EXHIBIT 10.1

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (as the same may be amended, restated,
modified, or supplemented from time to time, this “Agreement”) dated as of May
11, 2015 (the “Effective Date”) among IMMY Funding LLC, a Delaware limited
liability company, as collateral agent (in such capacity, together with its
successors and assigns in such capacity, “Collateral Agent”), and the Lenders
listed on Schedule 1.1 hereof or otherwise a party hereto from time to time
including IMMY Funding LLC in its capacity as a Lender (each a “Lender” and
collectively, the “Lenders”), and Imprimis Pharmaceuticals, Inc., a Delaware
corporation (“Borrower”), provides the terms on which the Lenders shall lend to
Borrower and Borrower shall repay the Lenders. The parties agree as follows:

 

1. DEFINITIONS AND OTHER TERMS

 

1.1 Terms. Capitalized terms used herein shall have the meanings set forth in
Section 1.3 to the extent defined therein. All other capitalized terms used but
not defined herein shall have the meaning given to such terms in the Code. Any
accounting term used but not defined herein shall be construed in accordance
with GAAP and all calculations shall be made in accordance with GAAP. The term
“financial statements” shall include the accompanying notes and schedules.

 

1.2 Section References. Any section, subsection, schedule or exhibit references
are to this Agreement unless otherwise specified.

 

1.3 Definitions. The following terms are defined in the Sections or subsections
referenced opposite such terms:

 

“Agreement” Preamble “Borrower” Preamble “Claims” Section 12.2 “Collateral
Agent” Preamble “Collateral Agent Report” Exhibit B, Section 5 “Communication”
Section 10 “Default Rate” Section 2.3(b) “Effective Date” Preamble “Event of
Default” Section 8 “Indemnified Person” Section 12.2 “Lender” and “Lenders”
Preamble “Lender Transfer” Section 12.1 “New Subsidiary” Section 6.10
“Non-Funding Lender” Exhibit B, Section 10(c)(ii) “Other Lender” Exhibit B,
Section 10(c)(ii) “Perfection Certificate” and “Perfection Certificates” Section
5.1 “Term A Loan” Section 2.2(a)(i) “Term B Loan” Section 2.2(a)(ii)
“Termination Date” Exhibit B, Section 8 “Term Loan” Section 2.2(a)(ii)
“Transfer” Section 7.1

 

In addition to the terms defined elsewhere in this Agreement, the following
terms have the following meanings:

 

1

   

 

“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and other sums owing to Borrower.

 

“Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made under the Code.

 

“Affiliate” of any Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person’s senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person’s managers and members.

 

“Amortization Date” is the earlier of (i) (unless waived by the Required
Lenders) an Event of Default occurring, or (ii) (A) the twentieth (20th) Payment
Date following the Effective Date if the Borrower fails to satisfy the Revenue
Threshold as of December 31, 2016, (B) the thirty-seventh (37th) Payment Date
following the Effective Date as long as the Borrower continues to satisfy the
Revenue Threshold or (C) on the Payment Date immediately after the Borrower
fails to satisfy the Revenue Threshold or the Collateral Agent reasonably
determines that Borrower has not reached or cannot reasonably achieve the
Revenue Threshold, unless the Required Lenders agree otherwise to postpone such
Amortization Date to a later Payment Date.

 

“Anti-Terrorism Laws” are any laws relating to terrorism or money laundering,
including without limitation Executive Order No. 13224 (effective September 24,
2001), the USA PATRIOT Act, the laws comprising or implementing the Bank Secrecy
Act, and the laws administered by OFAC.

 

“Blocked Person” is any Person: (a) listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (b) a Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order No.
13224, (c) a Person with which any Lender is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person
that commits, threatens or conspires to commit or supports “terrorism” as
defined in Executive Order No. 13224, or (e) a Person that is named a “specially
designated national” or “blocked person” on the most current list published by
OFAC or other similar list.

 

“Borrower’s Books” are Borrower’s or any of its Subsidiaries’ books and records
including ledgers, federal, and state tax returns, records regarding Borrower’s
or its Subsidiaries’ assets or liabilities, the Collateral, business operations
or financial condition, and all computer programs or storage or any equipment
containing such information.

 

“Business Day” is any day that is not a Saturday, Sunday or a day on which
Collateral Agent is closed.

 

“Cash Equivalents” are (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc., and (c) certificates of deposit
maturing no more than one (1) year after issue provided that the account in
which any such certificate of deposit is maintained is subject to a Control
Agreement in favor of Collateral Agent.

 

“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of New York; provided, that, to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, or priority of, or remedies with
respect to, Collateral Agent’s Lien on any Collateral is governed by the Uniform
Commercial Code in effect in a jurisdiction other than the State of New York,
the term “Code” shall mean the Uniform Commercial Code as enacted and in effect
in such other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority, or remedies and for purposes
of definitions relating to such provisions.

 

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“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.

 

“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account, or any other bank account maintained by Borrower or any Subsidiary at
any time.

 

“Commitment Percentage” is set forth in Schedule 1.1, as amended from time to
time.

 

“Commodity Account” is any “commodity account” as defined in the Code with such
additions to such term as may hereafter be made under the Code.

 

“Compliance Certificate” is that certain certificate in substantially the form
attached hereto as Exhibit D.

 

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (b) any
obligations for undrawn letters of credit for the account of that Person; and
(c) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; but “Contingent Obligation”
does not include endorsements in the ordinary course of business. The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
any guarantee or other support arrangement.

 

“Control Agreement” is any control agreement entered into among the depository
institution at which Borrower or any of its Subsidiaries maintains a Deposit
Account (other than an Excluded Account) or the securities intermediary or
commodity intermediary at which Borrower or any of its Subsidiaries maintains a
Securities Account or a Commodity Account (other than an Excluded Account),
Borrower and such Subsidiary, and Collateral Agent pursuant to which Collateral
Agent, for the benefit of the Lenders, obtains “control” (within the meaning of
the Code) over such Deposit Account, Securities Account, or Commodity Account.

 

“Copyrights” are any and all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret.

 

“Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.

 

“DOJ” means the U.S. Department of Justice or any successor thereto or any other
comparable Governmental Authority.

 

“Dollars,” “dollars” and “$” each mean lawful money of the United States.

 

“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

 

“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and
its regulations.

 

“Excluded Account” means (i) accounts of Borrower or any of its Subsidiaries
used exclusively for payroll, payroll taxes and other employee wage and benefit
payments, as identified to Collateral Agent by Borrower as such in the
Perfection Certificate or otherwise by written notice from time to time, or (ii)
accounts numbered ********2060 and *****2396 held at Bank of America, N.A. and
JPMorgan Chase Bank, N.A., respectively, so long as those accounts are closed
within fifteen (15) Business Days of the Effective Date.

 

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“Exigent Circumstance” means any event or circumstance that, in the reasonable
judgment of Collateral Agent, imminently threatens the ability of Collateral
Agent to realize upon any material portion of the Collateral, such as, without
limitation, fraudulent removal, concealment, or abscondment thereof, destruction
or material waste thereof, or failure of Borrower or any of its Subsidiaries
after reasonable demand to maintain or reinstate adequate casualty insurance
coverage, or which, in the judgment of Collateral Agent, could reasonably be
expected to result in a material diminution in value of the Collateral.

 

“Facility Fee” is a fee due on the Effective Date equal to 1.50% of the total
Term Loan Commitment, payable to IMMY Funding LLC.

 

“FDA” means the U.S. Food and Drug Administration or any successor thereto or
any other comparable Governmental Authority.

 

“Final Fee” is a payment (in addition to and not a substitution for the regular
monthly payments of principal plus accrued interest or any other fee payable
hereunder) due on the earliest to occur of (a) the Maturity Date, or (b) the
acceleration of any Term Loan, or (c) the prepayment of a Term Loan pursuant to
Section 2.2(c) or (d), in each case equal to five percent (5%) multiplied by the
principal amount of the Term Loan funded at such time, payable to Lenders in
accordance with their respective Pro Rata Shares.

 

“Foreign Currency” means lawful money of a country other than the United States.

 

“Foreign Subsidiary” is a Subsidiary that is not an entity organized under the
laws of the United States or any state thereof.

 

“Funding Date” is any date on which a Term Loan is made to or on account of
Borrower, which shall be a Business Day.

 

“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession in the
United States, which are applicable to the circumstances as of the date of
determination.

 

“General Intangibles” are all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
tax refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.

 

“Governmental Approval” is any consent, authorization, approval, order, license,
franchise, permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any Governmental
Authority.

 

“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body (including, without limitation, the FDA and any state board of
pharmacy or state pharmacy licensing authority), court, central bank or other
entity exercising executive, legislative, judicial, taxing, regulatory or
administrative functions of or pertaining to government, any securities exchange
and any self-regulatory organization.

 

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“Guarantor” is any Person providing a Guaranty in favor of Collateral Agent for
the benefit of the Lenders.

 

“Guaranty” is any guarantee (including the Secured Guaranty) of all or any part
of the Obligations, as the same may from time to time be amended, restated,
modified or otherwise supplemented.

 

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and (d)
Contingent Obligations.

 

“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions or proceedings
seeking reorganization, arrangement, or other relief.

 

“Insolvent” means not Solvent.

 

“Intellectual Property” means all of Borrower’s or any of its Subsidiaries’
right, title and interest in and to the following:

 

(a) its Copyrights, Trademarks and Patents;

 

(b) any and all trade secrets and trade secret rights, including, without
limitation, any rights to unpatented inventions, know-how, operating manuals;

 

(c) any and all source code;

 

(d) any and all design rights which may be available to Borrower;

 

(e) any and all claims for damages by way of past, present and future
infringement of any of the foregoing, with the right, but not the obligation, to
sue for and collect such damages for said use or infringement of the
Intellectual Property rights identified above;

 

(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks
or Patents; and

 

(g) all licenses, sublicenses or other contracts under which Borrower or any
Subsidiary is granted rights by third parties in any Intellectual Property
asset.

 

“Inventory” is all “inventory” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made under the Code,
and includes without limitation all merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products, including
without limitation such inventory as is temporarily out of any Person’s custody
or possession or in transit and including any returned goods and any documents
of title representing any of the above.

 

“Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance or
capital contribution to any Person.

 

“IP Security Agreement” is that certain Intellectual Property Security Agreement
executed and delivered by Borrower to Collateral Agent and dated as of the
Effective Date, as may be amended, restated, or otherwise modified or
supplemented from time to time.

 

“Key Person” is Borrower’s Chief Executive Officer, who is Mark L. Baum as of
the Effective Date.

 

“Knowledge” means to the “best of” Borrower’s knowledge, or with a similar
qualification, knowledge or awareness means the actual knowledge, after
reasonable investigation, of the Responsible Officers.

 

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“Lender” is any one of the Lenders.

 

“Lenders” are the Persons identified on Schedule 1.1 hereto and each permitted
assignee that becomes a party to this Agreement pursuant to Section 12.1.

 

“Lenders’ Expenses” are all audit fees and expenses, costs, and expenses
(including reasonable attorneys’ fees and expenses, as well as appraisal fees,
fees incurred on account of lien searches, inspection fees, and filing fees) for
preparing, amending, negotiating, administering, defending and enforcing the
Loan Documents (including, without limitation, those incurred in connection with
appeals or Insolvency Proceedings) or otherwise incurred by Collateral Agent
and/or the Lenders in connection with the Loan Documents.

 

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest, or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.

 

“Loan Documents” are, collectively, this Agreement, the Pledge Agreement, the IP
Security Agreement, the Secured Guaranty, the Warrants, the Perfection
Certificates, each Control Agreement, each Compliance Certificate, each Loan
Payment Request Form, any subordination agreements, any note, or notes or
guaranties executed by Borrower or any other Person, and any other present or
future agreement entered into by Borrower, any Guarantor or any other Person for
the benefit of the Lenders and Collateral Agent in connection with this
Agreement; all as amended, restated, or otherwise modified or supplemented from
time to time.

 

“Loan Payment Request Form” is that certain form attached hereto as Exhibit C.

 

“Material Adverse Change” is (a) a material adverse change in the business,
operations or condition (financial or otherwise) of Borrower or any Subsidiary,
when taken as a whole; (b) a material impairment of the prospect of repayment of
any portion of the Obligations or (c) a material adverse effect on the
Collateral that is not the result of the Collateral Agent’s or the Lenders’
action or inaction in connection with filings made or not made with respect to
the Collateral. For the avoidance of doubt, the following events, solely in and
of themselves, shall not constitute a Material Adverse Change or a Material
Adverse Effect: (a) a “going concern” or like qualification or “emphasis of
matter” paragraph in an auditor’s opinion; (b) Borrower or any of its
Subsidiaries conducts a mandatory or voluntary recall which could reasonably be
expected to result in liability and expense to Borrower or any of its
Subsidiaries of $1,000,000 or less; (c) Borrower or any of its Subsidiaries
enters into a settlement agreement with the FDA, DOJ, or other Governmental
Authority that results in aggregate liability as to any single or related series
of transactions, incidents or conditions, of $1,000,000 or less; or (d) an
action by a Governmental Authority of a type and magnitude substantially similar
to those disclosed in the Perfection Certificate provided to the Collateral
Agent prior to the date hereof, which could not reasonably be expected to cause
Borrower to discontinue its operations or otherwise result in or cause a
Material Adverse Change.

 

“Material Agreement” is any license, agreement or other contractual arrangement
with a Person or Governmental Authority whereby Borrower or any of its
Subsidiaries is reasonably likely to be required to transfer, either in-kind or
in cash, prior to the Maturity Date, assets or property valued (book or market)
at more than $500,000 in the aggregate or any license, agreement or other
contractual arrangement conveying rights in or to any Intellectual Property
necessary to make, use or sell any Inventory, products or services of Borrower
or any Subsidiary.

 

“Maturity Date” is, for each Term Loan, the earlier of (i) May 11, 2021 and (ii)
twenty-four (24) months following the Amortization Date only if the Revenue
Threshold is not met.

 

“Milestone Date” is the date that Borrower has achieved trailing twelve (12)
month revenue under GAAP of at least Fifteen Million Dollars ($15,000,000.00)
during any consecutive twelve (12) month period through and until May 11, 2016,
measured on an unaudited basis for any month for which audited financial
statements are not available, in each case subject to verification and
supporting evidence reasonably requested by Collateral Agent.

 

“Obligations” are all of Borrower’s obligations to pay when due any debts,
principal, interest, Lenders’ Expenses, the Final Fee, and other amounts
Borrower owes the Lenders now or later, in connection with, related to,
following, or arising from, out of or under, this Agreement or, the other Loan
Documents (other than the Warrants), and including interest accruing after
Insolvency Proceedings begin (whether or not allowed) and debts, liabilities, or
obligations of Borrower assigned to the Lenders and/or Collateral Agent, and the
performance of Borrower’s duties under the Loan Documents.

 

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“OFAC” is the U.S. Department of Treasury Office of Foreign Assets Control.

 

“OFAC Lists” are, collectively, the Specially Designated Nationals and Blocked
Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed.
Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other
restricted Persons maintained pursuant to any of the rules and regulations of
OFAC or pursuant to any other applicable Executive Orders.

 

“Operating Documents” are, for any Person, such Person’s formation documents, as
certified by the Secretary of State (or equivalent agency) of such Person’s
jurisdiction of organization on a date that is no earlier than thirty (30) days
prior to the Effective Date, and, (a) if such Person is a corporation, its
bylaws in current form, (b) if such Person is a limited liability company, its
limited liability company agreement (or similar agreement), and (c) if such
Person is a partnership, its partnership agreement (or similar agreement), each
of the foregoing with all current amendments or modifications thereto.

 

“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
re-examination certificates, utility models, extensions and
continuations-in-part of the same.

 

“Payment Date” is the first (1st) calendar day of each calendar month,
commencing on June 1, 2015.

 

“Permitted Indebtedness” is:

 

(a) Borrower’s Indebtedness to the Lenders and Collateral Agent under this
Agreement and the other Loan Documents;

 

(b) Indebtedness existing on the Effective Date and disclosed on the Perfection
Certificate(s);

 

(c) Subordinated Debt;

 

(d) unsecured Indebtedness to trade creditors and in connection with credit
cards incurred in the ordinary course of business;

 

(e) Indebtedness consisting of capitalized lease obligations and purchase money
Indebtedness, in each case incurred by Borrower or any of its Subsidiaries to
finance the acquisition, repair, improvement or construction of fixed or capital
assets of such person, provided that (i) the aggregate outstanding principal
amount of all such Indebtedness does not exceed (A) Two Million Dollars
($2,000,000.00) for construction and improvement efforts of pharmacy and
outsourcing facilities in New Jersey and California, and (B) Two Hundred Fifty
Thousand Dollars ($250,000.00) for other capitalized lease obligations and
purchase money Indebtedness at any time, and (ii) the principal amount of such
Indebtedness does not exceed the lower of the cost or fair market value of the
property so acquired or built or of such repairs or improvements financed with
such Indebtedness (each measured at the time of such acquisition, repair,
improvement or construction is made);

 

(f) Indebtedness incurred as a result of endorsing negotiable instruments
received in the ordinary course of Borrower’s business;

 

(g) provided that the full amount of the Term Loans have been drawn hereunder,
Indebtedness related to secured accounts receivable and inventory financing (A)
secured solely by accounts receivable and cash proceeds thereof, (B) in an
aggregate outstanding principal amount that does not exceed $2,500,000, (C) is
subject to an intercreditor agreement in form and substance satisfactory to
Collateral Agent and (D) the borrowings thereunder are subject to a maximum
borrowing base for accounts receivable of 80% and a maximum borrowing base for
inventory of 40%;

 

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(h) Indebtedness related to letters of credit related to trade payables and
creditors and real estate leases incurred in the Borrower’s ordinary course of
business, in an aggregate outstanding principal amount that does not exceed
$500,000;

 

(i) Indebtedness consisting of deferred compensation owing under the Stock
Purchase Agreement, dated as of November 26, 2014 (without any amendment or
modification effective after the date hereof without Collateral Agent’s
consent), among Borrower, South Coast Specialty Compounding, Inc. (d/b/a Park
Compounding) and the seller parties thereto;

 

(j) Indebtedness consisting of the bona fide financing of insurance premiums or
self-insurance obligations (which must be commercially reasonable and consistent
with insurance practices generally) that does not exceed $250,000;

 

(k) Indebtedness (i) among Borrower and Guarantors, (ii) of any Subsidiary that
is not a Guarantor to Borrower or any Guarantor that is a Permitted Investment,
and (iii) of any Subsidiary that is not a Guarantor to another Subsidiary that
is not a Guarantor, provided that, in each case, if any such Indebtedness
exceeds Two Hundred and Fifty Thousand ($250,000) for each transaction or Seven
Hundred and Fifty Thousand ($750,000) in the aggregate, it is, at Collateral
Agent’s discretion, subordinated to the Obligations hereunder in form and
substance acceptable to Collateral Agent and any notes or other instruments
evidencing such Indebtedness are pledged to Collateral Agent;

 

(l) Deposits or advances received from customers in the ordinary course of
business;

 

(m) Indebtedness consisting of guarantees resulting from endorsement of
negotiable instruments for collection by Borrower or any Subsidiary in the
ordinary course of business; and

 

(n) extensions, refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness (a) through (m) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose materially more burdensome terms upon Borrower, or its Subsidiary, as
the case may be.

