Exhibit 10.1

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND

REPLACED WITH “[**]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED

SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE

COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL

TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.

EXECUTION VERSION

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of May 7, 2012 (the
“Effective Date”) among OXFORD FINANCE LLC, a Delaware limited liability company
with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314
(“Oxford”), as collateral agent (in such capacity, “Collateral Agent”), the
Lenders listed on Schedule 1.1 hereof or otherwise a party hereto from time to
time including Oxford in its capacity as a Lender and SILICON VALLEY BANK, a
California corporation with an office located at 3003 Tasman Drive, Santa Clara,
CA 95054 (“Bank” or “SVB”) (each a “Lender” and collectively, the “Lenders”),
and AVANIR PHARMACEUTICALS, INC., a Delaware corporation (“Parent”), AVANIR
ACQUISITION CORP., a Delaware corporation, AVANIR HOLDING COMPANY, a California
corporation and XENEREX BIOSCIENCES, a California corporation, each with offices
located at 20 Enterprise, Suite 200, Aliso Viejo, CA 92656 (individually and
collectively with Parent, jointly and severally, “Borrower”), provides the terms
on which the Lenders shall lend to Borrower and Borrower shall repay the
Lenders. The parties agree as follows:

 

1. ACCOUNTING AND OTHER TERMS

1.1 Accounting terms not defined in this Agreement shall be construed in
accordance with GAAP. Calculations and determinations must be made in accordance
with GAAP; provided, however, for purposes of Section 6.10, recognition of
revenues for any fiscal year shall be determined on a consistent basis with the
revenues projected for such fiscal year in the Annual Projections. Capitalized
terms not otherwise defined in this Agreement shall have the meanings set forth
in Section 13. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein. All references to “Dollars” or “$” are United States
Dollars, unless otherwise noted.

 

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. Subject to the terms and conditions of this Agreement, the
Lenders agree, severally and not jointly, to make term loans to Borrower on the
Funding Date in an aggregate amount of Thirty Million Dollars ($30,000,000.00)
according to each Lender’s Term Loan Commitment as set forth on Schedule 1.1
hereto (such term loans are hereinafter referred to singly as a “Term Loan”, and
collectively as the “Term Loans”). After repayment, no Term Loan may be
re-borrowed.

(b) Repayment. Borrower shall make monthly payments of interest only commencing
on the first (1st) Payment Date following the Funding Date of the Term Loan, and
continuing on the Payment Date of each successive month thereafter through and
including the Payment Date immediately preceding the Amortization Date. If
requested by Collateral Agent, Borrower agrees to pay, on the Funding Date of
the Term Loan, any initial partial monthly interest payment otherwise due for
the period between the Funding Date of the Term Loan and the first Payment Date
thereof. 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

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

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(c) 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 thirty (30) months. All
unpaid principal and accrued and unpaid interest with respect to the Term Loan
is due and payable in full on the Maturity Date. The Term Loan may only be
prepaid in accordance with Sections 2.2(c) and 2.2(d).

(d) Mandatory Prepayments. If 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
Payment, plus (iii) all other Obligations that are due and payable, including
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 Payment had not previously been paid in full in
connection with the prepayment of the Term Loans in full, Borrower shall pay to
Collateral Agent, for payment to each Lender in accordance with its respective
Pro Rata Share, the Final Payment in respect of the Term Loans.

(e) Permitted Prepayment of Term Loans. Borrower shall have the option to, at
any time and from time to time, prepay all or any part (in increments of not
less than (x) Five Million Dollars ($5,000,000.00) or (y) the entire principal
amount then outstanding) 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 all or any part of the Term Loans at least ten (10) 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) the outstanding principal of the Term
Loans then being prepaid plus accrued and unpaid interest thereon through the
prepayment date, (B) the Final Payment, plus (C) all other Obligations that are
due and payable, including Lenders’ Expenses and interest at the Default Rate
with respect to any past due amounts.

2.3 Payment of Interest on the Credit Extensions.

(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 (which rate
shall be fixed for the duration of the applicable Term Loan) equal to the Basic
Rate, determined by Collateral Agent on the Funding Date, which interest shall
be payable monthly in arrears in accordance with Sections 2.2(b) and 2.3(e).
Interest shall accrue on each Term Loan commencing on, and including, the
Funding Date, and shall accrue on the principal amount outstanding under such
Term Loan through and including 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.

(c) 360-Day Year. Interest shall be computed on the basis of a three hundred
sixty (360) day year consisting of twelve (12) months of thirty (30) days.

