender in good faith considers related. (c) The Lender's right to hold the Premises shall terminate upon the earlier of payment in full of all Obligations, or final sale or disposition of all goods constituting Collateral and delivery of all such goods to purchasers. (d) The Lender shall not be obligated to pay or account for any rent or other compensation for the possession or use of any of the Premises; provided, however, that if the Lender does pay or account for any rent or other compensation for the possession or use of any of the Premises, the Borrower shall reimburse the Lender promptly for the full amount thereof. Section 3.4 License/Maintenance of Intellectual Property. The Borrower hereby grants to the Lender a nonexclusive worldwide and royalty-free license to use or otherwise exploit all trademarks, franchises, trade names, copyrights and patents owned by or licensed to the Borrower for the purpose of selling, leasing or otherwise disposing of any or all Collateral following an Event of Default. The Borrower shall not sell, transfer, assign (by operation of law or otherwise), exchange, lease, license, allow to go abandoned or otherwise dispose of all or any portion of said intellectual property and shall maintain and protect all of such property in accordance with all applicable state, federal and foreign laws. Section 3.5 Filing a Copy. A carbon, photographic, or other reproduction of this Agreement or of a financing statement signed by Borrower is sufficient as a financing statement.
Conditions of Lending In view of the fact that Advances may be made in the sole discretion of the Lender, this Agreement does not set forth conditions precedent to Advances. The Lender will advise the Borrower of the Lender's documentation and other requirements before considering any Advance.
Representations and Warranties The Borrower represents and warrants to the Lender as follows: Section 5.1 Name; Locations; Tax ID No., Subsidiaries. During its existence, the Borrower has done business solely under its corporate name as set forth herein and under such trade names and such other corporate names as disclosed to Lender in writing before this Agreement is signed and delivered. The address of Borrower's chief executive office and principal place of business and its federal tax identification number are set forth below its signature to this Agreement. All Inventory is located at the location or at one of the other locations disclosed to Lender in writing before this Agreement is signed and delivered. The Borrower has no subsidiaries except as disclosed to Lender in writing before this Agreement is signed and delivered. Section 5.2 Financial Condition; No Adverse Change. Before this Agreement was signed and delivered, the Borrower furnished the lender certain of its unaudited financial statements certified by the Borrower. Those statements fairly present the Borrower's financial condition as the dates indicated therein and the results of its operations for the period ended March 31, 1999 and were prepared in accordance with generally accepted accounting principles. Since March 31, 1999, there has been no material adverse change in the business, properties or condition (financial or otherwise) of the Borrower.
Affirmative Covenants of the Borrower So long as the Advances or any other obligations shall remain unpaid, the Borrower will comply with the requirements in this Article, unless the Lender shall otherwise consent in writing. Section 6.1 Reporting Requirements. The Borrower will deliver to the Lender each of the following in form and detail acceptable to the Lender: (a) as soon as available, and in any event within 120 days after the end of each fiscal year of the Borrower, the Borrower's audited financial statements prepared in accordance with GAAP; (b) as soon as available and in any event within 20 days after the end of each month, an unaudited/ internal balance sheet and statement of income and retained earnings of the Borrower as at the end of and for such month and for the year to date period then ended, prepared in accordance with GAAP, subject to reclassifications and year-end adjustments, together with a completed compliance certificate in the form attached hereto; (c) within 15 days after the end of each month, agings of the Borrower's accounts receivable, together with a certificate of ineligible accounts, and agings of the Borrower's accounts payable, each as of the end of such month; (d) as soon as available, and within fifteen (15) days of receipt thereof, a copy of the bank account statements of the Borrower from each bank with which Borrower maintains an account; (e) from time to time, with reasonable promptness, any and all receivables schedules, collection reports, deposit records, equipment schedules, copies of invoices to account debtors, shipment documents and delivery receipts for goods sold, and such other material, reports, records or information as the Lender may request; (f) within seven (7) days of Borrower's payment of or deposit of taxes, including but not limited to payroll taxes, proof of such payment in form acceptable to the Lender; (g) at least thirty (30) days before the beginning of each of Borrower's fiscal years, projections of Borrower's monthly balance sheets and income statements for such fiscal year; and (h) immediately after the commencement thereof, notice in writing of all litigation and of all proceedings before any governmental or regulatory agency affecting the Borrower or which seek a monetary recovery against the Borrower in excess of $10,000. Section 6.2 Inspection. Upon the Lender's request, the Borrower will permit any officer, employee, attorney, agent or accountant for the Lender to audit, review, make extracts from or copy any and all records of the Borrower (except for confidential information of Borrower's partners) and to inspect the Collateral at all times during ordinary business hours. Section 6.3 Account Verification. The Borrower will at any time and from time to time upon request of the Lender send requests for verification of Accounts or notices of assignment to account debtors and other obligors. The Borrower authorizes the Lender to verify Accounts directly with account debtors or other obligors from time to time, including on a daily basis (and the Borrower understands the Lender intends to do so by telephone and/or in writing). Section 6.4 No Other Liens. The Borrower will keep all Collateral free and clear of all security interests, liens and encumbrances except the Security Interest, purchase money security interests in equipment, and other security interests approved by the Lender in writing. Section 6.5 Insurance. The Borrower will at all times keep all tangible collateral insured against risks of fire (including so-called extended coverage), theft, collision (for Collateral consisting of motor vehicles) and such other risks and in such amounts as the Lender may reasonably request, with a lender's loss payable clause in favor of Lender to the extent of its interest. Section 6.6 Lockbox; Collateral Account. The Borrower has provided the Lender with agreements regarding a lockbox and a collateral account in connection with the collection of Accounts. Section 6.7 Minimum Book Net Income. The Borrower will at all times maintain during each period described below, a Book Net Income (on an unconsolidated, Borrower-only basis), determined as of the end of each month on a year-to-date basis, of at least the amount set forth opposite such period (bracketed amounts indicate maximum book Net Loss):