 

“Permitted Investments” are:

 

(a) Investments disclosed on the Perfection Certificate(s) and existing on the
Effective Date;

 

(b) (i) Investments consisting of cash and Cash Equivalents, and (ii) any
Investments permitted by Borrower’s investment policy, as amended from time to
time, provided that such investment policy (and any such amendment thereto) has
been approved in writing by Collateral Agent;

 

(c) Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
Borrower;

 

(d) Investments consisting of Deposit Accounts in which Collateral Agent has a
perfected security interest;

 

(e) Investments in connection with Transfers permitted by Section 7.1;

 

(f) Investments consisting of (i) travel advances and employee relocation loans
and other employee loans and advances in the ordinary course of business, and
(ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s board of directors; and
(iii) other loans or arrangements in the ordinary course of the Borrower’s
business that does not to exceed in the aggregate for (i), (ii) and (iii), (A)
One Hundred Fifty Thousand Dollars ($150,000.00) in fiscal year 2015, (B) Two
Hundred Fifty Thousand Dollars ($250,000.00) in fiscal year 2016; and (C) Three
Hundred Fifty Thousand Dollars ($350,000.00) in each fiscal year thereafter.

 

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(g) Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business;

 

(h) Investments consisting of notes receivable of, or prepaid royalties and
other credit extensions, to customers and suppliers who are not Affiliates, in
the ordinary course of business; provided that this paragraph (h) shall not
apply to Investments of Borrower in any Subsidiary;

 

(i) Investments in Subsidiaries, not to exceed Five Hundred Thousand Dollars
($500,000) per fiscal year;

 

(j) Investments in joint ventures or strategic alliances in the ordinary course
of Borrower’s business consisting of the licensing of technology, the
development of technology or the providing of technical support, in each case as
permitted hereunder (i.e. under a Permitted License), not to exceed Five Hundred
Thousand Dollars ($500,000) per fiscal year; and

 

(k) Excluded Accounts.

 

“Permitted Licenses” are (A) licenses of over-the-counter software that is
commercially available to the public, (B) non-exclusive licenses for the use of
the Intellectual Property of Borrower or any of its Subsidiaries entered into in
the ordinary course of business, provided, that, with respect to each such
license described in clause (B), the license constitutes an arms-length
transaction, the terms of which, on their face, do not provide for a sale or
assignment of any Intellectual Property and do not restrict the ability of
Borrower or any of its Subsidiaries, as applicable, to pledge, grant a security
interest in or lien on, or assign or otherwise Transfer any Intellectual
Property, or (C) exclusive or non-exclusive licenses relating to Investments
described under clause (k) of the definition of “Permitted Investments”;
provided, that, with respect to each such exclusive license described in this
clause (C), the license (i) constitutes an arms-length transaction, the terms of
which, on their face, do not provide for a sale or assignment of any
Intellectual Property and do not restrict the ability of Borrower or any of its
Subsidiaries, as applicable, to pledge, grant a security interest in or lien on,
or assign or otherwise Transfer any Intellectual Property, (ii) is limited in
territory with respect to a specific geographic country or region (i.e. Japan,
Germany, northern China) outside of the United States (i.e., not exclusive in
the United States), and (iii) Borrower has obtained the consent and
acknowledgement of the counterparty to such license for the collateral
assignment of such license to the Collateral Agent for the benefit of the
Lenders.

 

“Permitted Liens” are:

 

(a) Liens existing on the Effective Date and disclosed on the Perfection
Certificates or arising under this Agreement and the other Loan Documents;

 

(b) Liens for taxes, fees, assessments or other government charges or levies,
either (i) not due and payable or (ii) being contested in good faith and for
which Borrower maintains adequate reserves on its Books, provided that no notice
of any such Lien has been filed or recorded under the Internal Revenue Code of
1986, as amended, and the Treasury Regulations adopted thereunder;

 

(c) liens securing Indebtedness permitted under clause (e) of the definition of
“Permitted Indebtedness,” provided that (i) such liens exist prior to the
acquisition of, or attach substantially simultaneous with, or within twenty (20)
days after the, acquisition, lease, repair, improvement or construction of, such
property financed or leased by such Indebtedness and (ii) such liens do not
extend to any property of Borrower other than the property (and proceeds
thereof) acquired, leased or built, or the improvements or repairs, financed by
such Indebtedness;

 

9

   

 

(d) Liens securing Indebtedness permitted under clause (g) of the definition of
“Permitted Indebtedness;

 

(e) Liens of carriers, warehousemen, suppliers, or other Persons that are
possessory in nature arising in the ordinary course of business so long as such
Liens attach only to Inventory, securing liabilities in the aggregate amount not
to exceed One Hundred Thousand Dollars ($100,000.00), and which are not
delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;

 

(f) Liens to secure payment of workers’ compensation, employment insurance,
old-age pensions, social security and other like obligations incurred in the
ordinary course of business (other than Liens imposed by ERISA);

 

(g) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (d), but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the indebtedness may not increase;

 

(h) leases or subleases of real property granted in the ordinary course of
Borrower’s business (or, if referring to another Person, in the ordinary course
of such Person’s business), and leases, subleases, non-exclusive licenses or
sublicenses of personal property (other than Intellectual Property) granted in
the ordinary course of Borrower’s business (or, if referring to another Person,
in the ordinary course of such Person’s business), if the leases, subleases,
licenses and sublicenses do not prohibit granting Collateral Agent or any Lender
a security interest therein;

 

(i) banker’s liens, rights of setoff and Liens in favor of financial
institutions incurred in the ordinary course of business arising in connection
with Borrower’s deposit accounts or securities accounts held at such
institutions solely to secure payment of fees and similar costs and expenses and
provided such accounts are maintained in compliance with Section 6.6 hereof;

 

(j) Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Section 8.4 or 8.7;

 

(k) Permitted Licenses;

 

(l) deposits to secure indebtedness permitted under clause (h) of the definition
of “Permitted Indebtedness”;

 

(m) servitudes, easements, rights of way, restrictions and other similar
encumbrances on real property imposed by applicable laws and encumbrances
consisting of zoning or building restrictions, easements, licenses, restrictions
on the use of property or minor imperfections in title thereto which, in the
aggregate, are not material, and which do not in any case materially detract
from the value of the property subject thereto or interfere with the ordinary
conduct of the business of Borrower and its Subsidiaries; and

 

(n) with respect to any real property, (A) such defects or encroachments as
might be revealed by an up-to-date survey of such real property; (B) the
reservations, limitations, provisos and conditions expressed in the original
grant, deed or patent of such property by the original owner of such real
property pursuant to applicable laws; and (C) rights of expropriation, access or
user or any similar right conferred or reserved by or in applicable laws, which,
in the aggregate for (A), (B) and (C), are not material, and which do not in any
case materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of Borrower and its
Subsidiaries.

 

“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

 

10

   

 

“PIK Option Period” means the period from the Effective Date until the earlier
of (i) May 11, 2017 and (ii) the Amortization Date.

 

“Pledge Agreement” is that certain Pledge Agreement executed and delivered by
Borrower to Collateral Agent and dated as of the Effective Date, as may be
amended, restated, or otherwise modified or supplemented from time to time.

 

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, and whether tangible or intangible.

 

“Pro Rata Share” is, as of any date of determination, with respect to each
Lender, a percentage (expressed as a decimal, rounded to the ninth decimal
place) determined by dividing the outstanding principal amount of Term Loans
held by such Lender by the aggregate outstanding principal amount of all Term
Loans.

 

“Registered Organization” is any “registered organization” as defined in the
Code with such additions to such term as may hereafter be made under the Code.

 

“Registration” means any registration, authorization, approval, license, permit,
clearance, certificate, and exemption issued or allowed by the FDA or state
pharmacy licensing authorities (including, without limitation, new drug
applications, abbreviated new drug applications, biologics license applications,
investigational new drug applications, over-the-counter drug monograph, device
pre-market approval applications, device pre-market notifications,
investigational device exemptions, product recertifications, manufacturing
approvals, registrations and authorizations, CE Marks, pricing and reimbursement
approvals, labeling approvals or their foreign equivalent, controlled substance
registrations, and wholesale distributor permits).

 

“Regulatory Action” means an administrative, regulatory, or judicial enforcement
action, proceeding, investigation or inspection, FDA Form 483 notice of
inspectional observation, warning letter, untitled letter, other notice of
violation letter, recall, seizure, Section 305 notice or other similar written
communication, injunction or consent decree, issued by the FDA or a federal or
state court.

 

“Related Persons” means, with respect to any Person, each Affiliate of such
Person and each director, officer, employee, agent, trustee, representative,
attorney, accountant and each insurance, environmental, legal, financial and
other advisor and other consultants and agents of or to such Person or any of
its Affiliates.

 

“Required Lenders” means (i) for so long as all of the Persons that are Lenders
on the Effective Date (each an “Original Lender”) have not assigned or
transferred any of their interests in their Term Loan, Lenders holding one
hundred percent (100%) of the aggregate outstanding principal balance of the
Term Loan, or (ii) at any time from and after any Original Lender has assigned
or transferred any interest in its Term Loan, Lenders holding at least fifty-one
percent (51%) of the aggregate outstanding principal balance of the Term Loan.

 

“Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

 

“Responsible Officer” is any of the President, Chief Executive Officer, or Chief
Financial Officer of Borrower acting alone.

 

“Revenue Threshold” means the Borrower continuing to satisfy or meet the
following: (a) the trailing twelve (12) calendar months of Borrower’s revenue
under GAAP on or after December 31, 2016, is equal to or greater than
Twenty-Five Million Dollars ($25,000,000) or (b) Borrower has a balance of cash
equal to or greater than the then-outstanding Obligations in Collateral Accounts
subject to Control Agreements.

 

“Second Draw Period” is the period commencing on the Milestone Date and ending
on May 11, 2016.

 

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“Secured Guaranty” is that certain Secured Guaranty executed and delivered by
each Subsidiary of Borrower to Collateral Agent and dated as of the Effective
Date, as may be amended, restated, or otherwise modified or supplemented from
time to time.

 

“Securities Account” is any “securities account” as defined in the Code with
such additions to such term as may hereafter be made under the Code.

 

“Solvent” is, with respect to any Person: the fair salable value of such
Person’s consolidated assets (including goodwill minus disposition costs)
exceeds the fair value of such Person’s liabilities; such Person is not left
with unreasonably small capital after the transactions in this Agreement; and
such Person is able to pay its debts (including trade debts) as they mature in
the ordinary course (without taking into account any forbearance and extensions
related thereto).

 

“Subordinated Debt” is indebtedness incurred by Borrower or any of its
Subsidiaries subordinated to all Indebtedness of Borrower and/or its
Subsidiaries to the Lenders (pursuant to a subordination, intercreditor, or
other similar agreement in form and substance reasonably satisfactory to
Collateral Agent and the Lenders entered into between Collateral Agent,
Borrower, and/or any of its Subsidiaries, and the other creditor), on terms
acceptable to Collateral Agent and the Lenders.

 

“Subsidiary” is, with respect to any Person, any Person of which more than fifty
percent (50%) of the voting stock or other equity interests (in the case of
Persons other than corporations) is owned or controlled, directly or indirectly,
by such Person or through one or more intermediaries. Unless otherwise
specified, references herein to a Subsidiary means a Subsidiary of Borrower.

 

“Term Loan Commitment” is, for any Lender, the obligation of such Lender to make
a Term Loan, up to the principal amount shown on Schedule 1.1. “Term Loan
Commitments” means the aggregate amount of such commitments of all Lenders.

 

“Trademarks” means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower and each of its
Subsidiaries connected with and symbolized by such trademarks.

 

“Warrant” means any of that certain Warrant to Purchase Stock dated as of the
Effective Date issued by Borrower in favor of each Lender or such Lender’s
Affiliates or any other warrant entered into in connection with the Term Loan,
all as may be amended, restated, or otherwise modified or supplemented from time
to time.

 

2. LOANS AND TERMS OF PAYMENT

 

2.1 Promise to Pay. Borrower hereby unconditionally promises to pay each Lender,
the outstanding principal amount of all Term Loans advanced to Borrower by such
Lender and accrued and unpaid interest thereon and any other amounts due
hereunder as and when due in accordance with this Agreement.

 

2.2 Term Loans.

 

(a) Availability. (i) Subject to the terms and conditions of this Agreement, the
Lenders agree, severally and not jointly, to make term loans to Borrower on the
Effective Date in an aggregate principal amount of Ten Million Dollars
($10,000,000.00) according to each Lender’s Term A Loan Commitment as set forth
on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a
“Term A Loan”, and collectively as the “Term A Loans”). After repayment, no Term
A Loan may be re-borrowed.

 

(ii) Subject to the terms and conditions of this Agreement, the Lenders agree,
severally and not jointly, during the Second Draw Period, upon the request of
Borrower, to make term loans to Borrower in an aggregate principal amount up to
Five Million Dollars ($5,000,000) according to each Lender’s Term B Loan
Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter
referred to singly as a “Term B Loan”, and collectively as the “Term B Loans”;
each Term A Loan or Term B Loan is hereinafter referred to singly as a “Term
Loan” and the Term A Loans and the Term B Loans are hereinafter referred to
collectively as the “Term Loans”). Each Term B Loan shall be in minimum
increments of $2,500,000.00. After repayment, no Term B Loan may be re-borrowed.

 

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(b) Repayment. Borrower shall make monthly payments of interest only commencing
on the second (2nd) Payment Date following the Funding Date of each Term Loan,
and continuing on the Payment Date of each successive month thereafter through
and including the Payment Date immediately preceding the Amortization Date.
Borrower agrees to pay, on the Funding Date of each Term Loan, any initial
partial monthly interest payment otherwise due for the period between the
Funding Date of such Term Loan and the first Payment Date after such Funding
Date. Commencing on the Amortization Date, and continuing on the Payment Date of
each month thereafter, Borrower shall make consecutive equal monthly payments of
principal and interest, in arrears, to each Lender, as calculated by Collateral
Agent (which calculations shall be deemed correct absent manifest error) based
upon: (1) the amount of such Lender’s Term Loan, (2) the effective rate of
interest, as determined in Section 2.3(a), and (3) a repayment schedule equal to
twenty-four (24) months after the Amortization Date. All unpaid principal and
accrued and unpaid interest with respect to each Term Loan is due and payable in
full on the Maturity Date. The Term Loans may only be prepaid in accordance with
Sections 2.2(c) and 2.2(d).

 

(c) Mandatory Prepayments. If an event described in Section 7.2(c)(ii) occurs or
the Term Loans are accelerated following the occurrence of an Event of Default,
Borrower shall immediately pay to Lenders, payable to each Lender in accordance
with its respective Pro Rata Share, an amount equal to the sum of: (i) all
outstanding principal of the Term Loans plus accrued and unpaid interest thereon
through the prepayment date, (ii) the Final Fee, plus (iii) all other
Obligations that are due and payable, including, without limitation, Lenders’
Expenses and interest at the Default Rate with respect to any past due amounts.
Notwithstanding (but without duplication with) the foregoing, on the Maturity
Date, if the Final Fee had not previously been paid in full in connection with
the prepayment of the Term Loans in full, Borrower shall pay to each Lender in
accordance with its respective Pro Rata Share, the Final Fee in respect of the
Term Loans.

 

(d) Permitted Prepayment of Term Loans. Borrower shall have the option to prepay
all, but not less than all, of the Term Loans advanced by the Lenders under this
Agreement, provided Borrower (i) provides written notice to Collateral Agent of
its election to prepay the Term Loans at least five (5) Business Days prior to
such prepayment, and (ii) pays to the Lenders on the date of such prepayment,
payable to each Lender in accordance with its respective Pro Rata Share, an
amount equal to the sum of (A) all outstanding principal of the Term Loans plus
accrued and unpaid interest thereon through the prepayment date, (B) the Final
Fee, plus (C) all other Obligations that are due and payable, including, without
limitation, Lenders’ Expenses and interest at the Default Rate with respect to
any past due amounts.

 

2.3 Payment of Interest on the Term Loans.

 

(a) Interest Rate. Subject to Section 2.3(b), the principal amount outstanding
under the Term Loans shall accrue interest at a fixed per annum rate equal to
12.50%, which interest shall be payable monthly in arrears in accordance with
Sections 2.2(b) and 2.3(e); provided that during the PIK Option Period, at the
election of Borrower (which shall be considered given on the Effective Date)
with no less than five (5) Business Day written notice to Collateral Agent prior
to the applicable Payment Date, 2.00% of such 12.50% may be payable in-kind by
adding an amount equal to such 2.00% of the outstanding principal amount to the
then outstanding principal balance on a monthly basis so as to increase the
outstanding principal balance of such Term Loan on each Payment Date and which
amount shall be payable when the principal amount of the Term Loans are payable
in accordance with Sections 2.2(b) and 2.3(e) and on which principal amount
interest shall be owed pursuant to Section 2.3(a).

 

Interest shall accrue on each Term Loan commencing on, and including, the
Funding Date of such Term Loan, and shall accrue on the principal amount
outstanding under such Term Loan until but excluding the day on which such Term
Loan is paid in full.

 

(b) Default Rate. Immediately upon the occurrence and during the continuance of
an Event of Default, Obligations shall accrue interest at a fixed per annum rate
equal to the rate that is otherwise applicable thereto plus five percentage
points (5.00%) (the “Default Rate”). Payment or acceptance of the increased
interest rate provided in this Section 2.3(b) is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Collateral Agent.

 

13

   

 

(c) 365-Day Year. Interest shall be computed on the basis of a three hundred
sixty-five (365) day year and the actual number of days elapsed.

 

(d) Debit of Accounts. Collateral Agent and each Lender may debit (or ACH) any
deposit accounts, maintained by Borrower or any of its Subsidiaries for
principal and interest payments or any other amounts Borrower owes the Lenders
under the Loan Documents when due. Any such debits (or ACH activity) shall not
constitute a set-off.