(d) Debit of Accounts. Collateral Agent and each Lender may debit (or ACH) any
deposit accounts, maintained by Borrower, including the Designated Deposit
Account (but excluding any deposit accounts maintained solely for payroll, tax
or employee benefit payments), for principal and interest payments or any other
amounts Borrower owes the Lenders under the Loan Documents when due; provided
that, except (i) with respect to debits (or ACH activity) for regularly
scheduled principal and interest and (ii) as otherwise previously authorized by
Borrower, Collateral Agent or such Lender, as applicable, shall provide prompt
notice of such debit (or ACH activity). Any such debits (or ACH activity) shall
not constitute a set off.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

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(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 2:00 p.m. 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 Secured Promissory Notes. The Term Loans shall be evidenced by a Secured
Promissory Note or Notes in the form attached as Exhibit D hereto (each a
“Secured Promissory Note”), and shall be repayable as set forth in this
Agreement. Borrower irrevocably authorizes each Lender to make or cause to be
made, on or about the Funding Date of any Term Loan or at the time of receipt of
any payment of principal on such Lender’s Secured Promissory Note, an
appropriate notation on such Lender’s Secured Promissory Note Record reflecting
the making of such Term Loan or (as the case may be) the receipt of such
payment. The outstanding amount of each Term Loan set forth on such Lender’s
Secured Promissory Note Record shall be prima facie evidence of the principal
amount thereof owing and unpaid to such Lender, but the failure to record, or
any error in so recording, any such amount on such Lender’s Secured Promissory
Note Record shall not limit or otherwise affect the obligations of Borrower
under any Secured Promissory Note or any other Loan Document to make payments of
principal of or interest on any Secured Promissory Note when due. Upon receipt
of an affidavit of an officer of a Lender as to the loss, theft, destruction, or
mutilation of its Secured Promissory Note (and including customary lost note
indemnification provisions), Borrower shall issue, in lieu thereof, a
replacement Secured Promissory Note in the same principal amount thereof and of
like tenor.

2.5 Fees. Borrower shall pay to Collateral Agent:

(a) Facility Fee. A fully earned, non-refundable facility fee of One Hundred
Fifty Thousand Dollars ($150,000) to be shared between the Lenders pursuant to
their respective Commitment Percentages, receipt of which Collateral Agent
hereby acknowledges;

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

(c) Lenders’ Expenses. All Lenders’ Expenses (including reasonable documented
attorneys’ fees and expenses for documentation and negotiation of this
Agreement) incurred through and after the Effective Date, when due; provided
that, (i) through the Funding Date, Lenders’ Expenses with respect to attorneys’
fees and expenses shall be limited to those of one (1) counsel; and (ii) unless
an Event of Default has occurred, after the Funding Date, Lenders’ Expenses with
respect to attorneys’ fees and expenses shall be limited to out-of-pocket fees
and expenses of no more than two (2) counsel.

2.6 Withholding.

(a) Payments received by 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

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

3

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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 2.6 shall survive the termination of this Agreement.

(b) Each Lender agrees that, upon the occurrence of any event giving rise to the
operation of Section 2.6(a) with respect to such Lender, it will, if reasonably
requested by the Borrower, use commercially reasonable efforts (subject to legal
and regulatory restrictions) to mitigate the effect of any such event, including
by designating a different lending office for funding or booking its Term Loans
hereunder or assigning its rights and obligations hereunder to another of its
offices, branches or affiliates and by completing and delivering or filing any
tax related forms that would reduce or eliminate any amounts to be deducted or
withheld or paid by Borrower; provided that such efforts are made at Borrower’s
sole expense and on terms that, in the reasonable judgment of such Lender, cause
such Lender and its lending office to suffer no material adverse economic, legal
or regulatory effect, and provided further that nothing in this Section 2.6(b)
shall affect or postpone any of the Obligations of Borrower or the rights of
such Lender pursuant to Section 2.6(a).

 

3. CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Credit Extension. Subject to the terms of
the Post Closing Letter, each Lender’s obligation to make a Term Loan is subject
to the condition precedent that Collateral Agent and each Lender shall consent
to or shall have received, in form and substance 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:

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

(b) duly executed original Control Agreements with respect to any Collateral
Accounts maintained by Borrower or any of its Subsidiaries;

(c) duly executed original Secured Promissory Notes in favor of each Lender
according to its Term Loan Commitment Percentage;

(d) the certificate(s) for the Shares, together with Assignment(s) Separate from
Certificate, duly executed in blank;

(e) 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;

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

(g) the Annual Projections, for the current fiscal year;

(h) duly executed original officer’s certificate for Borrower and each
Subsidiary that is a party to the Loan Documents, in a form acceptable to
Collateral Agent and the Lenders;

(i) 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 Uniform Commercial Code
termination statements) that the Liens indicated in any such financing
statements either constitute Permitted Liens or have been or, in connection with
the initial Credit Extension, will be terminated or released;

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

4

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(j) the Post Closing Letter;

(k) a landlord’s consent executed in favor of Collateral Agent in respect of all
of Borrower’s and each Subsidiaries’ leased locations;

(l) 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);

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

(n) 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; and

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

3.2 Conditions Precedent to all Credit Extensions. The obligation of each Lender
to make each Credit Extension, including the initial Credit Extension, is
subject to the following conditions precedent:

(a) receipt by (i) the Lenders of an executed Disbursement Letter in the form of
Exhibit B-1 attached hereto; and (ii) SVB of an executed Loan Payment/Advance
Request Form in the form of Exhibit B-2 attached hereto;

(b) the representations and warranties in Section 5 hereof shall be true,
accurate and complete in all material respects on the date of the Disbursement
Letter (and the Loan Payment/Advance Request Form) and on the Funding Date of
each Credit Extension; 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
Credit Extension. Each Credit Extension is Borrower’s representation and
warranty on that date that the representations and warranties in Section 5
hereof are true, accurate and complete in all material respects; 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;

(c) in such Lender’s sole reasonable discretion, there has not been any Material
Adverse Change or any material adverse deviation by Borrower from the Annual
Projections of Borrower presented to and accepted by Collateral Agent and each
Lender;

(d) to the extent not delivered at the Effective Date, duly executed original
Secured Promissory Notes and Warrants, in number, form and content acceptable to
each Lender, and in favor of each Lender according to its Commitment Percentage,
with respect to each Credit Extension made by such Lender after the Effective
Date; and

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

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

5

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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 Credit Extension. Borrower expressly
agrees that a Credit Extension 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 Credit
Extension 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, Borrower shall notify the Lenders (which notice shall be
irrevocable) by electronic mail, facsimile, or telephone by 2:00 p.m. Eastern
time three (3) 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 the Lenders by electronic mail or facsimile a
completed Disbursement Letter (and the Loan Payment/Advance Request Form, with
respect to SVB) executed by a Responsible Officer or his or her designee. The
Lenders may rely on any telephone notice given by a person whom a Lender
reasonably believes is a Responsible Officer or designee. On the Funding Date,
each Lender shall credit and/or transfer (as applicable) to the Designated
Deposit Account, an amount equal to its Term Loan Commitment.

 

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. Borrower represents, warrants, and covenants that
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. If Borrower shall acquire a commercial tort
claim (as defined in the Code) in an amount in excess of Twenty Five Thousand
Dollars ($25,000.00), Borrower shall promptly notify Collateral Agent in a
writing signed by Borrower of the general details thereof (and further details
as may reasonably be required by Collateral Agent) and grant to Collateral
Agent, for the ratable benefit of the Lenders, in such writing 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.

Borrower acknowledges that it previously has entered, and/or may in the future
enter, into Bank Services Agreements with Bank. Regardless of the terms of any
Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank
thereunder shall be deemed to be Obligations hereunder and that it is the intent
of Borrower and Bank to have all such Obligations secured by the first priority
perfected security interest in the Collateral granted herein (subject only to
Permitted Liens that are permitted to have superior priority to Bank’s Lien
under the terms of this Agreement).

If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are
repaid in full in cash. Upon payment in full in cash of the Obligations (other
than inchoate indemnity obligations) and at such time as the Lenders’ obligation
to make Credit Extensions 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. In the event (x) all Obligations (other than
inchoate indemnity obligations), except for Bank Services, are satisfied in
full, and (y) this Agreement is terminated, Bank shall terminate the security
interest granted herein upon Borrower providing cash collateral acceptable to
Bank in its good faith business judgment consistent with Bank’s then current
practice for Bank Services, if any. In the event such Bank Services consist of
outstanding Letters of Credit, Borrower shall provide to Bank cash collateral in
an amount equal to (x) if such Letters of Credit are denominated in Dollars,
then one hundred five percent (105%); and (y) if such Letters of Credit are
denominated in a Foreign Currency, then one hundred ten percent (110%), of the
Dollar Equivalent of the face amount of all such Letters of Credit plus all
interest, fees, and costs due or to become due in connection therewith (as
estimated by Bank in its good faith business judgment), to secure all of the
Obligations relating to such Letters of Credit.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

6

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Upon any sale, lease, transfer or other disposition of any item of Collateral of
any Borrower or Guarantor permitted by, and in accordance with, the terms of the
Loan Documents, or upon the effectiveness of any consent to the release of the
security interest granted hereby in any Collateral pursuant to this Agreement,
or upon the release of any Borrower or any Guarantor from its obligations under
this Agreement or the applicable Guaranty, if any, in accordance with the terms
of the Loan Documents, the Collateral Agent will, at such Borrower’s or
Guarantor’s sole cost and expense, execute and deliver to such Borrower or
Guarantor such documents as such Borrower or Guarantor shall reasonably request
to evidence the release of such item of Collateral from the assignment and
security interest granted hereby; provided, however, that (i) at the time of
such request and such release no Event of Default shall have occurred and be
continuing and (ii) such Borrower or Guarantor shall have delivered to the
Collateral Agent, at least ten (10) Business Days’ prior to the date of the
proposed release, a written request for release describing the item of
Collateral, together with a form of release for execution by the Collateral
Agent, and such other information as Collateral Agent may reasonably request.