 

(e) Payments. Except as otherwise expressly provided herein, all payments by
Borrower under the Loan Documents shall be made to the respective Lender to
which such payments are owed, at such Lender’s office in immediately available
funds on the date specified herein. Unless otherwise provided, interest is
payable monthly on the Payment Date of each month. Payments of principal and/or
interest received after 12:00 noon Eastern time are considered received at the
opening of business on the next Business Day. When a payment is due on a day
that is not a Business Day, the payment is due the next Business Day and
additional fees or interest, as applicable, shall continue to accrue until paid.
All payments to be made by Borrower hereunder or under any other Loan Document,
including payments of principal and interest, and all fees, expenses,
indemnities and reimbursements, shall be made without set-off, recoupment or
counterclaim, in lawful money of the United States and in immediately available
funds.

 

2.4 Fees. Borrower shall pay to Collateral Agent:

 

(a) Facility Fee. The Facility Fee, which shall be due on the Effective Date, to
be shared between the Lenders in accordance with their respective Pro Rata
Shares;

 

(b) Final Fee. The Final Fee, when due hereunder, to be shared among the Lenders
in accordance with their respective Pro Rata Shares;

 

(c) Lenders’ Expenses. All Lenders’ Expenses (including reasonable attorneys’
fees and expenses for due diligence, investigation, documentation and
negotiation of this Agreement) incurred through and after the Effective Date,
when due.

 

2.5 Withholding. Payments received by the Collateral Agent or the Lenders from
Borrower hereunder will be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any governmental
authority (including any interest, additions to tax or penalties applicable
thereto). Specifically, however, if at any time any Governmental Authority,
applicable law, regulation or international agreement requires Borrower to make
any withholding or deduction from any such payment or other sum payable
hereunder to the Lenders, Borrower hereby covenants and agrees that the amount
due from Borrower with respect to such payment or other sum payable hereunder
will be increased to the extent necessary to ensure that, after the making of
such required withholding or deduction, each Lender receives a net sum equal to
the sum which it would have received had no withholding or deduction been
required and Borrower shall pay the full amount withheld or deducted to the
relevant Governmental Authority. Borrower will, upon request, furnish the
Lenders with proof reasonably satisfactory to the Lenders indicating that
Borrower has made such withholding payment; provided, however, that Borrower
need not make any withholding payment if the amount or validity of such
withholding payment is contested in good faith by appropriate and timely
proceedings and as to which payment in full is bonded or reserved against by
Borrower. The agreements and obligations of Borrower contained in this Section
2.5 shall survive the termination of this Agreement.

 

3. CONDITIONS OF LOANS

 

3.1 Conditions Precedent to Initial Term Loan. Each Lender’s obligation to make
a Term A Loan is subject to the condition precedent that Collateral Agent and
each Lender shall consent to or shall have received, in form and substance
reasonably satisfactory to Collateral Agent and each Lender, such documents, and
completion of such other matters, as Collateral Agent and each Lender may
reasonably deem necessary or appropriate, including, without limitation:

 

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(a) original Loan Documents, each duly executed by Borrower and each Subsidiary,
as applicable;

 

(b) a completed Perfection Certificate for Borrower and each of its
Subsidiaries;

 

(c) duly executed original Control Agreements with respect to any Collateral
Accounts maintained by Borrower or any of its Subsidiaries, other than an
Excluded Account;

 

(d) the Operating Documents and good standing certificates of Borrower and its
Subsidiaries certified by the Secretary of State (or equivalent agency) of
Borrower’s and such Subsidiaries’ jurisdiction of organization or formation and
each jurisdiction in which Borrower and each Subsidiary is qualified to conduct
business, each as of a date no earlier than thirty (30) days prior to the
Effective Date;

 

(e) a copy of resolutions of the governing body for Borrower evidencing approval
of the Term Loans and other transactions evidenced by the Loan Documents;

 

(f) duly executed original officer’s certificates for Borrower and each
Subsidiary that is a party to the Loan Documents certifying as to (i) the
incumbency of each Responsible Officer executing each Loan Document and (ii) the
documents delivered pursuant to Section 3.1(d) and 3.1(e), in a form reasonably
acceptable to Collateral Agent and the Lenders;

 

(g) certified copies, dated as of date no earlier than thirty (30) days prior to
the Effective Date, of financing statement searches, as Collateral Agent shall
request, accompanied by written evidence (including any UCC termination
statements) that the Liens indicated in any such financing statements either
constitute Permitted Liens or have been or, in connection with the initial Term
Loan, will be terminated or released;

 

(h) a duly executed legal opinion of counsel to Borrower dated as of the
Effective Date;

 

(i) evidence satisfactory to Collateral Agent and the Lenders that the insurance
policies required by Section 6.5 hereof are in full force and effect, together
with appropriate evidence showing loss payable and/or additional insured clauses
or endorsements in favor of Collateral Agent, for the ratable benefit of the
Lenders;

 

(j) a copy of any applicable Investors Rights Agreement and any amendments
thereto;

 

(k) [Reserved]

 

(l) payment of the Facility Fee and Lenders’ Expenses then due as specified in
Section 2.4 hereof.

 

3.2 Conditions Precedent to all Term Loans. The obligation of each Lender to
extend each Term Loan, including the initial Term Loan, is subject to the
following conditions precedent:

 

(a) receipt by Collateral Agent of an executed Loan Payment Request Form in the
form of Exhibit C attached hereto;

 

(b) the representations and warranties in Section 5 hereof shall be true,
accurate and complete in all material respects on the Funding Date of each Term
Loan; provided, however, that such materiality qualifier shall not be applicable
to any representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no
Event of Default shall have occurred and be continuing or result from the
funding of such Term Loan;

 

15

   

 

(c) in such Lender’s reasonable discretion, there has not been any Material
Adverse Change;

 

(d) no Event of Default or event that with the passage of time would result in
an Event of Default, shall exist; and

 

(e) payment of the fees and Lenders’ Expenses then due as specified in Section
2.5 hereof.

 

3.3 Covenant to Deliver. Borrower agrees to deliver to Collateral Agent and the
Lenders each item required to be delivered to Collateral Agent under this
Agreement as a condition precedent to any Term Loan. Borrower expressly agrees
that a Term Loan made prior to the receipt by Collateral Agent or any Lender of
any such item shall not constitute a waiver by Collateral Agent or any Lender of
Borrower’s obligation to deliver such item, and any such Term Loan in the
absence of a required item shall be made in each Lender’s sole discretion.

 

3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other
applicable conditions to the making of a Term Loan set forth in this Agreement,
to obtain a Term Loan (other than the Term Loan funded on the Effective Date),
Borrower shall notify the Lenders (which notice shall be irrevocable) by
electronic mail, facsimile, or telephone by 12:00 noon New York City time twelve
(12) Business Days prior to the date the Term Loan is to be made. Together with
any such electronic, facsimile or telephonic notification, Borrower shall
deliver to Collateral Agent by electronic mail or facsimile a completed Loan
Payment Request Form executed by a Responsible Officer or his or her designee.
The Collateral Agent may rely on any telephone notice given by a person whom
Collateral Agent reasonably believes is a Responsible Officer or designee.

 

3.5 Post-Closing Obligations. Notwithstanding any provision herein or in any
other Loan Document to the contrary, to the extent not actually delivered on or
prior to the Effective Date, the Borrowers shall, and shall cause each
applicable Subsidiary to:

 

(a) no later June 10, 2015 (or such later date as Collateral Agent may agree)
deliver a landlord’s consent executed in favor of Collateral Agent in respect of
all of Borrower’s and each Subsidiaries’ leased locations;

 

(b) no later than June 10, 2015 (or such later date as Collateral Agent may
agree) deliver a bailee waiver executed in favor of Collateral Agent in respect
of each third party bailee where Borrower or any Subsidiary maintains Collateral
having a book value in excess of Two Hundred Fifty Thousand Dollars
($250,000.00); and

 

(c) no later than May 26, 2015 (or such later date as Collateral Agent may
agree) deliver to Collateral Agent an executed Control Agreement among Borrower,
South Coast Specialty Compounding, Inc., Pharmacy Creations, L.L.C., MUFG Union
Bank, N.A. and Collateral Agent.

 

4. CREATION OF SECURITY INTEREST

 

4.1 Grant of Security Interest. Borrower hereby grants Collateral Agent, for the
ratable benefit of the Lenders, to secure the payment and performance in full of
all of the Obligations, a continuing security interest in, and pledges to
Collateral Agent, for the ratable benefit of the Lenders, the Collateral,
wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof. If Borrower shall acquire a commercial tort claim
(as defined in the Code), Borrower shall grant to Collateral Agent, for the
ratable benefit of the Lenders, a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be in form
and substance reasonably satisfactory to Collateral Agent.

 

If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall
continue until the Obligations (other than inchoate contingent obligations) are
repaid in full in cash. Upon payment in full in cash of the Obligations (other
than inchoate contingent obligations) and at such time as the Lenders’
obligation to extend Term Loans has terminated, Collateral Agent shall, at the
sole cost and expense of Borrower, release its Liens in the Collateral and all
rights therein shall revert to Borrower.

 

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4.2 Authorization to File Financing Statements. Borrower hereby authorizes
Collateral Agent to file financing statements or take any other action required
to perfect Collateral Agent’s security interests in the Collateral, without
notice to Borrower, with all appropriate jurisdictions to perfect or protect
Collateral Agent’s interest or rights under the Loan Documents.

 

5. REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants to Collateral Agent and the Lenders as follows:

 

5.1 Due Organization, Authorization: Power and Authority. Borrower and each of
its Subsidiaries is duly existing and in good standing as a Registered
Organization in its jurisdictions of organization or formation and Borrower and
each of its Subsidiaries is qualified and licensed to do business and is in good
standing in any jurisdiction in which the conduct of its businesses or its
ownership of property requires that it be qualified except where the failure to
do so could not reasonably be expected to have a Material Adverse Change. In
connection with this Agreement, Borrower and each of its Subsidiaries has
delivered to Collateral Agent a completed perfection certificate and any updates
or supplements thereto on or before the Effective Date (each a “Perfection
Certificate” and collectively, the “Perfection Certificates”). Borrower
represents and warrants that all the information set forth on the Perfection
Certificates pertaining to Borrower and each of its Subsidiaries is accurate and
complete.

 

The execution, delivery and performance by Borrower and each of its Subsidiaries
of the Loan Documents to which it is a party have been duly authorized, and do
not (i) conflict with any of Borrower’s or such Subsidiaries’ organizational
documents, including its respective Operating Documents, (ii) contravene,
conflict with, constitute a default under or violate any material Requirement of
Law applicable thereto, (iii) contravene, conflict or violate any applicable
order, writ, judgment, injunction, decree, determination or award of any
Governmental Authority by which Borrower or such Subsidiary, or any of their
property or assets may be bound or affected, (iv) require any action by, filing,
registration, or qualification with, or Governmental Approval from, any
Governmental Authority (except such Governmental Approvals which have already
been obtained and are in full force and effect) or are being obtained pursuant
to Section 6.1(b), or (v) constitute an event of default under any Material
Agreement by which Borrower or any of such Subsidiaries, or their respective
properties, is bound. Neither Borrower nor any of its Subsidiaries is in default
under any agreement to which it is a party or by which it or any of its assets
is bound in which such default could reasonably be expected to have a Material
Adverse Change.

 

5.2 Collateral.

 

(a) Borrower and each its Subsidiaries have good title to, have rights in, and
the power to transfer each item of the Collateral upon which it purports to
grant a Lien under the Loan Documents, free and clear of any and all Liens
except Permitted Liens, and neither Borrower nor any of its Subsidiaries have
any Deposit Accounts, Securities Accounts, Commodity Accounts or other
investment accounts other than the Collateral Accounts or the other investment
accounts, if any, described in the Perfection Certificates delivered to
Collateral Agent in connection herewith with respect of which Borrower or such
Subsidiary has given Collateral Agent notice and taken such actions as are
necessary to give Collateral Agent a perfected security interest therein (other
than Excluded Accounts). The Accounts are bona fide, existing obligations of the
Account Debtors.

 

(b) The security interest granted herein is and shall at all times continue to
be a first priority perfected security interest in the Collateral, subject only
to Permitted Liens that are permitted by the terms of this Agreement to have
priority to Collateral Agent’s Lien.

 

(c) On the Effective Date, and except as disclosed on the Perfection Certificate
(i) the Collateral is not in the possession of any third party bailee, and (ii)
no such third party bailee possesses components of the Collateral in excess of
Fifty Thousand Dollars ($50,000.00).

 

(d) All Inventory and Equipment is in all material respects of good and
marketable quality, free from material defects.

 

(e) Borrower and each of its Subsidiaries is the sole owner of the Intellectual
Property each respectively purports to own, free and clear of all Liens other
than Permitted Liens. Except as noted on the Perfection Certificates, neither
Borrower nor any of its Subsidiaries is a party to, nor is bound by, any
material license or other Material Agreement.

 

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5.3 Litigation. Except as disclosed on the Perfection Certificate, there are no
actions, suits, investigations, or proceedings pending or, to the Knowledge of
the Responsible Officers, threatened in writing by or against Borrower or any of
its Subsidiaries involving more than Two Hundred Fifty Thousand Dollars
($250,000.00) or a claim for infringement of any intellectual property. Except
as disclosed on the Perfection Certificate, there are no actions, suits,
investigations or proceedings pending or, to the Knowledge of the Responsible
Officers, threatened in writing by or against Borrower or any Subsidiaries
involving challenges to the validity of the Intellectual Property.

 

5.4 No Material Adverse Change; Financial Statements. All consolidated financial
statements for Borrower and its Subsidiaries, delivered to Collateral Agent
fairly present, in conformity with GAAP, in all material respects the
consolidated financial condition of Borrower and its Subsidiaries, and the
consolidated results of operations of Borrower and its Subsidiaries. Since
December 31, 2014, there has not been a Material Adverse Change.

 

5.5 Solvency. Borrower and each of its Subsidiaries, when taken as a whole, is
Solvent.

 

5.6 Regulatory Compliance. Neither Borrower nor any of its Subsidiaries is an
“investment company” or a company “controlled” by an “investment company” under
the Investment Company Act of 1940, as amended. Neither Borrower nor any of its
Subsidiaries is engaged as one of its important activities in extending credit
for margin stock (under Regulations X, T and U of the Federal Reserve Board of
Governors). Borrower and each of its Subsidiaries has complied in all material
respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of
its Subsidiaries is a “holding company” or an “affiliate” of a “holding company”
or a “subsidiary company” of a “holding company” as each term is defined and
used in the Public Utility Holding Company Act of 2005. Neither Borrower nor any
of its Subsidiaries has violated any laws, ordinances or rules, the violation of
which could reasonably be expected to have a Material Adverse Change. Neither
Borrower’s nor any of its Subsidiaries’ properties or assets has been used by
Borrower or such Subsidiary or, to Borrower’s Knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than in material compliance with applicable laws, except where such
failure to be in material compliance could not reasonably be expected to have a
Material Adverse Change. Borrower and each of its Subsidiaries has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all Governmental Authorities that are necessary
to continue their respective businesses as currently conducted in the ordinary
course of business.

 

None of Borrower, any of its Subsidiaries, or any of Borrower’s or its
Subsidiaries’ Affiliates or any of their respective agents acting or benefiting
in any capacity in connection with the transactions contemplated by this
Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or
conspiring to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding or attempts to violate, any of the prohibitions
set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person. None of
Borrower, any of its Subsidiaries, or to the Knowledge of Borrower and any of
their Affiliates or agents, acting or benefiting in any capacity in connection
with the transactions contemplated by this Agreement, (x) conducts any business
or engages in making or receiving any contribution of funds, goods or services
to or for the benefit of any Blocked Person, or (y) deals in, or otherwise
engages in any transaction relating to, any property or interest in property
blocked pursuant to Executive Order No. 13224, any similar executive order or
other Anti-Terrorism Law.

 

5.7 Investments. Neither Borrower nor any of its Subsidiaries owns any stock,
shares, partnership interests or other equity securities except for Permitted
Investments.

 

5.8 Tax Returns and Payments; Pension Contributions. Borrower and each of its
Subsidiaries has timely filed all required tax returns and reports, and Borrower
and each of its Subsidiaries, has timely paid all foreign, federal, state, and
local taxes, assessments, deposits and contributions owed by Borrower and such
Subsidiaries in an amount greater than Fifty Thousand Dollars ($50,000), in all
jurisdictions in which Borrower or any such Subsidiary is subject to taxes,
including the United States, unless such taxes are being contested in accordance
with the next sentence. Borrower and each of its Subsidiaries, may defer payment
of any contested taxes, provided that Borrower or such Subsidiary, in good faith
contests its obligation to pay the taxes by appropriate proceedings promptly and
diligently instituted and conducted. Neither Borrower nor any of its
Subsidiaries is aware of any claims or adjustments proposed for any of
Borrower’s or such Subsidiaries’, prior tax years which could result in
additional taxes becoming due and payable by Borrower or its Subsidiaries in an
amount greater than Fifty Thousand ($50,000) Dollars. Borrower and each of its
Subsidiaries have paid all amounts necessary to fund all present pension, profit
sharing and deferred compensation plans in accordance with their terms, and
neither Borrower nor any of its Subsidiaries have, withdrawn from participation
in, and have not permitted partial or complete termination of, or permitted the
occurrence of any other event with respect to, any such plan which could
reasonably be expected to result in any material liability of Borrower or its
Subsidiaries, including any material liability to the Pension Benefit Guaranty
Corporation or its successors or any other Governmental Authority.

 

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5.9 Use of Proceeds. Borrower shall use the proceeds of the Term Loans solely as
working capital and to fund its general business requirements in accordance with
the provisions of this Agreement, and not for personal, family, household or
agricultural purposes.

 

5.10 Full Disclosure. No written representation, warranty or other statement of
Borrower or any of its Subsidiaries in any certificate or written statement
given to Collateral Agent or any Lender, as of the date such representation,
warranty, or other statement was made, taken together with all such written
certificates and written statements given to Collateral Agent or any Lender,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized that projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions are not
viewed as facts and that actual results during the period or periods covered by
such projections and forecasts may differ from the projected or forecasted
results).

 

6. AFFIRMATIVE COVENANTS

 

Borrower shall, and shall cause each of its Subsidiaries to, do all of the
following:

 

6.1 Government Compliance.

 

(a) Maintain its and all its Subsidiaries’ legal existence and good standing in
their respective jurisdictions of organization and maintain qualification in
each jurisdiction in which the failure to so qualify could reasonably be
expected to have a Material Adverse Change. Comply with all laws, ordinances and
regulations to which Borrower or any of its Subsidiaries is subject, the
noncompliance with which could reasonably be expected to have a Material Adverse
Change.