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, including a
notice that any disposition of the Collateral, except to the extent permitted by
the terms of this Agreement, by Borrower, or any other Person, shall be deemed
to violate the rights of Collateral Agent under the Code. Such financing
statements may indicate the Collateral as “all assets of the Debtor other than
the Debtor’s Intellectual Property” or words of similar effect, or as being of
an equal or lesser scope, or with greater detail, all as reasonably determined
by Collateral Agent.

4.3 Pledge of Collateral. Borrower hereby pledges, assigns and grants to
Collateral Agent, for the ratable benefit of the Lenders, a security interest in
all the Shares, together with all proceeds and substitutions thereof, all cash,
stock and other moneys and property paid thereon, all rights to subscribe for
securities declared or granted in connection therewith, and all other cash and
noncash proceeds of the foregoing, as security for the performance of the
Obligations. On the Effective Date, or, to the extent not certificated as of the
Effective Date, within ten (10) days of the certification of any Shares, the
certificate or certificates for the Shares will be delivered to Collateral
Agent, accompanied by an instrument of assignment duly executed in blank by
Borrower. To the extent required by the terms and conditions governing the
Shares, Borrower shall cause the books of each entity whose Shares are part of
the Collateral and any transfer agent to reflect the pledge of the Shares. Upon
the occurrence and during the continuance of an Event of Default hereunder,
Collateral Agent may effect the transfer of any securities included in the
Collateral (including but not limited to the Shares) into the name of Collateral
Agent and cause new (as applicable) certificates representing such securities to
be issued in the name of Collateral Agent or its transferee. Borrower will
execute and deliver such documents, and take or cause to be taken such actions,
as Collateral Agent may reasonably request to perfect or continue the perfection
of Collateral Agent’s security interest in the Shares. Unless an Event of
Default shall have occurred and be continuing, Borrower shall be entitled to
exercise any voting rights with respect to the Shares and to give consents,
waivers and ratifications in respect thereof, provided that no vote shall be
cast or consent, waiver or ratification given or action taken which would be
inconsistent with any of the terms of this Agreement or which would constitute
or create any violation of any of such terms. All such rights to vote and give
consents, waivers and ratifications shall be suspended upon the occurrence and
continuance of an Event of Default.

 

5. REPRESENTATIONS AND WARRANTIES

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

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

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

7

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certificate signed by an officer of Borrower or such Subsidiary (as updated from
time to time by Borrower or the respective Subsidiary in accordance with this
Agreement, each a “Perfection Certificate” and collectively, the “Perfection
Certificates”). Borrower represents and warrants that (a) Borrower and each of
its Subsidiaries’ exact legal name is that which is indicated on its respective
Perfection Certificate and on the signature page of each Loan Document to which
it is a party; (b) Borrower and each of its Subsidiaries is an organization of
the type and is organized in the jurisdiction set forth on its respective
Perfection Certificate; (c) each Perfection Certificate accurately sets forth
each of Borrower’s and its Subsidiaries’ organizational identification number or
accurately states that Borrower or such Subsidiary has none; (d) each Perfection
Certificate accurately sets forth Borrower’s and each of its Subsidiaries’ place
of business, or, if more than one, its chief executive office as well as
Borrower’s and each of its Subsidiaries’ mailing address (if different than its
chief executive office); (e) except as set forth in the Perfection Certificate,
Borrower and each of its Subsidiaries (and each of its respective predecessors)
have not, in the past five (5) years, changed its jurisdiction of organization,
organizational structure or type, or any organizational number assigned by its
jurisdiction; and (f) all other information set forth on the Perfection
Certificates pertaining to Borrower and each of its Subsidiaries, is accurate
and complete (it being understood and agreed that Borrower and each of its
Subsidiaries may from time to time update certain information in the Perfection
Certificates (including the information set forth in clause (d) above) after the
Effective Date to the extent permitted by one or more specific provisions in
this Agreement); such updated Perfection Certificates subject to the review and
approval of Collateral Agent. If Borrower or any of its Subsidiaries is not now
a Registered Organization but later becomes one, Borrower shall notify
Collateral Agent of such occurrence and provide Collateral Agent with such
Person’s organizational identification number within five (5) Business Days of
receiving such organizational identification number.