 

(b) Obtain and keep in full force and effect, all of the material Governmental
Approvals necessary for the performance by Borrower and its Subsidiaries of
their respective businesses and obligations under the Loan Documents and the
grant of a security interest to Collateral Agent for the ratable benefit of the
Lenders, in all of the Collateral.

 

6.2 Financial Statements, Reports, Certificates; Notices.

 

(a) Deliver to Collateral Agent and each Lender:

 

(i) as soon as available, but no later than forty-five (45) days after the last
day of each quarter, a company prepared consolidated and consolidating balance
sheet, income statement and cash flow statement covering the consolidated
operations of Borrower and its Subsidiaries for such month certified by a
Responsible Officer and in a form reasonably acceptable to Collateral Agent;

 

(ii) as soon as available, but no later than ninety (90) days after the last day
of Borrower’s fiscal year or within five (5) days of filing with the Securities
and Exchange Commission, audited consolidated financial statements prepared
under GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm
acceptable to Collateral Agent in its reasonable discretion;

 

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(iii) as soon as available after approval thereof by Borrower’s board of
directors, but no later than the earlier of ten (10) days after such approval
and sixty (60) days after the last day of Borrower’s fiscal year, Borrower’s
annual (A) financial projections and (B) budget, in each case, for the entire
current fiscal year as approved by Borrower’s board of directors; provided that,
any revisions to such projections and/or budget approved by Borrower’s board of
directors shall be delivered to Collateral Agent and the Lenders no later than
seven (7) days after such approval);

 

(iv) within five (5) days of delivery, copies of all non-ministerial statements,
reports and notices made available to Borrower’s board of directors, security
holders or holders of Subordinated Debt;

 

(v) within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission;

 

(vi) as soon as available, but no later than thirty (30) days after the last day
of each month, copies of the month-end account statements for each Collateral
Account maintained by Borrower or its Subsidiaries (other than an Excluded
Account), which statements may be provided to Collateral Agent and each Lender
by Borrower or directly from the applicable institution(s);

 

(vii) prompt delivery of (and in any event within five (5) days after the same
are sent or received) copies of all material correspondence, reports, documents
and other filings with any Governmental Authority that could reasonably be
expected to have a material adverse effect on any of the Governmental Approvals
material to Borrower’s business or otherwise could reasonably be expected to
have a Material Adverse Change;

 

(viii) prompt notice of any event that (A) could reasonably be expected to
materially and adversely affect the Borrower’s Intellectual Property and (B)
could reasonably be expected to result in a Material Adverse Change;

 

(ix) written notice at least (10) days’ prior to Borrower’s creation of a New
Subsidiary in accordance with the terms of Section 6.10);

 

(x) written notice at least (30) days’ prior to Borrower’s (A) adding any new
offices or business locations, including warehouses (unless such new offices or
business locations contain less than Two Hundred Fifty Thousand Dollars
($250,000.00) in assets or property of Borrower or any of its Subsidiaries), (B)
changing its jurisdiction of organization, (C) changing its organizational
structure or type, (D) change its legal name, (E) changing any organizational
number (if any) assigned by its jurisdiction of organization, or (F) registering
or filing any Intellectual Property;

 

(xi) upon Borrower becoming aware of the existence of any Event of Default or
event which, with the giving of notice or passage of time, or both, would
constitute an Event of Default, prompt (and in any event within three (3)
Business Days) written notice of such occurrence, which such notice shall
include a reasonably detailed description of such Event of Default or event
which, with the giving of notice or passage of time, or both, would constitute
an Event of Default;

 

(xii) immediate notice if Borrower or such Subsidiary has Knowledge that
Borrower, or any Subsidiary or Affiliate of Borrower, is listed on the OFAC
Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on,
or (d) is arraigned and held over on charges involving money laundering or
predicate crimes to money laundering;

 

(xiii) notice of any commercial tort claim with an expected value in excess of
Fifty Thousand Dollars ($50,000) and of the general details thereof;

 

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(xiv) if Borrower or any of its Subsidiaries is not now a Registered
Organization but later becomes one, written notice of such occurrence and
information regarding such Person’s organizational identification number within
seven (7) Business Days of receiving such organizational identification number;
and

 

(xv) other information as reasonably requested by Collateral Agent or any
Lender.

 

Notwithstanding the foregoing, documents required to be delivered pursuant to
the terms hereof (to the extent any such documents are included in materials
otherwise filed with the Securities and Exchange Commission) may be delivered
electronically and if so delivered, shall be deemed to have been delivered on
the date on which Borrower posts such documents, or provides a link thereto, on
Borrower’s website on the internet at Borrower’s website address.

 

(b) Concurrently with the delivery of the financial statements specified in
Section 6.2(a)(i) above but no later than thirty (30) days after the last day of
each quarter, deliver to Collateral Agent and each Lender:

 

(i) a duly completed Compliance Certificate signed by a Responsible Officer;

 

(ii) an updated Perfection Certificate to reflect any amendments, modifications
and updates to certain information in the Perfection Certificate after the
Effective Date to the extent such amendments, modifications and updates are
permitted by one or more specific provisions in this Agreement;

 

(iii) copies of any material Governmental Approvals obtained by Borrower or any
of its Subsidiaries;

(iv) written notice of the commencement of, and any material development in, the
proceedings contemplated by Section 5.8 hereof;

 

(v) written notice of any litigation or governmental proceedings pending or
threatened (in writing) against Borrower or any of its Subsidiaries, which could
reasonably be expected to result in damages or costs to Borrower or any of its
Subsidiaries of Two Hundred Fifty Thousand Dollars ($250,000.00); and

 

(vi) written notice of all returns, recoveries, disputes and claims regarding
Inventory that involve more than Two Hundred Fifty Thousand Dollars
($250,000.00) individually or in the aggregate in any calendar year.

 

(c) Keep proper, complete and true books of record and account in accordance
with GAAP in all material respects. Borrower shall, and shall cause each of its
Subsidiaries to, allow, at the sole cost of Borrower, Collateral Agent or any
Lender, during regular business hours upon reasonable prior notice (provided
that no notice shall be required when an Event of Default has occurred and is
continuing), to visit and inspect any of its properties, to examine and make
abstracts or copies from any of its books and records, and to conduct a
collateral audit and analysis of its operations and the Collateral. Such audits
shall be conducted no more often than twice every year unless (and more
frequently if) an Event of Default has occurred and is continuing.
Notwithstanding the foregoing, upon request of any Lender, Borrower agrees to
permit such Lender to communicate with Borrower’s accounting firm with respect
to the consolidated financial statements delivered hereunder.

 

6.3 Inventory; Returns. Keep all Inventory in good and marketable condition,
free from material defects. Returns and allowances between Borrower, or any of
its Subsidiaries, and their respective Account Debtors shall follow Borrower’s,
or such Subsidiary’s, customary practices as they exist at the Effective Date.

 

6.4 Taxes; Pensions. Timely file and require each of its Subsidiaries to timely
file, all required tax returns and reports in an aggregate amount greater than
Three Hundred Fifty Thousand Dollars ($350,000) and timely pay, and require each
of its Subsidiaries to timely file, all foreign, federal, state, and local
taxes, assessments, deposits and contributions owed by Borrower or its
Subsidiaries in an aggregate amount greater than Three Hundred Fifty Thousand
Dollars ($350,000), except as otherwise permitted pursuant to the terms of
Section 5.8 hereof, and shall deliver to Collateral Agent and each Lender, on
demand, appropriate certificates attesting to such payments, and pay all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with the terms of such plans.

 

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6.5 Insurance. Keep Borrower’s and its Subsidiaries’ business and the Collateral
insured for risks and in amounts standard for companies in Borrower’s and its
Subsidiaries’ industry and location and as Collateral Agent may reasonably
request, including, but not limited to, D&O insurance reasonably satisfactory to
Collateral Agent. Insurance policies shall be in a form, with companies, and in
amounts that are reasonably satisfactory to Collateral Agent and Lenders. All
property policies shall have a lender’s loss payable endorsement showing
Collateral Agent as lender loss payee and waive subrogation against Collateral
Agent, and all liability policies shall show, or have endorsements showing,
Collateral Agent, as additional insured. The Collateral Agent shall be named as
lender loss payee and/or additional insured with respect to any such insurance
providing coverage in respect of any Collateral, and each provider of any such
insurance shall agree, by endorsement upon the policy or policies issued by it
or by independent instruments furnished to the Collateral Agent, that it will
give the Collateral Agent thirty (30) days’ prior written notice before any such
policy or policies shall be materially altered or canceled (other than
cancellation for non-payment of premiums, for which ten (10) days’ prior written
notice shall be required). At Collateral Agent’s request, Borrower shall deliver
certified copies of policies and evidence of all premium payments. Proceeds
payable under any policy shall, at Collateral Agent’s option, be payable to
Collateral Agent, for the ratable benefit of the Lenders, on account of the
Obligations. Notwithstanding the foregoing, (a) so long as no Event of Default
has occurred and is continuing, Borrower shall have the option of applying the
proceeds of any casualty policy within 90 days of receipt thereof up to Two
Hundred Fifty Thousand Dollars ($250,000.00) with respect to any loss, but not
exceeding Two Hundred Fifty Thousand Dollars ($250,000.00), in the aggregate for
all losses under all casualty policies in any one year, toward the replacement
or repair of destroyed or damaged property; provided that any such replaced or
repaired property (i) shall be of equal or like value as the replaced or
repaired Collateral and (ii) shall be deemed Collateral in which Collateral
Agent has been granted a first priority security interest, and (b) after the
occurrence and during the continuance of an Event of Default, all proceeds
payable under such casualty policy shall, at the option of Collateral Agent, be
payable to Collateral Agent, for the ratable benefit of the Lenders, on account
of the Obligations. If Borrower or any of its Subsidiaries fails to obtain
insurance as required under this Section 6.5 or to pay any amount or furnish any
required proof of payment to third persons, Collateral Agent and/or any Lender
may make (but has no obligation to do so), at Borrower’s expense, all or part of
such payment or obtain such insurance policies required in this Section 6.5, and
take any action under the policies Collateral Agent or such Lender deems
prudent.

 

6.6 Operating Accounts.

 

(a) Borrower shall provide Collateral Agent ten (10) days’ prior written notice
before Borrower or any of its Subsidiaries establishes any Collateral Account
(other than an Excluded Account). In addition, for each Collateral Account
(other than an Excluded Account) that Borrower or any of its Subsidiaries, at
any time maintains, Borrower or such Subsidiary shall cause the applicable bank
or financial institution at or with which such Collateral Account is maintained
to execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Collateral Agent’s Lien in such
Collateral Account in accordance with the terms hereunder prior to the
establishment of such Collateral Account, which Control Agreement may not be
terminated without prior written consent of Collateral Agent. The provisions of
the previous sentence shall not apply to Excluded Accounts.

 

(b) Neither Borrower nor any of its Subsidiaries shall maintain any Collateral
Accounts except Collateral Accounts maintained in accordance with Section 6.6.

 

6.7 Protection of Intellectual Property Rights. Borrower and each of its
Subsidiaries shall: (a) protect, defend and maintain the validity and
enforceability of its Intellectual Property that is material to its business;
(b) promptly advise Collateral Agent in writing of a challenge to the validity,
or material infringement by a third party of its Intellectual Property; and (c)
not allow any Intellectual Property material to its business to be abandoned,
forfeited or dedicated to the public without Collateral Agent’s prior written
consent.

 

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6.8 Litigation Cooperation. Commencing on the Effective Date and continuing
through the termination of this Agreement, make available to Collateral Agent
and the Lenders, without expense to Collateral Agent or the Lenders, Borrower
and each of Borrower’s officers, employees and agents and Borrower’s Books, to
the extent that Collateral Agent or any Lender may reasonably deem them
necessary to prosecute or defend any third-party suit or proceeding instituted
by or against Collateral Agent or any Lender with respect to any Collateral or
relating to Borrower.

 

6.9 Landlord Waivers; Bailee Waivers. In the event that Borrower or any of its
Subsidiaries, after the Effective Date, intends to add any new offices or
business locations, including warehouses, or otherwise store any portion of the
Collateral with, or deliver any portion of the Collateral to, a bailee, in each
case pursuant to Section 7.2, then Borrower or such Subsidiary will first
receive the written consent of Collateral Agent and, in the event that the
Collateral at any new location is valued in excess of Two Hundred Fifty Thousand
Dollars ($250,000.00) in the aggregate, at Collateral Agent’s election, such
bailee or landlord, as applicable, must execute and deliver a bailee waiver or
landlord waiver, as applicable, in form and substance reasonably satisfactory to
Collateral Agent prior to the addition of any new offices or business locations,
or any such storage with or delivery to any such bailee, as the case may be.

 

6.10 Creation/Acquisition of Subsidiaries. In the event any Borrower or any
Subsidiary of any Borrower creates or acquires any Subsidiary after the
Effective Date, Borrower or such Subsidiary shall promptly notify Bank of such
creation or acquisition, and Borrower or such Subsidiary shall take all actions
reasonably requested by Bank to achieve any of the following with respect to
such “New Subsidiary” (defined as a Subsidiary formed after the date hereof
during the term of this Agreement): (i) to cause such New Subsidiary to become
either a co-Borrower hereunder, if such New Subsidiary is organized under the
laws of the United States, or a secured guarantor with respect to the
Obligations; and (ii) to grant and pledge to Collateral Agent a perfected
security interest in 100% of the stock, units or other evidence of ownership
held by Borrower or its Subsidiaries of any such New Subsidiary which is
organized under the laws of the United States, and 65% of the stock, units or
other evidence of ownership held by Borrower or its Subsidiaries of any such New
Subsidiary which is not organized under the laws of the United States.

 

6.11 Further Assurances. Execute any further instruments and take further action
as Collateral Agent or any Lender reasonably requests to perfect or continue
Collateral Agent’s Lien in the Collateral or to effect the purposes of this
Agreement, including without limitation, permit Collateral Agent or any Lender
to discuss Borrower’s financial condition with Borrower’s accountants.

 

7. NEGATIVE COVENANTS

 

Borrower shall not, and shall not permit any of its Subsidiaries to, do any of
the following without the prior written consent of the Required Lenders:

 

7.1 Dispositions. Convey, sell, lease, transfer, assign, dispose of
(collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property (including Intellectual Property),
except for Transfers (a) of Inventory in the ordinary course of business; (b) of
worn-out or obsolete Equipment; and (c) Permitted Liens, Permitted Investments
and Permitted Licenses.

 

7.2 Changes in Business, Management, Ownership, or Business Locations. (a)
Engage in or permit any of its Subsidiaries to engage in any business other than
the businesses engaged in by Borrower as of the Effective Date or reasonably
related thereto; (b) liquidate or dissolve; or (c) (i) any Key Person shall
cease to be actively engaged in the management of Borrower unless written notice
thereof is provided to Collateral Agent and each Lender within ten (10) days of
such, or (ii) enter into any transaction or series of related transactions in
which (A) the stockholders of Borrower who were not stockholders immediately
prior to the first such transaction own more than 35% of the voting stock of
Borrower immediately after giving effect to such transaction or related series
of such transactions and (B) Borrower ceases to own 100% of the ownership
interests of a Subsidiary of Borrower. Borrower shall not, without at least
thirty (30) days’ prior written notice to Collateral Agent: (A) add any new
offices or business locations, including warehouses (unless such new offices or
business locations contain less than Two Hundred Fifty Thousand Dollars
($250,000.00) in assets or property of Borrower or any of its Subsidiaries); (B)
change its jurisdiction of organization, (C) change its organizational structure
or type, (D) change its legal name, or (E) change any organizational number (if
any) assigned by its jurisdiction of organization.

 

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7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock, shares or property of another Person. A Subsidiary may merge or
consolidate into another Subsidiary (provided such surviving Subsidiary is a
“co-Borrower” hereunder or has provided a secured Guaranty of Borrower’s
Obligations hereunder) or with (or into) Borrower provided Borrower is the
surviving legal entity, and as long as no Event of Default is occurring prior
thereto or arises as a result therefrom.

 

7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or
permit any Subsidiary to do so, other than Permitted Indebtedness.

 

7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein (except for Permitted Liens), or enter into any
agreement, document, instrument or other arrangement (except with or in favor of
Collateral Agent, for the ratable benefit of the Lenders) with any Person which
directly or indirectly prohibits or has the effect of prohibiting Borrower, or
any of its Subsidiaries, from assigning, mortgaging, pledging, granting a
security interest in or upon, or encumbering any of Borrower’s or such
Subsidiary’s Intellectual Property, except as is otherwise permitted in Section
7.1 hereof and the definition of “Permitted Liens”.

 

7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except
pursuant to the terms of Section 6.6 hereof.

 

7.7 Restricted Payments. Pay any dividends (other than dividends payable solely
in capital stock) or make any distribution or payment in respect of or redeem,
retire or purchase any capital stock (other than (i) repurchases pursuant to the
terms of employee stock purchase plans, employee restricted stock agreements,
stockholder rights plans, director or consultant stock option plans, or similar
plans, provided in each case that such repurchases and payments do not exceed
Three Hundred Thousand Dollars ($300,000.00) in the aggregate per fiscal year
and (ii) payments related to share withholdings for individual taxes related to
vested restricted stock units (RSUs), options and other equity grants made to
employees, as permitted under the Borrower’s 2007 Incentive Stock and Awards
Plan, as amended as of the date hereof, and required under certain of the
Borrower’s equity grants and employment agreements, in each case as in effect as
of the date hereof, and provided that in each case such payments or
distributions (A) shall only be made with the proceeds of a simultaneous
(subject to customary provisions in relation to the receipt of funds) equity or
Subordinated Debt offering and (B) not permit the company’s net cash position
(i.e. cash on balance sheet) to change in connection with such distributions or
payments.

 

7.8 Investments. Directly or indirectly make any Investment other than Permitted
Investments, or permit any of its Subsidiaries to do so.

 

7.9 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower or any of its
Subsidiaries, except for (a) transactions that are in the ordinary course of
Borrower’s or such Subsidiary’s business, upon fair and reasonable terms that
are no less favorable to Borrower or such Subsidiary than would be obtained in
an arm’s length transaction with a non-affiliated Person, and (b) Subordinated
Debt or equity investments by Borrower’s investors in Borrower or its
Subsidiaries.

 

7.10 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt,
except under the terms of the subordination, intercreditor, or other similar
agreement to which such Subordinated Debt is subject, or (b) amend any provision
in any document relating to the Subordinated Debt which would increase the
amount thereof or adversely affect the subordination thereof to Obligations owed
to the Lenders without the consent of the Lenders, which consent shall not be
unreasonably withheld, delayed or conditioned.