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.

(b) 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 (such as a
warehouse), and (ii) no such third party bailee possesses components of the
Collateral in excess of Two Hundred Fifty Thousand Dollars ($250,000.00). None
of the components of the Collateral shall be maintained at locations other than
as disclosed in the Perfection Certificates on the Effective Date or as
permitted pursuant to Section 6.11.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

8

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(c) All Inventory is in all material respects of good and marketable quality,
free from material defects, except for Inventory for which adequate reserves
(such reserves not to exceed five percent (5.00%) of the book value of all such
Inventory) have been established and maintained.

(d) 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 with respect to which Borrower or
such Subsidiary is the licensee that (i) prohibits or otherwise restricts
Borrower or its Subsidiaries from granting a security interest in Borrower’s or
such Subsidiaries’ interest in such material license or material agreement or
any other property, or (ii) for which a default under or termination of could
interfere with Collateral Agent’s or any Lender’s right to sell any Collateral.
Borrower shall provide written notice to Collateral Agent and each Lender within
ten (10) days of Borrower or any of its Subsidiaries entering into or becoming
bound by any license or agreement with respect to with Borrower or any
Subsidiary is the licensee (other than over-the-counter software that is
commercially available to the public). Borrower shall, and shall cause its
Subsidiaries to, take such commercially reasonable steps as Collateral Agent and
any Lender requests to obtain the consent of, or waiver by, any Person whose
consent or waiver is necessary for (i) all licenses or agreements with respect
to which Borrower or any Subsidiary is the licensee to be deemed “Collateral”
and for Collateral Agent and each Lender to have a security interest in it that
might otherwise be restricted or prohibited by law or by the terms of any such
license or agreement, whether now existing or entered into in the future, and
(ii) Collateral Agent and each Lender shall have the ability in the event of a
liquidation of any Collateral to dispose of such Collateral in accordance with
Collateral Agent’s and such Lender’s rights and remedies under this Agreement
and the other Loan Documents.

5.3 Litigation. Except as disclosed (i) on the Perfection Certificates, or
(ii) in accordance with Section 6.9 hereof, 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 One Hundred Thousand Dollars ($100,000.00).

5.4 No Material Deterioration in Financial Position; 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 position of Borrower and its Borrower’s
Subsidiaries, and the consolidated results of operations of Borrower and its
Subsidiaries, subject only to year-end audit adjustments and the absence of
footnotes. There has not been any Material Adverse Change since the date of the
most recent financial statements submitted to any Lender.

5.5 Solvency. Borrower and each of its Subsidiaries 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. 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.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

9

--------------------------------------------------------------------------------

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) 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 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 following sentence. Borrower and each of its
Subsidiaries, may defer payment of any contested taxes, provided that Borrower
or such Subsidiary, (a) in good faith contests its obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted,
(b) notifies Collateral Agent in writing of the commencement of, and any
material development in, the proceedings, and (c) posts bonds or takes any other
steps required to prevent the Governmental Authority levying such contested
taxes from obtaining a Lien upon any of the Collateral that is other than a
“Permitted Lien.” As of the Effective Date, 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.
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
liability of Borrower or its Subsidiaries, including any liability to the
Pension Benefit Guaranty Corporation or its successors or any other Governmental
Authority.

5.9 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions
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 Shares. Borrower has full power and authority to create a first lien on the
Shares and no disability or contractual obligation exists that would prohibit
Borrower from pledging the Shares pursuant to this Agreement. To Borrower’s
knowledge, there are no subscriptions, warrants, rights of first refusal or
other restrictions on transfer relative to, or options exercisable with respect
to the Shares. The Shares have been and will be duly authorized and validly
issued, and are fully paid and non-assessable. To Borrower’s knowledge, the
Shares are not the subject of any present or threatened suit, action,
arbitration, administrative or other proceeding, and Borrower knows of no
reasonable grounds for the institution of any such proceedings.

5.11 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 in light of the circumstances under which such
statements were made (after giving effect to all supplements and updates
thereto) (it being recognized that the projections and forecasts provided by
Borrower in good faith and based upon assumptions believed to be reasonable by
the Borrower or such Subsidiary 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).

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

10

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5.12 Definition of “Knowledge.” For purposes of the Loan Documents, whenever a
representation or warranty is made to Borrower’s knowledge or awareness, 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.

 

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 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. Borrower shall promptly provide copies to Collateral
Agent of any material Governmental Approvals obtained by Borrower or any of its
Subsidiaries.