 

7.11 Compliance. Become an “investment company” or a company controlled by an
“investment company”, under the Investment Company Act of 1940, as amended, or
undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Term Loan for that purpose;
fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur, if the violation
could reasonably be expected to have a Material Adverse Change; fail to comply
with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a Material
Adverse Change, or permit any of its Subsidiaries to do so; withdraw or permit
any Subsidiary to withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
present pension, profit sharing and deferred compensation plan which could
reasonably be expected to result in any material liability of Borrower or any of
its Subsidiaries, including any material liability to the Pension Benefit
Guaranty Corporation or its successors or any other Governmental Authority.

 

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7.12 Compliance with Anti-Terrorism Laws. Neither Borrower nor any of its
Subsidiaries shall, nor shall Borrower or any of its Subsidiaries permit any
Affiliate to, directly or indirectly, knowingly enter into any documents,
instruments, agreements or contracts with any Person listed on the OFAC Lists.
Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of
its Subsidiaries, permit any Affiliate to, directly or indirectly, (i) conduct
any business or engage in any transaction or dealing with any Blocked Person,
including, without limitation, the making or receiving of any contribution of
funds, goods or services to or for the benefit of any Blocked Person, (ii) deal
in, or otherwise engage in any transaction relating to, any property or
interests in property blocked pursuant to Executive Order No. 13224 or any
similar executive order or other Anti-Terrorism Law, or (iii) engage in or
conspire to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in Executive Order No. 13224 or other Anti-Terrorism Law.

 

7.13 Material Agreements. Neither Borrower nor any of its Subsidiaries shall,
without the consent of Collateral Agent (which consent shall not be unreasonably
withheld, conditioned or otherwise delayed), (a) enter into a Material Agreement
or (b) materially amend a Material Agreement, in each case if such action would
materially and adversely affect the interests of the Lenders hereunder.

 

8. EVENTS OF DEFAULT

 

Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:

 

8.1 Payment Default. Borrower fails to (a) make any payment of principal on any
Term Loan on its due date, or (b) pay any interest or any other Obligations
within three (3) Business Days after such Obligations are due and payable (which
three (3) Business Day grace period shall not apply to payments due on the
Maturity Date or the date or acceleration pursuant to Section 9.1 (a) hereof);

 

8.2 Covenant Default.

 

(a) Borrower or any of its Subsidiaries fails or neglects to perform any
obligation in Sections 6.2 (Financial Statements, Reports, Certificates), 6.4
(Taxes), 6.5 (Insurance), 6.6 (Operating Accounts), 6.7 (Protection of
Intellectual Property Rights), 6.9 (Landlord Waivers; Bailee Waivers), 6.10
(Creation/Acquisition of Subsidiaries) or Borrower violates any provision in
Section 7; or

 

(b) Borrower, or any of its Subsidiaries, fails or neglects to perform, keep, or
observe any other term, provision, condition, covenant or agreement contained in
this Agreement or any Loan Documents, and as to any default (other than those
specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within
fifteen (15) days after the occurrence thereof; provided, however, that if the
default cannot by its nature be cured within the fifteen (15) day period or
cannot after diligent attempts by Borrower be cured within such fifteen (15) day
period, and such default is likely to be cured within a reasonable time, then
Borrower shall have an additional period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to cure the default shall not be deemed an Event of
Default (but no Term Loans shall be made during such cure period). For purposes
of this Section 8.2(b) only, “Subsidiaries” shall exclude any single Subsidiary
or group of Subsidiaries where such Subsidiary’s revenue or such group of
Subsidiaries’ revenue (in each case in accordance with GAAP) or assets is less
than 5.0% of the aggregate (A) revenue or (B) assets, of the Borrower and all
its Subsidiaries, in each case measured on a consolidated basis for the Borrower
and all its Subsidiaries.

 

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8.3 Material Adverse Change. A Material Adverse Change has occurred;

 

8.4 Attachment; Levy; Restraint on Business.

 

(a) (i) The service of process seeking to attach, by trustee or similar process,
any funds of Borrower or any of its Subsidiaries or of any entity under control
of Borrower or its Subsidiaries on deposit with any institution at which
Borrower or any of its Subsidiaries maintains a Collateral Account, or (ii) a
notice of lien, levy, or assessment is filed against Borrower or any of its
Subsidiaries or their respective assets by any government agency, and the same
under subclauses (i) and (ii) hereof are not, within thirty (30) days after the
occurrence thereof, discharged or stayed (whether through the posting of a bond
or otherwise); and

 

(b) (i) any material portion of Borrower’s or any of its Subsidiaries’ assets is
attached, seized, levied on, or comes into possession of a trustee or receiver,
or (ii) any court order enjoins, restrains, or prevents Borrower or any of its
Subsidiaries from conducting any part of its business;

 

8.5 Insolvency. (a) Borrower or any of its Subsidiaries is or becomes Insolvent;
(b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or (c)
an Insolvency Proceeding is begun against Borrower or any of its Subsidiaries
and not dismissed or stayed within sixty (60) days (but no Term Loans shall be
extended while Borrower or any Subsidiary is Insolvent and/or until any
Insolvency Proceeding is dismissed). For purposes of this Section 8.5 only,
“Subsidiaries” shall exclude any single Subsidiary or group of Subsidiaries
where such Subsidiary’s revenue or such group of Subsidiaries’ revenue (in each
case in accordance with GAAP) or assets is less than 5.0% of the aggregate (A)
revenue or (B) assets, of the Borrower and all its Subsidiaries, in each case
measured on a consolidated basis for the Borrower and all its Subsidiaries.

 

8.6 Other Agreements. There is (a) a default in any agreement to which Borrower
or any of its Subsidiaries is a party with a third party or parties resulting in
a right by such third party or parties, whether or not exercised, to accelerate
the maturity of any Indebtedness in an amount in excess of Two Hundred Fifty
Thousand Dollars ($250,000.00) or that could reasonably be expected to have a
Material Adverse Change; (b) any default under a Material Agreement that permits
the counterparty thereto to accelerate the payments owed thereunder; or (c) a
revocation of a Material Agreement which is reasonably likely to cause a
Material Adverse Change.

 

8.7 Judgments. (a) One or more judgments, orders, or decrees for the payment of
money in an amount, individually or in the aggregate, of at least Two Hundred
Fifty Thousand Dollars ($250,000.00) (not covered by independent third-party
insurance) shall be rendered against Borrower or any of its Subsidiaries and
shall remain unsatisfied, unvacated, or unstayed for a period of thirty (30)
days after the entry thereof or (b) any judgments, orders or decrees rendered
against Borrower that could reasonably be expected to result in a Material
Adverse Change;

 

8.8 Misrepresentations. Borrower or any of its Subsidiaries or any Person acting
for Borrower or any of its Subsidiaries makes any representation, warranty, or
other statement now or later in this Agreement, any Loan Document or in any
writing delivered to Collateral Agent and/or Lenders or to induce Collateral
Agent and/or the Lenders to enter this Agreement or any Loan Document, and such
representation, warranty, or other statement, when taken as a whole, is
incorrect in any material respect when made;

 

8.9 Subordinated Debt. A default or breach occurs under any Material Agreement
between Borrower or any of its Subsidiaries and any creditor of Borrower or any
of its Subsidiaries that signed a subordination, intercreditor, or other similar
agreement with Collateral Agent or the Lenders, or any creditor that has signed
such an agreement with Collateral Agent or the Lenders breaches any material
terms of such agreement;

 

8.10 Guaranty. (a) Any Guaranty terminates or ceases for any reason to be in
full force and effect; (b) any Guarantor does not perform any obligation or
covenant under any Guaranty; (c) any circumstance described in Section 8 occurs
with respect to any Guarantor; or (d) a Material Adverse Change with respect to
any Guarantor;

 

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8.11 Governmental Approvals; FDA Action. (a) Any Governmental Approval shall
have been revoked, rescinded, suspended, modified in an adverse manner, or not
renewed in the ordinary course for a full term and such revocation, rescission,
suspension, modification or non-renewal has resulted in or could reasonably be
expected to result in a Material Adverse Change; or (b) (i) the FDA, DOJ, or
other Governmental Authority initiates a Regulatory Action or any other
enforcement action against Borrower or any of its Subsidiaries or any supplier
of Borrower or any of its Subsidiaries causes Borrower or any of its
Subsidiaries to recall, withdraw, remove or discontinue manufacturing,
distributing, and/or marketing any of its products that (i) for each individual
product, constitute trailing twelve months revenues (in accordance with GAAP) to
the Borrower and its Subsidiaries of at least $1,000,000, or (ii) in the
aggregate for all such products, constitute trailing twelve months revenues (in
accordance with GAAP) to the Borrower and its Subsidiaries of at least (A)
$2,500,000, or (B) 5.0% of the total trailing twelve month revenue for Borrower
and its Subsidiaries, whichever is greater, in each case even if such action is
based on previously disclosed conduct; (ii) the FDA issues a warning letter or
Regulatory Action to Borrower or any of its Subsidiaries with respect to any of
its activities or products which could reasonably be expected to result in a
Material Adverse Change; (iii) Borrower or any of its Subsidiaries conducts a
mandatory or voluntary recall which could reasonably be expected to result in
liability and expense to Borrower or any of its Subsidiaries of $1,000,000 or
more; (iv) Borrower or any of its Subsidiaries enters into a settlement
agreement with the FDA, DOJ, or other Governmental Authority that results in
aggregate liability as to any single or related series of transactions,
incidents or conditions, of $1,000,000 or more, or that could reasonably be
expected to result in a Material Adverse Change even if such settlement
agreement is based on previously disclosed conduct; or (v) Borrower or any of
its Subsidiaries fails to make adequate progress remediating observations
identified in an FDA Form 483 notice of inspection observation to Collateral
Agent’s or, if agreed by the Collateral Agent and Borrower (which agreement by
the Collateral Agent or Lenders shall not be unreasonably withheld or delayed),
a qualified third party’s, reasonable satisfaction, within six months of
receipt; or (vi) the FDA revokes any authorization or permission granted under
any Registration, or Borrower or any of its Subsidiaries withdraws any
Registration, that could reasonably be expected to result in a Material Adverse
Change.

 

8.12 Lien Priority; Intellectual Property. Any Lien created hereunder or by any
other Loan Document shall at any time fail to constitute a valid and perfected
Lien on any material portion of the Collateral purported to be secured thereby,
subject to no prior or equal Lien, other than Permitted Liens arising as a
matter of applicable law. Any Intellectual Property material to Borrower’s
business shall cease to be validly owned or licensed by Borrower free and clear
of any Liens other than Permitted Liens.

 

9. RIGHTS AND REMEDIES

 

9.1 Rights and Remedies.

 

(a) Upon the occurrence and during the continuance of an Event of Default,
Collateral Agent may, without notice or demand, do any or all of the following:
(i) deliver notice of the Event of Default to Borrower, (ii) by notice to
Borrower declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations shall be immediately due
and payable without any action by Collateral Agent or the Lenders) or (iii) by
notice to Borrower suspend or terminate the obligations, if any, of the Lenders
to advance money or extend credit for Borrower’s benefit under this Agreement or
under any other agreement between Borrower and Collateral Agent and/or the
Lenders (but if an Event of Default described in Section 8.5 occurs all
obligations, if any, of the Lenders to advance money or extend credit for
Borrower’s benefit under this Agreement or under any other agreement between
Borrower and Collateral Agent and/or the Lenders shall be immediately terminated
without any action by Collateral Agent or the Lenders).

 

(b) Without limiting the rights of Collateral Agent and the Lenders set forth in
Section 9.1(a) above, upon the occurrence and during the continuance of an Event
of Default, Collateral Agent shall have the right, without notice or demand, to
do any or all of the following:

 

(i) foreclose upon and/or sell or otherwise liquidate, the Collateral;

 

(ii) apply to the Obligations any (a) balances and deposits of Borrower that
Collateral Agent or any Lender holds or controls, or (b) any amount held or
controlled by Collateral Agent or any Lender owing to or for the credit or the
account of Borrower; and/or

 

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(iii) commence and prosecute an Insolvency Proceeding or consent to Borrower
commencing any Insolvency Proceeding.

 

(c) Without limiting the rights of Collateral Agent and the Lenders set forth in
Sections 9.1(a) and (b) above, upon the occurrence and during the continuance of
an Event of Default, Collateral Agent shall have the right, without notice or
demand, to do any or all of the following:

 

(i) settle or adjust disputes and claims directly with Account Debtors for
amounts on terms and in any order that Collateral Agent considers advisable,
notify any Person owing Borrower money of Collateral Agent’s security interest
in such funds, and verify the amount of such account;

 

(ii) make any payments and do any acts it considers necessary or reasonable to
protect the Collateral and/or its security interest in the Collateral. Borrower
shall assemble the Collateral if Collateral Agent requests and make it available
in a location as Collateral Agent reasonably designates. Collateral Agent may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Collateral Agent a license to enter and
occupy any of its premises, without charge, to exercise any of Collateral
Agent’s rights or remedies;

 

(iii) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
and/or advertise for sale, the Collateral. Collateral Agent is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s and each of its Subsidiaries’ labels, Patents, Copyrights, mask
works, rights of use of any name, trade secrets, trade names, Trademarks,
service marks, and advertising matter, or any similar property as it pertains to
the Collateral, in completing production of, advertising for sale, and selling
any Collateral and, in connection with Collateral Agent’s exercise of its rights
under this Section 9.1, Borrower’s and each of its Subsidiaries’ rights under
all licenses and all franchise agreements inure to Collateral Agent, for the
benefit of the Lenders;

 

(iv) place a “hold” on any account maintained with Collateral Agent or the
Lenders and/or deliver a notice of exclusive control, any entitlement order, or
other directions or instructions pursuant to any Control Agreement or similar
agreements providing control of any Collateral;

 

(v) demand and receive possession of Borrower’s Books;

 

(vi) appoint a receiver to seize, manage and realize any of the Collateral, and
such receiver shall have any right and authority as any competent court will
grant or authorize in accordance with any applicable law, including any power or
authority to manage the business of Borrower or any of its Subsidiaries; and

 

(vii) subject to clauses 9.1(a) and (b), exercise all rights and remedies
available to Collateral Agent and each Lender under the Loan Documents or at law
or equity, including all remedies provided under the Code (including disposal of
the Collateral pursuant to the terms thereof).

 

Notwithstanding any provision of this Section 9.1 to the contrary, upon the
occurrence of any Event of Default, Collateral Agent shall have the right to
exercise any and all remedies referenced in this Section 9.1 without the written
consent of Required Lenders following the occurrence of an Exigent Circumstance.

 

9.2 Power of Attorney. Borrower hereby irrevocably appoints Collateral Agent as
its lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower’s or any of its
Subsidiaries’ name on any checks or other forms of payment or security; (b) sign
Borrower’s or any of its Subsidiaries’ name on any invoice or bill of lading for
any Account or drafts against Account Debtors; (c) settle and adjust disputes
and claims about the Accounts directly with Account Debtors, for amounts and on
terms Collateral Agent determines reasonable; (d) make, settle, and adjust all
claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien,
charge, encumbrance, security interest, and adverse claim in or to the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; and (f) transfer the Collateral into the name
of Collateral Agent or a third party as the Code or any applicable law permits.
Borrower hereby appoints Collateral Agent as its lawful attorney-in-fact to sign
Borrower’s or any of its Subsidiaries’ name on any documents necessary to
perfect or continue the perfection of Collateral Agent’s security interest in
the Collateral regardless of whether an Event of Default has occurred until all
Obligations (other than inchoate indemnity obligations) have been satisfied in
full and Collateral Agent and the Lenders are under no further obligation to
make extend Term Loans hereunder. Collateral Agent’s foregoing appointment as
Borrower’s or any of its Subsidiaries’ attorney in fact, and all of Collateral
Agent’s rights and powers, coupled with an interest, are irrevocable until all
Obligations (other than inchoate indemnity obligations) have been fully repaid
and performed and Collateral Agent’s and the Lenders’ obligation to provide Term
Loans terminates.

 

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9.3 Protective Payments. If Borrower or any of its Subsidiaries fail to obtain
the insurance called for by Section 6.5 or fails to pay any premium thereon or
fails to pay any other amount which Borrower or any of its Subsidiaries is
obligated to pay under this Agreement or any other Loan Document, Collateral
Agent may obtain such insurance or make such payment, and all amounts so paid by
Collateral Agent are Lenders’ Expenses and immediately due and payable, bearing
interest at the Default Rate, and secured by the Collateral. Collateral Agent
will make reasonable efforts to provide Borrower with notice of Collateral Agent
obtaining such insurance or making such payment at the time it is obtained or
paid or within a reasonable time thereafter. No such payments by Collateral
Agent are deemed an agreement to make similar payments in the future or
Collateral Agent’s waiver of any Event of Default.

 

9.4 Application of Payments and Proceeds. Notwithstanding anything to the
contrary contained in this Agreement, upon the occurrence and during the
continuance of an Event of Default, (a) Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times thereafter
received by Collateral Agent from or on behalf of Borrower or any of its
Subsidiaries of all or any part of the Obligations, and, as between Borrower on
the one hand and Collateral Agent and Lenders on the other, Collateral Agent
shall have the continuing and exclusive right to apply and to reapply any and
all payments received against the Obligations in such manner as Collateral Agent
may deem advisable notwithstanding any previous application by Collateral Agent,
and (b) the proceeds of any sale of, or other realization upon all or any part
of the Collateral shall be applied: first, to the Lenders’ Expenses; second, to
accrued and unpaid interest on the Obligations (including any interest which,
but for the provisions of the United States Bankruptcy Code, would have accrued
on such amounts); third, to the principal amount of the Obligations outstanding;
and fourth, to any other indebtedness or obligations of Borrower owing to
Collateral Agent or any Lender under the Loan Documents. Any balance remaining
shall be delivered to Borrower or to whoever may be lawfully entitled to receive
such balance or as a court of competent jurisdiction may direct. In carrying out
the foregoing, (x) amounts received shall be applied in the numerical order
provided until exhausted prior to the application to the next succeeding
category, and (y) each of the Persons entitled to receive a payment in any
particular category shall receive an amount equal to its pro rata share of
amounts available to be applied pursuant thereto for such category. Any
reference in this Agreement to an allocation between or sharing by the Lenders
of any right, interest or obligation “ratably,” “proportionally” or in similar
terms shall refer to Pro Rata Share unless expressly provided otherwise.
Collateral Agent, or if applicable, each Lender, shall promptly remit to the
other Lenders such sums as may be necessary to ensure the ratable repayment of
each Lender’s portion of any Term Loan and the ratable distribution of interest,
fees and reimbursements paid or made by Borrower. Notwithstanding the foregoing,
a Lender receiving a scheduled payment shall not be responsible for determining
whether the other Lenders also received their scheduled payment on such date;
provided, however, if it is later determined that a Lender received more than
its ratable share of scheduled payments made on any date or dates, then such
Lender shall remit to Collateral Agent or other Lenders such sums as may be
necessary to ensure the ratable payment of such scheduled payments, as
instructed by Collateral Agent. If any payment or distribution of any kind or
character, whether in cash, properties or securities, shall be received by a
Lender in excess of its ratable share, then the portion of such payment or
distribution in excess of such Lender’s ratable share shall be received by such
Lender in trust for and shall be promptly paid over to the other Lender for
application to the payments of amounts due on the other Lenders’ claims. To the
extent any payment for the account of Borrower is required to be returned as a
voidable transfer or otherwise, the Lenders shall contribute to one another as
is necessary to ensure that such return of payment is on a pro rata basis. If
any Lender shall obtain possession of any Collateral, it shall hold such
Collateral for itself and as agent and bailee for Collateral Agent and other
Lenders for purposes of perfecting Collateral Agent’s security interest therein.