6.2 Financial Statements, Reports, Certificates.

(a) Deliver to each Lender:

(i) as soon as available, but no later than thirty-five (35) days after the last
day of each month, 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;
provided that, for the avoidance of doubt, the form of such balance sheet,
income statement and cash flow statement prepared by the Borrower for the month
ending March 31, 2012 is a form reasonably acceptable to Collateral Agent;

(ii) as soon as available, but no later than one hundred eighty (180) days after
the last day of Borrower’s fiscal year or within five (5) days of filing with
the SEC, 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; provided that KMJ Corbin &
Company LLP is a firm acceptable to Collateral Agent;

(iii) as soon as available after approval thereof by Borrower’s Board of
Directors, but no later than sixty (60) days after the last day of each of
Borrower’s fiscal years, Borrower’s annual financial projections for the entire
current fiscal year as approved by Borrower’s Board of Directors, which such
annual financial projections shall be set forth in a month-by-month format (such
annual financial projections as originally delivered to Collateral Agent and the
Lenders are referred to herein as the “Annual Projections”; provided that, any
revisions of the Annual Projections approved by Borrower’s Board of Directors
shall be delivered to Collateral Agent and the Lenders no later than fifteen
(15) days after such approval; and, unless Collateral Agent notifies Borrower to
the contrary in writing within five (5) Business Days after receipt thereof, the
term “Annual Projections” shall include such revisions);

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

11

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(iv) within five (5) days of delivery, copies of all statements, reports and
notices made available to Borrower’s 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) prompt notice of (A) any material change in the composition of the
Intellectual Property, (B) prompt notice of Borrower’s knowledge of any event
that could reasonably be expected to materially and adversely affect the value
of the Intellectual Property;

(vii) prompt (but no more frequently than fifteen (15) days after the end of
each quarter during the term hereof, unless an Event of Default has occurred),
notice of the registration of any copyright, including any subsequent ownership
right of Borrower or any of its Subsidiaries in or to any copyright, patent or
trademark, including a copy of any such registration;

(viii) as soon as available, but no later than thirty-five (35) days after the
last day of each month, copies of the month-end account statements for each
Deposit Account or Securities Account maintained by Borrower or its
Subsidiaries, which statements may be provided to Collateral Agent and each
Lender by Borrower or directly from the applicable institution(s);

(ix) prompt notice of any material amendments of or other material changes to
the capitalization table of Borrower and to the Operating Documents of Borrower
or any of its Subsidiaries, together with any copies reflecting such amendments
or changes with respect thereto; and

(x) other financial 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 SEC) 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-five (35) days after the last
day of each month, deliver to each Lender, a duly completed Compliance
Certificate signed by a Responsible Officer.

(c) Keep proper books of record and account in accordance with GAAP in all
material respects, in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities. 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.

If any date on which Borrower is required to deliver any information or
certificates pursuant to Section 6.2(a) or Section 6.2(b) is not a Business Day,
Borrower shall be permitted to deliver such information on the next day
following such date that is a Business Day.

6.3 Inventory; Returns. Keep all Inventory in good and marketable condition,
free from material defects, except for Inventory for which adequate reserves
(such reserves not to exceed five percent (5.00%) of the book value of all such
Inventory) have been established and maintained. Returns and allowances between
Borrower, or any of its Subsidiaries, and their respective Account Debtors shall
follow Borrower’s, or such

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

12

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Subsidiary’s, customary practices as they exist at the Effective Date. Borrower
must promptly notify Collateral Agent and the Lenders of all returns,
recoveries, disputes and claims that involve more than (x) Two Hundred Fifty
Thousand Dollars ($250,000.00) individually, or (y) Five Hundred Thousand
Dollars ($500,000.00) in the aggregate; in any fiscal year.

6.4 Taxes; Pensions. Timely file and require each of its Subsidiaries to timely
file, all required tax returns and reports 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,
except for deferred payment of any taxes contested pursuant to the terms of
Section 5.8 hereof, and shall deliver to Lenders, 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.

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. 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. All property, casualty and liability policies (or the
loss payable and additional insured endorsements) shall provide that the insurer
shall endeavor to give Collateral Agent at least thirty (30) days notice before
canceling, amending, or declining to renew its policy. At Collateral Agent’s
request, Borrower shall deliver certified copies of policies and evidence of all
premium payments. Proceeds payable under any property, casualty or liability
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 up to Two Hundred Fifty Thousand Dollars ($250,000.00) with
respect to any loss, but not exceeding Five Hundred Thousand Dollars
($500,000.00), 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, 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) Maintain all of Borrower’s and its Subsidiaries’, domestic Collateral
Accounts in accounts which are subject to a Control Agreement in favor of
Collateral Agent.

(b) Borrower shall provide Collateral Agent five (5) days’ prior written notice
before Borrower or any of its Subsidiaries establishes any Collateral Account at
or with any Person other than Bank or its Affiliates or any of the institutions
identified on the Perfection Certificates and subject to Control Agreements in
favor of Collateral Agent. In addition, for each Collateral 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 deposit accounts exclusively used for payroll, payroll taxes
and other employee wage and benefit payments to or for the benefit of
Borrower’s, or any of its Subsidiaries’, employees and identified to Collateral
Agent by Borrower as such in the Perfection Certificates.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

13

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

(d) Collateral Agent and the Lenders agree not to give a notice of exclusive
control, entitlement order, or other similar directions or instructions under
any Control Agreement unless an Event of Default has occurred and is continuing.

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

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, upon reasonable notice and at reasonable times (unless an Event
of Default has occurred), 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 Notice of Litigation; Notice of Default.

(a) Borrower will give prompt written notice to Collateral Agent and the Lenders
of any litigation or governmental proceedings pending or threatened (in writing)
by or against Borrower or any of its Subsidiaries, involving or which could
reasonably be expected to result in damages or costs to Borrower or any of its
Subsidiaries of One Hundred Thousand Dollars ($100,000.00) or more or which
could reasonably be expected to have a Material Adverse Change.

(b) Without limiting or contradicting any other more specific provision of this
Agreement, promptly (and in any event within three (3) Business Days) 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, Borrower shall give written notice to Collateral Agent and the
Lenders 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.

6.10 Performance to Plan; Revenues. Borrower shall either (a) achieve revenues,
measured as of the last day of each fiscal month, on a trailing three (3) month
basis, of at least [**] of the revenues projected for such three-month period in
the Annual Projections delivered to Collateral Agent and the Lenders pursuant to
Section 6.2(a)(iii); or (b) maintain unrestricted cash and Cash Equivalents in
Collateral Accounts subject to Control Agreements in favor of Collateral Agent
equal to at least one and one half (1.50) times the then-outstanding amount of
the Obligations.

6.11 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
($250,000.00) in the aggregate, 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.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

14

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6.12 Creation/Acquisition of Subsidiaries. In the event Borrower, or any of its
Subsidiaries creates or acquires any Subsidiary, Borrower shall (a) provide
prompt written notice to Collateral Agent and each Lender of the creation or
acquisition of such new Subsidiary and (b) promptly (and, in any event, within
ten (10) Business Days of such creation or acquisition) (i) take all such action
as may be reasonably required by Collateral Agent or any Lender to cause each
such Subsidiary to become a co-Borrower hereunder or to guarantee the
Obligations of Borrower under the Loan Documents, (ii) grant a continuing pledge
and security interest in and to the assets of such Subsidiary (substantially as
described on Exhibit A hereto) (unless Borrower demonstrates to Collateral
Agent’s reasonable satisfaction that such a pledge and security interest by a
Subsidiary which is not an entity organized under the laws of the United States
or any territory thereof, creates a present and existing adverse tax consequence
to Borrower under the U.S. Internal Revenue Code); and (iii) grant and pledge to
Collateral Agent, for the ratable benefit of the Lenders, a perfected security
interest in the Shares of each such Subsidiary.

6.13 Further Assurances.

(a) 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.

(b) Deliver to Collateral Agent and Lenders, 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 reasonably be expected to have
Material Adverse Change.

 

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 or otherwise
make cash payments consisting of (collectively, “Transfer”), or permit any of
its Subsidiaries to Transfer, all or any part of its business or property,
except for Transfers (a) consisting of cash payments to trade creditors in the
ordinary course of business; (b) of Inventory in the ordinary course of
business; (c) of worn-out or obsolete Equipment; (d) in connection with
Permitted Liens and Permitted Investments; (e) Permitted Licenses; or (f) to the
extent the same are contemplated in the Annual Projections; provided that Parent
may make royalty and milestone payments, and may pay upfront and other similar
fees, all in connection with in-bound licenses, in an amount not to exceed Five
Million Dollars ($5,000,000.00) in the aggregate in any fiscal year.

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) except as permitted in Section 7.3, liquidate or
dissolve; or (c) (i) any Key Person shall cease to be actively engaged in the
management of Borrower unless a replacement for such Key Person is approved by
Borrower’s Board of Directors and engaged by Borrower within one hundred eighty
(180) days of such change, or (ii) enter into any transaction or series of
related transactions in which the stockholders of Borrower who were not
stockholders immediately prior to the first such transaction own more than forty
nine percent (49%) of the voting stock of Borrower immediately after giving
effect to such transaction or related series of such transactions (other than by
the sale of Borrower’s equity securities in a public offering, a private
placement of public equity or to venture capital investors so long as Borrower
identifies to Collateral Agent the venture capital investors prior to the
closing of the transaction). Borrower shall not, without at least twenty
(20) 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)

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

15

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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.