 

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9.5 Liability for Collateral. So long as Collateral Agent and the Lenders comply
with reasonable banking practices regarding the safekeeping of the Collateral in
the possession or under the control of Collateral Agent and the Lenders,
Collateral Agent and the Lenders shall not be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any
diminution in the value of the Collateral; or (d) any act or default of any
carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss,
damage or destruction of the Collateral.

 

9.6 No Waiver; Remedies Cumulative. Failure by Collateral Agent or any Lender,
at any time or times, to require strict performance by Borrower of any provision
of this Agreement or any other Loan Document shall not waive, affect, or
diminish any right of Collateral Agent or any Lender thereafter to demand strict
performance and compliance herewith or therewith. No waiver hereunder shall be
effective unless signed by Collateral Agent and the Required Lenders and then is
only effective for the specific instance and purpose for which it is given. The
rights and remedies of Collateral Agent and the Lenders under this Agreement and
the other Loan Documents are cumulative. Collateral Agent and the Lenders have
all rights and remedies provided under the Code, any applicable law, by law, or
in equity. The exercise by Collateral Agent or any Lender of one right or remedy
is not an election, and Collateral Agent’s or any Lender’s waiver of any Event
of Default is not a continuing waiver. Collateral Agent’s or any Lender’s delay
in exercising any remedy is not a waiver, election, or acquiescence.

 

9.7 Demand Waiver. Borrower waives, to the fullest extent permitted by law,
demand, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees held by Collateral Agent or any Lender on which Borrower or any
Subsidiary is liable.

 

10. NOTICES

 

All notices, consents, requests, approvals, demands, or other communication
(collectively, “Communication”) by any party to this Agreement or any other Loan
Document must be in writing and shall be deemed to have been validly served,
given, or delivered: (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the U.S. mail, first class, registered or
certified mail return receipt requested, with proper postage prepaid; (b) upon
transmission, when sent by facsimile transmission; (c) one (1) Business Day
after deposit with a reputable overnight courier with all charges prepaid; or
(d) when delivered, if hand-delivered by messenger, all of which shall be
addressed to the party to be notified and sent to the address, facsimile number,
or email address indicated below. Any of Collateral Agent, Lender or Borrower
may change its mailing address or facsimile number by giving the other party
written notice thereof in accordance with the terms of this Section 10.

 

If to Borrower:  

Imprimis Pharmaceuticals, Inc.

12264 El Camino Real, Suite 350

San Diego, CA 92130

Attn: Andrew Boll

Fax: 858-345-1745

Email: aboll@imprimispharma.com

      with a copy (which shall not constitute notice) to:  

Morrison & Foerster LLP

12531 High Bluff Drive, Suite 100

San Diego, CA 92130-2040

Attn: Steve Rowles

Fax: (858) 720-5125

Email: srowles@mofo.com

      If to Collateral Agent:  

IMMY Funding LLC

c/o Life Sciences Alternative Funding LLC

50 Main Street

Suite 1000

White Plains, NY 10606

Attention: Stephen J. DeNelsky

Email: steve@lsafunding.com

      with a copy (which shall not constitute notice) to:  

Latham & Watkins LLP

505 Montgomery Street

Suite 2000

San Francisco, CA 94111-6538

Attn: Haim Zaltzman

Fax: 415.395.8095

Email: haim.zaltzman@lw.com

 

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11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

 

11.1 Waiver of Jury Trial. EACH OF BORROWER, COLLATERAL AGENT AND LENDERS
UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER LOAN
DOCUMENTS, ANY OF THE INDEBTEDNESS SECURED HEREBY, ANY DEALINGS AMONG BORROWER,
COLLATERAL AGENT AND/OR LENDERS RELATING TO THE SUBJECT MATTER OF THIS
TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING
ESTABLISHED AMONG BORROWER, COLLATERAL AGENT AND/OR LENDERS. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THIS WAIVER MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING. THE WAIVER ALSO SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY OTHER
LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
TRANSACTION OR ANY RELATED TRANSACTION. THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.

 

11.2 Governing Law and Jurisdiction.

 

(a) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS (EXCLUDING THOSE LOAN DOCUMENTS
THAT BY THEIR OWN TERMS ARE EXPRESSLY GOVERNED BY THE LAWS OF ANOTHER
JURISDICTION) AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT
OF LAWS PRINCIPLES that would result in the application of any laws other than
the laws OF the State of New York), INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE COLLATERAL,
PROVIDED, HOWEVER, THAT IF THE LAWS OF ANY JURISDICTION OTHER THAN NEW YORK
SHALL GOVERN IN REGARD TO THE VALIDITY, PERFECTION OR EFFECT OF PERFECTION OF
ANY LIEN OR IN REGARD TO PROCEDURAL MATTERS AFFECTING ENFORCEMENT OF ANY LIENS
IN COLLATERAL, SUCH LAWS OF SUCH OTHER JURISDICTIONS SHALL CONTINUE TO APPLY TO
THAT EXTENT.

 

(b) Submission to Jurisdiction. Any legal action or proceeding with respect to
the Loan Documents shall be brought exclusively in the courts of the State of
New York located in the City of New York, Borough of Manhattan, or of the United
States of America for the Southern District of New York and, by execution and
delivery of this Agreement, Borrower hereby accepts for itself and in respect of
its Property, generally and unconditionally, the jurisdiction of the aforesaid
courts. Notwithstanding the foregoing, Collateral Agent and Lenders shall have
the right to bring any action or proceeding against Borrower (or any property of
Borrower) in the court of any other jurisdiction Collateral Agent or Lenders
deem necessary or appropriate in order to realize on the Collateral or other
security for the Obligations. The parties hereto hereby irrevocably waive any
objection, including any objection to the laying of venue or based on the
grounds of forum non conveniens, that any of them may now or hereafter have to
the bringing of any such action or proceeding in such jurisdictions.

 

(c) Service of Process. Borrower irrevocably waives personal service of any and
all legal process, summons, notices and other documents and other service of
process of any kind and consents to such service in any suit, action or
proceeding brought in the United States of America with respect to or otherwise
arising out of or in connection with any Loan Document by any means permitted by
applicable requirements of law, including by the mailing thereof (by registered
or certified mail, postage prepaid) to the address of Borrower specified herein
(and shall be effective when such mailing shall be effective, as provided
therein). Borrower agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.

 

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(d) Non-exclusive Jurisdiction. Nothing contained in this Section 11.2 shall
affect the right of Collateral Agent or Lenders to serve process in any other
manner permitted by applicable requirements of law or commence legal proceedings
or otherwise proceed against Borrower in any other jurisdiction.

 

12. GENERAL PROVISIONS

 

12.1 Successors and Assigns. This Agreement binds and is for the benefit of the
successors and permitted assigns of each party. Borrower may not transfer,
pledge or assign this Agreement or any rights or obligations under it without
Collateral Agent’s prior written consent (which may be granted or withheld in
Collateral Agent’s discretion, subject to Section 12.5). The Lenders have the
right, without the consent of or notice to Borrower, to sell, transfer, assign,
pledge, negotiate, or grant participation in (any such sale, transfer,
assignment, negotiation, or grant of a participation, a “Lender Transfer”) all
or any part of, or any interest in, the Lenders’ obligations, rights, and
benefits under this Agreement and the other Loan Documents except, unless an
Event of Default has occurred and is continuing, and other than to an Affiliate
of Lender, to (i) any Person that sells, markets, manufactures or produces
products and services in competition with Borrower, or (ii) any vulture fund or
similar type of investor whose primary investment strategy consists of
investments in and purchases of debt of distressed companies to control and
dispose of the assets of such companies, each as reasonably determined by the
Collateral Agent.

 

12.2 Indemnification. Borrower agrees to indemnify, defend and hold Collateral
Agent and the Lenders and their respective directors, officers, employees,
consultants, agents, attorneys, or any other Person affiliated with or
representing Collateral Agent or the Lenders (each, an “Indemnified Person”)
harmless against: (a) all obligations, demands, claims, and liabilities
(collectively, “Claims”) asserted by any other party in connection with; related
to; following; or arising from, out of or under, the transactions contemplated
by the Loan Documents; and (b) all losses or Lenders’ Expenses incurred, or paid
by Indemnified Person in connection with; related to; following; or arising
from, out of or under, the transactions contemplated by the Loan Documents
between Collateral Agent, and/or the Lenders and Borrower (including reasonable
attorneys’ fees and expenses), except for Claims and/or losses directly caused
by such Indemnified Person’s gross negligence or willful misconduct. Borrower
hereby further indemnifies, defends and holds each Indemnified Person harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including the fees and disbursements of
counsel for such Indemnified Person) in connection with any investigative,
response, remedial, administrative or judicial matter or proceeding, whether or
not such Indemnified Person shall be designated a party thereto and including
any such proceeding initiated by or on behalf of Borrower, and the reasonable
expenses of investigation by engineers, environmental consultants and similar
technical personnel and any commission, fee or compensation claimed by any
broker (other than any broker retained by Collateral Agent or Lenders) asserting
any right to payment for the transactions contemplated hereby which may be
imposed on, incurred by or asserted against such Indemnified Person as a result
of or in connection with the transactions contemplated hereby and the use or
intended use of the proceeds of the loan proceeds except for liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements directly caused by such Indemnified Person’s
gross negligence or willful misconduct.

 

12.3 Severability of Provisions. Each provision of this Agreement is severable
from every other provision in determining the enforceability of any provision.

 

12.4 Correction of Loan Documents. Collateral Agent may correct patent errors
and fill in any blanks in this Agreement and the other Loan Documents consistent
with the agreement of the parties.

 

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12.5 Amendments in Writing; Integration. (a) No amendment, modification,
termination or waiver of any provision of this Agreement or any other Loan
Document, no approval or consent thereunder, or any consent to any departure by
Borrower or any of its Subsidiaries therefrom, shall in any event be effective
unless the same shall be in writing and signed by Borrower, Collateral Agent and
the Required Lenders provided that:

 

(i) no such amendment, waiver or other modification that would have the effect
of increasing or reducing a Lender’s Term Loan Commitment or Commitment
Percentage shall be effective as to such Lender without such Lender’s written
consent;

 

(ii) no such amendment, waiver or modification that would affect the rights and
duties of Collateral Agent shall be effective without Collateral Agent’s written
consent or signature; and

 

(iii) no such amendment, waiver or other modification shall, unless signed by
all the Lenders directly affected thereby, (A) reduce the principal of, rate of
interest on or any fees with respect to any Term Loan or forgive any principal,
interest (other than default interest) or fees (other than late charges) with
respect to any Term Loan (B) postpone the date fixed for, or waive, any payment
of principal of any Term Loan or of interest on any Term Loan (other than
default interest) or any fees provided for hereunder (other than late charges or
for any termination of any commitment); (C) change the definition of the term
“Required Lenders” or the percentage of Lenders which shall be required for the
Lenders to take any action hereunder; (D) release all or substantially all of
any material portion of the Collateral, authorize Borrower to sell or otherwise
dispose of all or substantially all or any material portion of the Collateral or
release any Guarantor of all or any portion of the Obligations or its guaranty
obligations with respect thereto, except, in each case with respect to this
clause (D), as otherwise may be expressly permitted under this Agreement or the
other Loan Documents (including in connection with any disposition permitted
hereunder); (E) amend, waive or otherwise modify this Section 12.5 or the
definitions of the terms used in this Section 12.5 insofar as the definitions
affect the substance of this Section 12.5; (F) consent to the assignment,
delegation or other transfer by Borrower of any of its rights and obligations
under any Loan Document or release Borrower of its payment obligations under any
Loan Document, except, in each case with respect to this clause (F), pursuant to
a merger or consolidation permitted pursuant to this Agreement; (G) amend any of
the provisions of Section 9.4 or amend any of the definitions of Pro Rata Share,
Term Loan Commitment, Commitment Percentage or that provide for the Lenders to
receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of
Collateral hereunder; (H) subordinate the Liens granted in favor of Collateral
Agent securing the Obligations; or (I) amend any of the provisions of Section
12.5. It is hereby understood and agreed that all Lenders shall be deemed
directly affected by an amendment, waiver or other modification of the type
described in the preceding clauses (C), (D), (E), (F), (G) and (H) of the
immediately preceding sentence.

 

(b) Other than as expressly provided for in Section 12.5(a)(i)-(iii), Collateral
Agent may, if requested by the Required Lenders, from time to time designate
covenants in this Agreement less restrictive by notification to a representative
of Borrower.

 

(c) This Agreement and the Loan Documents represent the entire agreement about
this subject matter and supersede prior negotiations or agreements with respect
to such subject matter. All prior agreements, understandings, representations,
warranties, and negotiations between the parties about the subject matter of
this Agreement and the Loan Documents merge into this Agreement and the Loan
Documents.

 

12.6 Counterparts. This Agreement may be executed in any number of counterparts
and by different parties on separate counterparts, each of which, when executed
and delivered, is an original, and all taken together, constitute one Agreement.

 

12.7 Survival. All covenants, representations and warranties made in this
Agreement continue in full force and effect until this Agreement has terminated
pursuant to its terms and all Obligations (other than inchoate indemnity
obligations and any other obligations which, by their terms, are to survive the
termination of this Agreement) have been satisfied. The obligation of Borrower
in Section 12.2 to indemnify each Lender and Collateral Agent, as well as the
confidentiality provisions in Section 12.8 below, shall survive until the
statute of limitations with respect to such claim or cause of action shall have
run.

 

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12.8 Confidentiality. In handling any confidential information of Borrower, the
Lenders and Collateral Agent shall exercise the same degree of care that it
exercises for their own proprietary information, but disclosure of information
may be made: (a) subject to the terms and conditions of this Agreement, to the
Lenders’ and Collateral Agent’s Subsidiaries or Affiliates; (b) to prospective
transferees (other than those identified in (a) above) or purchasers of any
interest in the Term Loans (provided, however, the Lenders and Collateral Agent
shall, except upon the occurrence and during the continuance of an Event of
Default, obtain such prospective transferee’s or purchaser’s agreement to the
terms of this provision or to similar confidentiality terms); (c) as required by
law, regulation, subpoena, or other order; (d) to Lenders’ or Collateral Agent’s
regulators or as otherwise required in connection with an examination or audit;
(e) as Collateral Agent reasonably considers appropriate in exercising remedies
under the Loan Documents; and (f) to third party service providers of the
Lenders and/or Collateral Agent so long as such service providers have executed
a confidentiality agreement or have agreed to similar confidentiality terms with
the Lenders and Collateral Agent with terms no less restrictive than those
contained herein. Confidential information does not include information that
either: (i) is in the public domain or in the Lenders’ and/or Collateral Agent’s
possession when disclosed to the Lenders and/or Collateral Agent, or becomes
part of the public domain after disclosure to the Lenders and/or Collateral
Agent at no fault of the Lenders or the Collateral Agent; or (ii) is disclosed
to the Lenders and/or Collateral Agent by a third party, if the Lenders and/or
Collateral Agent does not know that the third party is prohibited from
disclosing the information. Collateral Agent and the Lenders may use
confidential information for any purpose, including, without limitation, for the
development of client databases, reporting purposes, and market analysis. The
provisions of the immediately preceding sentence shall survive the termination
of this Agreement. The agreements provided under this Section 12.8 supersede all
prior agreements, understanding, representations, warranties, and negotiations
between the parties about the subject matter of this Section 12.8.

 

12.9 Right of Set Off. Borrower hereby grants to Collateral Agent and to each
Lender, a lien, security interest and right of set off as security for all
Obligations to Collateral Agent and each Lender hereunder, whether now existing
or hereafter arising upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
Collateral Agent or the Lenders or any entity under the control of Collateral
Agent or the Lenders (including a Collateral Agent affiliate) or in transit to
any of them. At any time after the occurrence and during the continuance of an
Event of Default, without demand or notice, Collateral Agent or the Lenders may
set off the same or any part thereof and apply the same to any liability or
obligation of Borrower even though unmatured and regardless of the adequacy of
any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE
COLLATERAL AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED BY BORROWER.

 

12.10 Cooperation of Borrower. If necessary, Borrower agrees to (i) execute any
documents reasonably required to effectuate and acknowledge each assignment of a
Term Loan Commitment or Term Loan to an assignee in accordance with Section
12.1, (ii) make Borrower’s management available to meet with Collateral Agent
and prospective participants and assignees of Term Loan Commitments (which
meetings shall be conducted no more often than twice every twelve months unless
an Event of Default has occurred and is continuing), and (iii) assist Collateral
Agent or the Lenders in the preparation of information relating to the financial
affairs of Borrower as any prospective participant or assignee of a Term Loan
Commitment or Term Loan reasonably may request. Subject to the provisions of
Section 12.8, Borrower authorizes each Lender to disclose to any prospective
participant or assignee of a Term Loan Commitment, any and all information in
such Lender’s possession concerning Borrower and its financial affairs which has
been delivered to such Lender by or on behalf of Borrower pursuant to this
Agreement, or which has been delivered to such Lender by or on behalf of
Borrower in connection with such Lender’s credit evaluation of Borrower prior to
entering into this Agreement.

 

12.11 Public Announcement. Borrower hereby agrees that Collateral Agent and each
Lender may make a public announcement of the transactions contemplated by this
Agreement, and may publicize the same in marketing materials, newspapers and
other publications, and otherwise, and in connection therewith may use
Borrower’s name, tradenames and logos.

 

12.12 Collateral Agent and Lender Agreement. Collateral Agent and each Lender
hereby agree to the terms and conditions set forth on Exhibit B attached hereto.
Borrower acknowledges and agrees to the terms and conditions set forth on
Exhibit B attached hereto.

 

[Balance of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the Effective Date.

 

BORROWER:           Imprimis Pharmaceuticals, Inc.         By: /s/ Mark L. Baum
        Name: Mark L. Baum         Title: Chief Executive Officer        
COLLATERAL AGENT AND LENDER:         IMMY FUNDING LLC       By: /s/ Stephen J.
DeNelsky         Name: Stephen J. DeNelsky         Title: President  

 

[Signature Page to Loan and Security Agreement]

 

 

   

 

SCHEDULE 1.1

Lenders and Commitments

 

Term A Loans  Lender  Term Loan Commitment   Commitment Percentage  IMMY Funding
LLC  $10,000,000.00    100.00% TOTAL  $10,000,000.00    100.00%

 

Term B Loans  Lender  Term Loan Commitment   Commitment Percentage  IMMY Funding
LLC  $5,000,000.00    100.00% TOTAL  $5,000,000.00    100.00%

 

Aggregate (all Term Loans) Lender  Term Loan Commitment   Commitment Percentage 
IMMY Funding LLC  $15,000,000.00    100.00% TOTAL  $15,000,000.00    100.00%

 

 

   

 

EXHIBIT A

Description of Collateral

 

The Collateral consists of all of Borrower’s right, title and interest in and to
the following property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles (including Intellectual Property),
commercial tort claims, documents, instruments (including any promissory notes),
chattel paper (whether tangible or electronic), cash, deposit accounts and other
Collateral Accounts, all certificates of deposit, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

 

All Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

 

Notwithstanding the foregoing, the Collateral shall not include: (i) more than
sixty five percent (65%) of the total combined voting power of all classes of
stock entitled to vote the shares of capital stock (the “Shares”) of any foreign
Subsidiary if Borrower demonstrates to the Collateral Agent’s reasonable
satisfaction that a pledge of more than sixty five percent (65%) of the Shares
of such Subsidiary creates a present and existing adverse tax consequence to
Borrower under the U.S. Internal Revenue Code; (ii) any equipment that is
subject to a Permitted Lien permitted under clause (c) of the definition of
Permitted Liens and the loan agreement or lease relating to such equipment
forbids any Liens to be attached to such equipment other than a purchase money
security interest and only to the extent so prohibited during the term of such
lease or loan agreement; (iii) any lease, license, contract, property rights,
joint venture interests, or agreement to which Borrower is a party or any of its
rights or interests thereunder, in each case, if and only if, and solely to the
extent that, the grant of a security interest therein shall constitute or result
in a breach, termination, default, abandonment, unenforceability or invalidity
thereunder or thereof (other than to the extent that any such term would be
rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the
UCC of any relevant jurisdiction or any other applicable law or principles of
equity); provided that immediately upon the time at which the consequences
described in the foregoing clause shall no longer exist, the Collateral shall
include, and Borrower shall be deemed to have granted a security interest in,
all of Borrower’s right, title and interest in such lease, license, contract,
property rights, joint venture interests, or agreement; (iv) Motor Vehicles for
which certificates of title have been issued, and (v) any “intent-to-use”
application for registration of a Trademark filed pursuant to Section 1(b) of
the Lanham Act, 15 U.S.C. § 1051, prior to the filing of a “Statement of Use”
pursuant to Section 1(d) of the Lanham Act or an “Amendment to Allege Use”
pursuant to Section 1(c) of the Lanham Act with respect thereto, solely to the
extent, if any, that, and solely during the period, if any, in which, the grant
of a security interest therein would impair the validity or enforceability of
any registration that issues from such intent-to-use application under
applicable federal law.

 

 

   

 

EXHIBIT B

Collateral Agent and Lender Terms

 

1. Appointment of Collateral Agent.

 

(a) Each Lender hereby appoints IMMY Funding LLC (together with any successor
Collateral Agent pursuant to Section 7 of this Exhibit B) as Collateral Agent
under the Loan Documents and authorizes Collateral Agent to (i) execute and
deliver the Loan Documents and accept delivery thereof on its behalf from
Borrower, (ii) take such action on its behalf and to exercise all rights, powers
and remedies and perform the duties as are expressly delegated to Collateral
Agent under such Loan Documents and (iii) exercise such powers as are reasonably
incidental thereto.

 

(b) Without limiting the generality of clause (a) above, Collateral Agent shall
have the sole and exclusive right and authority (to the exclusion of the
Lenders), and is hereby authorized, to (i) act as the disbursing and collecting
agent for the Lenders with respect to all payments and collections arising in
connection with the Loan Documents (including in any other bankruptcy,
insolvency or similar proceeding), and each Person making any payment in
connection with any Loan Document to any Lender is hereby authorized to make
such payment to Collateral Agent, (ii) file and prove claims and file other
documents necessary or desirable to allow the claims of Collateral Agent and
Lenders with respect to any Obligation in any bankruptcy, insolvency or similar
proceeding (but not to vote, consent or otherwise act on behalf of such Lender),
(iii) act as collateral agent for Collateral Agent and each Lender for purposes
of the perfection of all Liens created by the Loan Documents and all other
purposes stated therein, (iv) manage, supervise and otherwise deal with the
Collateral, (v) take such other action as is necessary or desirable to maintain
the perfection and priority of the Liens created or purported to be created by
the Loan Documents, (vi) except as may be otherwise specified in any Loan
Document, exercise all remedies given to Collateral Agent and the other Lenders
with respect to the Borrower and/or the Collateral, whether under the Loan
Documents, applicable Requirements of Law or otherwise and (vii) execute any
amendment, consent or waiver under the Loan Documents on behalf of any Lender
that has consented in writing to such amendment, consent or waiver; provided,
however, that Collateral Agent hereby appoints, authorizes and directs each
Lender to act as collateral sub-agent for Collateral Agent and the Lenders for
purposes of the perfection of all Liens with respect to the Collateral,
including any Deposit Account maintained by Borrower with, and cash and Cash
Equivalents held by, such Lender, and may further authorize and direct the
Lenders to take further actions as collateral sub-agents for purposes of
enforcing such Liens or otherwise to transfer the Collateral subject thereto to
Collateral Agent, and each Lender hereby agrees to take such further actions to
the extent, and only to the extent, so authorized and directed. Collateral Agent
may, upon any term or condition it specifies, delegate or exercise any of its
rights, powers and remedies under, and delegate or perform any of its duties or
any other action with respect to, any Loan Document by or through any trustee,
co-agent, employee, attorney-in-fact and any other Person (including any
Lender). Any such Person shall benefit from this Exhibit B to the extent
provided by Collateral Agent.

 

(c) Under the Loan Documents, Collateral Agent (i) is acting solely on behalf of
the Lenders, with duties that are entirely administrative in nature,
notwithstanding the use of the defined term “Collateral Agent”, the terms
“agent”, “Collateral Agent” and “collateral agent” and similar terms in any Loan
Document to refer to Collateral Agent, which terms are used for title purposes
only, (ii) is not assuming any obligation under any Loan Document other than as
expressly set forth therein or any role as agent, fiduciary or trustee of or for
any Lender or any other Person and (iii) shall have no implied functions,
responsibilities, duties, obligations or other liabilities under any Loan
Document, and each Lender, by accepting the benefits of the Loan Documents,
hereby waives and agrees not to assert any claim against Collateral Agent based
on the roles, duties and legal relationships expressly disclaimed in clauses (i)
through (iii) above. Except as expressly set forth in the Loan Documents,
Collateral Agent shall not have any duty to disclose, and shall not be liable
for failure to disclose, any information relating to Borrower or any of its
Subsidiaries that is communicated to or obtained by IMMY Funding LLC or any of
its Affiliates in any capacity.

 

2. Binding Effect; Use of Discretion; E-Systems.

 

(a) Each Lender, by accepting the benefits of the Loan Documents, agrees that
(i) any action taken by Collateral Agent or Required Lenders (or, if expressly
required in any Loan Document, a greater proportion of the Lenders) in
accordance with the provisions of the Loan Documents, (ii) any action taken by
Collateral Agent in reliance upon the instructions of Required Lenders (or,
where so required, such greater proportion) and (iii) the exercise by Collateral
Agent or Required Lenders (or, where so required, such greater proportion) of
the powers set forth herein or therein, together with such other powers as are
reasonably incidental thereto, shall be authorized and binding upon all of
Lenders.

 

 

   

 

(b) If Collateral Agent shall request instructions from Required Lenders or all
affected Lenders with respect to any act or action (including failure to act) in
connection with any Loan Document, then Collateral Agent shall be entitled to
refrain from such act or taking such action unless and until Collateral Agent
shall have received instructions from Required Lenders or all affected Lenders,
as the case may be, and Collateral Agent shall not incur liability to any Person
by reason of so refraining. Collateral Agent shall be fully justified in failing
or refusing to take any action under any Loan Document (i) if such action would,
in the opinion of Collateral Agent, be contrary to any Requirement of Law or any
Loan Document, (ii) if such action would, in the opinion of Collateral Agent,
expose Collateral Agent to any potential liability under any Requirement of Law
or (iii) if Collateral Agent shall not first be indemnified to its satisfaction
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. Without limiting the foregoing,
no Lender shall have any right of action whatsoever against Collateral Agent as
a result of Collateral Agent acting or refraining from acting under any Loan
Document in accordance with the instructions of Required Lenders or all affected
Lenders, as applicable.

 

(c) Collateral Agent is hereby authorized by Borrower and each Lender to
establish procedures (and to amend such procedures from time to time) to
facilitate administration and servicing of the Term Loans and other matters
incidental thereto. Without limiting the generality of the foregoing, Collateral
Agent is hereby authorized to establish procedures to make available or deliver,
or to accept, notices, documents (including, without limitation, borrowing base
certificates) and similar items on, by posting to or submitting and/or
completion, on E-Systems. Borrower and each Lender acknowledges and agrees that
the use of transmissions via an E-System or electronic mail is not necessarily
secure and that there are risks associated with such use, including risks of
interception, disclosure and abuse, and Borrower and each Lender assumes and
accepts such risks by hereby authorizing the transmission via E-Systems or
electronic mail. Each “e-signature” on any such posting shall be deemed
sufficient to satisfy any requirement for a “signature”, and each such posting
shall be deemed sufficient to satisfy any requirement for a “writing”, in each
case including pursuant to any Loan Document, any applicable provision of any
Code, the federal Uniform Electronic Transactions Act, the Electronic Signatures
in Global and National Commerce Act and any substantive or procedural
Requirement of Law governing such subject matter. All uses of an E-System shall
be governed by and subject to, in addition to this Section, the separate terms,
conditions and privacy policy posted or referenced in such E-System (or such
terms, conditions and privacy policy as may be updated from time to time,
including on such E-System) and related contractual obligations executed by
Collateral Agent, Borrower and/or Lenders in connection with the use of such
E-System. ALL E-SYSTEMS AND ELECTRONIC TRANSMISSIONS SHALL BE PROVIDED “AS IS”
AND “AS AVAILABLE”. NO REPRESENTATION OR WARRANTY OF ANY KIND IS MADE BY AGENT,
ANY LENDER OR ANY OF THEIR RELATED PERSONS IN CONNECTION WITH ANY E-SYSTEMS.

 

3. Collateral Agent’s Reliance, Etc. Collateral Agent may, without incurring any
liability hereunder, (a) consult with any of its Related Persons and, whether or
not selected by it, any other advisors, accountants and other experts (including
advisors to, and accountants and experts engaged by, Borrower) and (b) rely and
act upon any document and information (including those transmitted by electronic
transmission) and any telephone message or conversation, in each case believed
by it to be genuine and transmitted, signed or otherwise authenticated by the
appropriate parties. None of Collateral Agent and its Related Persons shall be
liable for any action taken or omitted to be taken by any of them under or in
connection with any Loan Document, and each Lender and Borrower hereby waives
and shall not assert (and Borrower shall cause its Subsidiaries to waive and
agree not to assert) any right, claim or cause of action based thereon, except
to the extent of liabilities resulting from the gross negligence or willful
misconduct of Collateral Agent or, as the case may be, such Related Person (each
as determined in a final, non-appealable judgment of a court of competent
jurisdiction) in connection with the duties of Collateral Agent expressly set
forth herein. Without limiting the foregoing, Collateral Agent: (i) shall not be
responsible or otherwise incur liability for any action or omission taken in
reliance upon the instructions of the Required Lenders or for the actions or
omissions of any of its Related Persons, except to the extent that a court of
competent jurisdiction determines in a final non-appealable judgment that
Collateral Agent acted with gross negligence or willful misconduct in the
selection of such Related Person; (ii) shall not be responsible to any Lender or
other Person for the due execution, legality, validity, enforceability,
effectiveness, genuineness, sufficiency or value of, or the attachment,
perfection or priority of any Lien created or purported to be created under or
in connection with, any Loan Document; (iii) makes no warranty or
representation, and shall not be responsible, to any Lender or other Person for
any statement, document, information, representation or warranty made or
furnished by or on behalf of Borrower or any Related Person of Borrower in
connection with any Loan Document or any transaction contemplated therein or any
other document or information with respect to Borrower, whether or not
transmitted or (except for documents expressly required under any Loan Document
to be transmitted to the Lenders) omitted to be transmitted by Collateral Agent,
including as to completeness, accuracy, scope or adequacy thereof, or for the
scope, nature or results of any due diligence performed by Collateral Agent in
connection with the Loan Documents; and (iv) shall not have any duty to
ascertain or to inquire as to the performance or observance of any provision of
any Loan Document, whether any condition set forth in any Loan Document is
satisfied or waived, as to the financial condition of Borrower or as to the
existence or continuation or possible occurrence or continuation of any Event of
Default, and shall not be deemed to have notice or Knowledge of such occurrence
or continuation unless it has received a notice from Borrower or any Lender
describing such Event of Default that is clearly labeled “notice of default” (in
which case Collateral Agent shall promptly give notice of such receipt to all
Lenders, provided that Collateral Agent shall not be liable to any Lender for
any failure to do so, except to the extent that such failure is attributable to
Collateral Agent’s gross negligence or willful misconduct as determined by a
final non-appealable judgment of a court of competent jurisdiction); and, for
each of the items set forth in clauses (i) through (iv) above, each Lender and
Borrower hereby waives and agrees not to assert (and Borrower shall cause its
Subsidiaries to waive and agree not to assert) any right, claim or cause of
action it might have against Collateral Agent based thereon.

 

 

   

 

4. Collateral Agent Individually. Collateral Agent and its Affiliates may make
loans and other extensions of credit to, acquire stock and stock equivalents of,
engage in any kind of business with, Borrower or any Affiliate of Borrower as
though it were not acting as Collateral Agent and may receive separate fees and
other payments therefor. To the extent Collateral Agent or any of its Affiliates
makes any Term Loans or otherwise becomes a Lender hereunder, it shall have and
may exercise the same rights and powers hereunder and shall be subject to the
same obligations and liabilities as any other Lender and the terms “Lender”,
“Required Lender” and any similar terms shall, except where otherwise expressly
provided in any Loan Document, include, without limitation, Collateral Agent or
such Affiliate, as the case may be, in its individual capacity as Lender, or as
one of the Required Lenders.

 

5. Lender Credit Decision; Collateral Agent Report. Each Lender acknowledges
that it shall, independently and without reliance upon Collateral Agent, any
Lender or any of their Related Persons or upon any document solely or in part
because such document was transmitted by Collateral Agent or any of its Related
Persons, conduct its own independent investigation of the financial condition
and affairs of Borrower and make and continue to make its own credit decisions
in connection with entering into, and taking or not taking any action under, any
Loan Document or with respect to any transaction contemplated in any Loan
Document, in each case based on such documents and information as it shall deem
appropriate. Except for documents expressly required by any Loan Document to be
transmitted by Collateral Agent to the Lenders, Collateral Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, prospects, operations, Property, financial
and other condition or creditworthiness of Borrower or any Affiliate of Borrower
that may come in to the possession of Collateral Agent or any of its Related
Persons. Each Lender agrees that is shall not rely on any field examination,
audit or other report provided by Collateral Agent or its Related Persons (a
“Collateral Agent Report”). Each Lender further acknowledges that any Collateral
Agent Report (a) is provided to the Lenders solely as a courtesy, without
consideration, and based upon the understanding that such Lender will not rely
on such Collateral Agent Report, (b) was prepared by Collateral Agent or its
Related Persons based upon information provided by Borrower solely for
Collateral Agent’s own internal use, and (c) may not be complete and may not
reflect all information and findings obtained by Collateral Agent or its Related
Persons regarding the operations and condition of Borrower. Neither Collateral
Agent nor any of its Related Persons makes any representations or warranties of
any kind with respect to (i) any existing or proposed financing, (ii) the
accuracy or completeness of the information contained in any Collateral Agent
Report or in any related documentation, (iii) the scope or adequacy of
Collateral Agent’s and its Related Persons’ due diligence, or the presence or
absence of any errors or omissions contained in any Collateral Agent Report or
in any related documentation, and (iv) any work performed by Collateral Agent or
Collateral Agent’s Related Persons in connection with or using any Collateral
Agent Report or any related documentation. Neither Collateral Agent nor any of
its Related Persons shall have any duties or obligations in connection with or
as a result of any Lender receiving a copy of any Collateral Agent Report.
Without limiting the generality of the forgoing, neither Collateral Agent nor
any of its Related Persons shall have any responsibility for the accuracy or
completeness of any Collateral Agent Report, or the appropriateness of any
Collateral Agent Report for any Lender’s purposes, and shall have no duty or
responsibility to correct or update any Collateral Agent Report or disclose to
any Lender any other information not embodied in any Collateral Agent Report,
including any supplemental information obtained after the date of any Collateral
Agent Report. Each Lender releases, and agrees that it will not assert, any
claim against Collateral Agent or its Related Persons that in any way relates to
any Collateral Agent Report or arises out of any Lender having access to any
Collateral Agent Report or any discussion of its contents, and agrees to
indemnify and hold harmless Collateral Agent and its Related Persons from all
claims, liabilities and expenses relating to a breach by any Lender arising out
of such Lender’s access to any Collateral Agent Report or any discussion of its
contents.

 

 

   

 

6. Indemnification. Each Lender agrees to reimburse Collateral Agent and each of
its Related Persons (to the extent not reimbursed by Borrower as required under
the Loan Documents) promptly upon demand for its Pro Rata Share of any
out-of-pocket costs and expenses (including, without limitation, fees, charges
and disbursements of financial, legal and other advisors and any taxes or
insurance paid in the name of, or on behalf of, Borrower) incurred by Collateral
Agent or any of its Related Persons in connection with the preparation,
syndication, execution, delivery, administration, modification, amendment,
consent, waiver or enforcement of, or the taking of any other action (whether
through negotiations, through any work-out, bankruptcy, restructuring or other
legal or other proceeding (including, without limitation, preparation for and/or
response to any subpoena or request for document production relating thereto) or
otherwise) in respect of, or legal advice with respect to, its rights or
responsibilities under, any Loan Document. Each Lender further agrees to
indemnify Collateral Agent and each of its Related Persons (to the extent not
reimbursed by Borrower as required under the Loan Documents), ratably according
to its Pro Rata Share, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including, to the extent not
indemnified by the applicable Lender, taxes, interests and penalties imposed for
not properly withholding or backup withholding on payments made to or for the
account of any Lender) that may be imposed on, incurred by, or asserted against
Collateral Agent or any of its Related Persons in any matter relating to or
arising out of, in connection with or as a result of any Loan Document or any
other act, event or transaction related, contemplated in or attendant to any
such document, or, in each case, any action taken or omitted to be taken by
Collateral Agent or any of its Related Persons under or with respect to the
foregoing; provided that no Lender shall be liable to Collateral Agent or any of
its Related Persons under this Section 6 of this Exhibit B to the extent such
liability has resulted from the gross negligence or willful misconduct of
Collateral Agent or, as the case may be, such Related Person, as determined by a
final non-appealable judgment of a court of competent jurisdiction. To the
extent required by any applicable Requirement of Law, Collateral Agent may
withhold from any payment to any Lender under a Loan Document an amount equal to
any applicable withholding tax. If the Internal Revenue Service or any other
Governmental Authority asserts a claim that Collateral Agent did not properly
withhold tax from amounts paid to or for the account of any Lender for any
reason, or if Collateral Agent reasonably determines that it was required to
withhold taxes from a prior payment to or for the account of any Lender but
failed to do so, such Lender shall promptly indemnify Collateral Agent fully for
all amounts paid, directly or indirectly, by Collateral Agent as tax or
otherwise, including penalties and interest, and together with all expenses
incurred by Collateral Agent. Collateral Agent may offset against any payment to
any Lender under a Loan Document, any applicable withholding tax that was
required to be withheld from any prior payment to such Lender but which was not
so withheld, as well as any other amounts for which Collateral Agent is entitled
to indemnification from such Lender under the immediately preceding sentence of
this Section 6 of this Exhibit B.

 

7. Successor Collateral Agent. Collateral Agent may resign at any time by
delivering notice of such resignation to the Lenders and Borrower, effective on
the date set forth in such notice or, if no such date is set forth therein, upon
the date such notice shall be effective, in accordance with the terms of this
Section 7 of this Exhibit B. If Collateral Agent delivers any such notice, the
Required Lenders shall have the right to appoint a successor Collateral Agent.
If, after 30 days after the date of the retiring Collateral Agent’s notice of
resignation, no successor Collateral Agent has been appointed by the Required
Lenders that has accepted such appointment, then the retiring Collateral Agent
may, on behalf of the Lenders, appoint a successor Collateral Agent from among
the Lenders. Effective immediately upon its resignation, (a) the retiring
Collateral Agent shall be discharged from its duties and obligations under the
Loan Documents, (b) the Lenders shall assume and perform all of the duties of
Collateral Agent until a successor Collateral Agent shall have accepted a valid
appointment hereunder, (c) the retiring Collateral Agent and its Related Persons
shall no longer have the benefit of any provision of any Loan Document other
than with respect to any actions taken or omitted to be taken while such
retiring Collateral Agent was, or because such Collateral Agent had been,
validly acting as Collateral Agent under the Loan Documents, and (iv) subject to
its rights under Section 2(b) of this Exhibit B, the retiring Collateral Agent
shall take such action as may be reasonably necessary to assign to the successor
Collateral Agent its rights as Collateral Agent under the Loan Documents.
Effective immediately upon its acceptance of a valid appointment as Collateral
Agent, a successor Collateral Agent shall succeed to, and become vested with,
all the rights, powers, privileges and duties of the retiring Collateral Agent
under the Loan Documents.

 

 

   

 

8. Release of Collateral. Each Lender hereby consents to the release and hereby
directs Collateral Agent to release (or in the case of clause (b)(ii) below,
release or subordinate) the following:

 

(d) any Guarantor if all of the stock of such Subsidiary owned by Borrower is
sold or transferred in a transaction permitted under the Loan Documents
(including pursuant to a valid waiver or consent), to the extent that, after
giving effect to such transaction, such Subsidiary would not be required to
guaranty any Obligations pursuant to any Loan Document; and

 

(e) any Lien held by Collateral Agent for the benefit of itself and the Lenders
against (i) any Collateral that is sold or otherwise disposed of by Borrower in
a transaction permitted by the Loan Documents (including pursuant to a valid
waiver or consent), (ii) any Collateral subject to a Lien that is expressly
permitted under clause (c) of the definition of the term “Permitted Lien” and
(iii) all of the Collateral and Borrower, upon (A) termination of all of the
Commitments, (B) payment in full in cash of all of the Obligations that
Collateral Agent has theretofore been notified in writing by the holder of such
Obligation are then due and payable, and (C) to the extent requested by
Collateral Agent, receipt by Collateral Agent and Lenders of liability releases
from Borrower in form and substance acceptable to Collateral Agent (the
satisfaction of the conditions in this clause (iii), the “Termination Date”).

 

9. Setoff and Sharing of Payments. In addition to any rights now or hereafter
granted under any applicable requirement of law and not by way of limitation of
any such rights, upon the occurrence and during the continuance of any Event of
Default and subject to Section 10(d) of this Exhibit B, each Lender is hereby
authorized at any time or from time to time upon the direction of Collateral
Agent, without notice to Borrower or any other Person, any such notice being
hereby expressly waived, to setoff and to appropriate and to apply any and all
balances held by it at any of its offices for the account of Borrower
(regardless of whether such balances are then due to Borrower) and any other
properties or assets at any time held or owing by that Lender or that holder to
or for the credit or for the account of Borrower against and on account of any
of the Obligations that are not paid when due. Any Lender exercising a right of
setoff or otherwise receiving any payment on account of the Obligations in
excess of its Pro Rata Share thereof shall purchase for cash (and the other
Lenders or holders shall sell) such participations in each such other Lender’s
or holder’s Pro Rata Share of the Obligations as would be necessary to cause
such Lender to share the amount so offset or otherwise received with each other
Lender or holder in accordance with their respective Pro Rata Shares of the
Obligations. Borrower agrees, to the fullest extent permitted by law, that (a)
any Lender may exercise its right to offset with respect to amounts in excess of
its Pro Rata Share of the Obligations and may purchase participations in
accordance with the preceding sentence and (b) any Lender so purchasing a
participation in the Term Loans made or other Obligations held by other Lenders
or holders may exercise all rights of offset, bankers’ lien, counterclaim or
similar rights with respect to such participation as fully as if such Lender or
holder were a direct holder of the Term Loans and the other Obligations in the
amount of such participation. Notwithstanding the foregoing, if all or any
portion of the offset amount or payment otherwise received is thereafter
recovered from the Lender that has exercised the right of offset, the purchase
of participations by that Lender shall be rescinded and the purchase price
restored without interest.

 

10. Advances; Payments; Non-Funding Lenders; Actions in Concert.

 

(a) Advances; Payments. If Collateral Agent receives any payment with respect to
a Term Loan for the account of Lenders on or prior to 2:00 p.m. (New York time)
on any Business Day, Collateral Agent shall pay to each applicable Lender such
Lender’s Pro Rata Share of such payment on such Business Day. If Collateral
Agent receives any payment with respect to a Term Loan for the account of
Lenders after 2:00 p.m. (New York time) on any Business Day, Collateral Agent
shall pay to each applicable Lender such Lender’s Pro Rata Share of such payment
on the next Business Day.

 

 

   

 

(b) Return of Payments.

 

(i) If Collateral Agent pays an amount to a Lender under this Agreement in the
belief or expectation that a related payment has been or will be received by
Collateral Agent from Borrower and such related payment is not received by
Collateral Agent, then Collateral Agent will be entitled to recover such amount
(including interest accruing on such amount at the rate otherwise applicable to
such Obligation) from such Lender on demand without setoff, counterclaim or
deduction of any kind.

 

(ii) If Collateral Agent determines at any time that any amount received by
Collateral Agent under any Loan Document must be returned to Borrower or paid to
any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of any Loan Document, Collateral
Agent will not be required to distribute any portion thereof to any Lender. In
addition, each Lender will repay to Collateral Agent on demand any portion of
such amount that Collateral Agent has distributed to such Lender, together with
interest at such rate, if any, as Collateral Agent is required to pay to
Borrower or such other Person, without setoff, counterclaim or deduction of any
kind and Collateral Agent will be entitled to set off against future
distributions to such Lender any such amounts (with interest) that are not
repaid on demand.

 

(c) Non-Funding Lenders.

 

(i) Unless Collateral Agent shall have received notice from a Lender prior to
the date of any Term Loan that such Lender will not make available to Collateral
Agent such Lender’s Pro Rata Share of such Term Loan, Collateral Agent may
assume that such Lender will make such amount available to it on the date of
such Term Loan in accordance with Section 2(b) of this Exhibit B, and Collateral
Agent may (but shall not be obligated to), in reliance upon such assumption,
make available a corresponding amount for the account of Borrower on such date.
If and to the extent that such Lender shall not have made such amount available
to Collateral Agent, such Lender and Borrower severally agree to repay to
Collateral Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the day such amount is made available to
Borrower until the day such amount is repaid to Collateral Agent, at a rate per
annum equal to the interest rate applicable to the Obligation that would have
been created when Collateral Agent made available such amount to Borrower had
such Lender made a corresponding payment available. If such Lender shall repay
such corresponding amount to Collateral Agent, the amount so repaid shall
constitute such Lender’s portion of such Term Loan for purposes of this
Agreement.

 

(ii) To the extent that any Lender has failed to fund any Term Loan or any other
payments required to be made by it under the Loan Documents after any such Term
Loan is required to be made or such payment is due (a “Non-Funding Lender”),
Collateral Agent shall be entitled to set off the funding short-fall against
that Non-Funding Lender’s Pro Rata Share of all payments received from Borrower.
The failure of any Non-Funding Lender to make any Term Loan or any payment
required by it hereunder shall not relieve any other Lender (each such other
Lender, an “Other Lender”) of its obligations to make such Term Loan, but
neither any Other Lender nor Collateral Agent shall be responsible for the
failure of any Non-Funding Lender to make such Term Loan or make any other
payment required hereunder. Notwithstanding anything set forth herein to the
contrary, a Non-Funding Lender shall not have any voting or consent rights under
or with respect to any Loan Document or constitute a “Lender” (or be included in
the calculation of “Required Lender” hereunder) for any voting or consent rights
under or with respect to any Loan Document. At Borrower’s request, Collateral
Agent or a Person reasonably acceptable to Collateral Agent shall have the right
with Collateral Agent’s consent and in Collateral Agent’s sole discretion (but
Collateral Agent or any such Person shall have no obligation) to purchase from
any Non-Funding Lender, and each Lender agrees that if it becomes a Non-Funding
Lender it shall, at Collateral Agent’s request, sell and assign to Collateral
Agent or such Person, all of the Term Loan Commitment (if any), and all of the
outstanding Term Loan of that Non-Funding Lender for an amount equal to the
aggregate outstanding principal balance of the Term Loan held by such
Non-Funding Lender and all accrued interest with respect thereto through the
date of sale, such purchase and sale to be consummated pursuant to an executed
assignment agreement in form and substance reasonably satisfactory to, and
acknowledged by, Collateral Agent.

 

(d) Actions in Concert. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of any Loan
Document (including exercising any rights of setoff) without first obtaining the
prior written consent of Collateral Agent or Required Lenders, it being the
intent of Lenders that any such action to protect or enforce rights under any
Loan Document shall be taken in concert and at the direction or with the consent
of Collateral Agent or Required Lenders.

 

 

   

 

EXHIBIT C

Loan Payment Request Form

 

Fax To:   Date: _____________________

 

Loan Payment:

[________________________]

 

From Account #     To Account #     (Deposit Account #)     (Loan Account #)

 

Principal $     and/or Interest $  

 

Authorized Signature:     Phone Number:  

 

Print Name/Title:        

 

Loan Advance:

 

Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.

 

From Account #     To Account #     (Loan Account #)     (Deposit Account #)

 

Amount of Advance $        

 

All Borrower’s representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
request for an advance; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such date:

 

Authorized Signature:     Phone Number:  

 

Print Name/Title:        

 

Outgoing Wire Request:

 

Complete only if all or a portion of funds from the loan advance above is to be
wired.

 

Beneficiary Name:     Amount of Wire: $   Beneficiary Bank:     Account Number:
  City and State:        

 

Beneficiary Bank Transit (ABA) #:     Beneficiary Bank Code (Swift, Sort, Chip,
etc.):         (For International Wire Only)

 

Intermediary Bank:     Transit (ABA) #:   For Further Credit to:        

 

Special Instruction:
________________________________________________________________________________
By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).

 

Authorized Signature:     2nd Signature (if required):   Print Name/Title:    
Print Name/Title:   Telephone #:     Telephone #:  

 

 

   

 

EXHIBIT D

Compliance Certificate

 

TO: IMMY Funding LLC, as Collateral Agent and Lender     FROM: IMPRIMIS
PHARMACEUTICALS, INC., as Borrower

 

The undersigned authorized officer (“Officer”) of Imprimis Pharmaceuticals, Inc.
(“Borrower”), hereby certifies that in accordance with the terms and conditions
of the Loan and Security Agreement dated as of May 11, 2015, by and among
Borrower, Collateral Agent, and the Lenders from time to time party thereto (the
“Loan Agreement;” capitalized terms used but not otherwise defined herein shall
have the meanings given them in the Loan Agreement),

 

(a) Borrower is in complete compliance for the period ending _______________
with all required covenants except as noted below;

 

(b) There are no Defaults or Events of Default, except as noted below;

 

(c) Except as noted below, all representations and warranties of Borrower stated
in the Loan Documents are true and correct in all material respects on this date
and for the period described in (a), above; provided, however, that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date.

 

(d) Borrower, and each of Borrower’s Subsidiaries, has timely filed all required
tax returns and reports, Borrower, and each of Borrower’s Subsidiaries, has
timely paid all foreign, federal, state, and local taxes, assessments, deposits
and contributions owed by Borrower, or Subsidiary, except as otherwise permitted
pursuant to the terms of Section 5.8 of the Loan Agreement;

 

(e) No Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Collateral Agent and the
Lenders.

 

Attached are the required documents, if any, supporting our certification(s).
The Officer, on behalf of Borrower, further certifies that the attached
financial statements are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes and except, in
the case of unaudited financial statements, for the absence of footnotes and
subject to year-end audit adjustments as to the interim financial statements.

 

Please indicate compliance status since the last Compliance Certificate by
circling Yes, No, or N/A under “Complies” column.

 

    Reporting Covenant   Requirement   Actual   Complies                   1)  
Financial statements   Quarterly within 45 days         Yes No N/A              
          2)   Annual (CPA Audited) statements   Within 90 days after FYE      
  Yes No N/A                         3)   Annual Financial Projections/Budget
(prepared on a monthly basis)   Annually (within earlier 10 days of approval or
60 days of FYE), and when revised (no later than 7 days of approval)         Yes
No N/A                         4)   8-K, 10-K and 10-Q Filings   If applicable,
within 5 days of filing         Yes No N/A                         5)  
Compliance Certificate   Monthly within 30 days         Yes No N/A              
          6)   IP Report   When required         Yes No N/A                    
    7)   Total amount of Borrower’s cash and cash equivalents at the last day of
the measurement period       $   Yes No N/A                         8)   Total
amount of Borrower’s Subsidiaries’ cash and cash equivalents at the last day of
the measurement period       $   Yes No N/A

 

 

   

 

Negative Covenant Compliance

 

    Negative Covenant   Complies           1)   Dispositions (§ 7.1)   Yes No
N/A               2)   Changes in Business, Management, Ownership, or Business
Locations (§ 7.2)   Yes No N/A               3)   Mergers or Acquisitions (§
7.3)   Yes No N/A               4)   Indebtedness (§ 7.4)   Yes No N/A          
    5)   Encumbrance (§ 7.5)   Yes No N/A               6)   Maintenance of
Collateral Accounts (§ 7.6)   Yes No N/A               7)   Restricted Payments
(§ 7.7)   Yes No N/A               8)   Investments (§ 7.8)   Yes No N/A        
      9)   Transactions with Affiliates (§ 7.9)   Yes No N/A               10)  
Subordinated Debt (§ 7.10)   Yes No N/A               11)   Compliance (§ 7.11)
  Yes No N/A               12)   Compliance with Anti-Terrorism Laws (§ 7.12)  
Yes No N/A               13)   Material Agreements (§ 7.13)   Yes No N/A

 

Deposit and Securities Accounts

 

(Please list all accounts; attach separate sheet if additional space needed)

 

    Institution Name   Account Number   New Account?   Account Control Agreement
in place?                   1)           Yes No   Yes No 2)           Yes No  
Yes No 3)           Yes No   Yes No 4)           Yes No   Yes No

 

 

   

 

Other Matters

 

1)   Have there been any changes in any Key Person since the last Compliance
Certificate?   Yes   No               2)   Have there been any
transfers/sales/disposals/retirement of Collateral or IP prohibited by the Loan
Agreement?   Yes   No               3)   Have there been any new or pending
claims or causes of action against Borrower that involve more than Two Hundred
Fifty Thousand Dollars ($250,000.00)?   Yes   No               4)   Have there
been any amendments of or other changes to the capitalization table of Borrower
and to the Operating Documents of Borrower or any of its Subsidiaries? If yes,
provide copies of any such amendments or changes with this Compliance
Certificate.   Yes   No               5)   Has Borrower or any Subsidiary
entered into or amended any Material Agreement? If yes, please explain and
provide a copy of the Material Agreement(s) and/or amendment(s).   Yes   No    
          6)   Has Borrower provided the Collateral Agent with all notices
required to be delivered under Sections 6.2(a) and 6.2(b) of the Loan Agreement?
  Yes   No 7)   Have there been any material updates to the contents of the
Perfection Certificate last delivered? If yes, please explain.   Yes   No

 

 

   

 

Exceptions

 

Please explain any exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions.” Attach separate sheet if additional
space needed.)

 

[____________________________]

 

By:           Name:           Title:         Date:    

 

  COLLATERAL AGENT USE ONLY         Received by: _________________________ Date:
_______         Verified by: __________________________ Date: _______        
Compliance Status:           Yes          No