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 that either (a) such surviving
Subsidiary is a “co Borrower” hereunder or has provided a secured Guaranty of
Borrower’s Obligations hereunder or (b) neither Subsidiary is a co-Borrower
hereunder or is required to provide, 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 that are permitted by the
terms of this Agreement to have priority over Collateral Agent’s Lien), 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” herein.

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

7.7 Distributions; Investments. (a) 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 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 such repurchases do not exceed One Hundred
Thousand Dollars ($100,000.00) in the aggregate per fiscal year) or (b) directly
or indirectly make any Investment other than Permitted Investments, or permit
any of its Subsidiaries to do so.

7.8 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, (b) Subordinated Debt
or equity investments by Borrower’s investors in Borrower or its Subsidiaries
and (c) Investments permitted under subclause (j) of the defined term “Permitted
Investments.”

7.9 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.

7.10 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 Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

16

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occur; 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.

7.11 Compliance with Anti-Terrorism Laws. Collateral Agent hereby notifies
Borrower and each of its Subsidiaries that pursuant to the requirements of
Anti-Terrorism Laws, and Collateral Agent’s policies and practices, Collateral
Agent is required to obtain, verify and record certain information and
documentation that identifies Borrower and each of its Subsidiaries and their
principals, which information includes the name and address of Borrower and each
of its Subsidiaries and their principals and such other information that will
allow Collateral Agent to identify such party in accordance 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. Borrower and each of its Subsidiaries shall
immediately notify Collateral Agent 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. 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.

 

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 or
interest on any Credit Extension on its due date, or (b) pay 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 of acceleration pursuant to Section 9.1
(a) hereof). During the cure period, the failure to cure the payment default is
not an Event of Default (but no Credit Extension will be made during the cure
period);

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 (Notice of Litigation and Default), 6.10
(Performance to Plan; Revenues), 6.11 (Landlord Waivers; Bailee Waivers), 6.12
(Creation/Acquisition of Subsidiaries) or 6.13 (Further Assurances) or Borrower
violates any covenant 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
ten (10) days after the earlier to occur of the date on which (i) written notice
thereof is furnished to Borrower by the Collateral Agent or any Lender or
(ii) Borrower or any Responsible Officer thereof knew, should have known or
became aware of such failure; provided, however,

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

17

--------------------------------------------------------------------------------

that if the default cannot by its nature be cured within the ten (10) day period
or cannot after diligent attempts by Borrower be cured within such ten (10) 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 Credit Extensions shall be made during such cure period). Grace
periods provided under this Section shall not apply, among other things, to
financial covenants or any other covenants set forth in subsection (a) above;

8.3 Material Adverse Change. A Material Adverse Change occurs;

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 Lender or any Lender’s
Affiliate or any bank or other 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 assets by any
government agency, and the same under subclauses (i) and (ii) hereof are not,
within ten (10) days after the occurrence thereof, discharged or stayed (whether
through the posting of a bond or otherwise); provided, however, no Credit
Extensions shall be made during any ten (10) day cure period; 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 all or any material 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 forty-five (45) days (but no
Credit Extensions shall be made while Borrower or any Subsidiary is Insolvent
and/or until any Insolvency Proceeding is dismissed);

8.6 Other Agreements. There is 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;

8.7 Judgments. 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 as to which liability has been accepted by such insurance carrier)
shall be rendered against Borrower or any of its Subsidiaries and shall remain
unsatisfied, unvacated, or unstayed for a period of twenty (20) days after the
entry thereof (provided that no Credit Extensions will be made prior to the
satisfaction, vacation, or stay of such judgment, order or decree);

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 is incorrect in any material
respect when made;

8.9 Subordinated Debt. A default or breach occurs under any 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 terms of
such agreement;

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

18

--------------------------------------------------------------------------------

8.10 Guaranty. (a) Except for any Guaranty permitted to be and in fact released
or terminated by Collateral Agent pursuant to this Agreement or the other Loan
Documents, 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 (and, except with respect to the provisions described in the
following subclause (c), such failure to perform remains uncured for a ten
(10) day period (or if such failure to perform is likely to be cured within a
reasonable time, then such failure to perform remains uncured for an additional
period not to exceed thirty (30) days)); (c) any circumstance described in
Sections 8.3, 8.4, 8.5, 8.7, or 8.8 occurs with respect to any Guarantor, or
(d) the death. liquidation, winding up, or termination of existence of any
Guarantor;

8.11 Governmental Approvals. Any Governmental Approval shall have been revoked,
rescinded, suspended, modified in an adverse manner, or not renewed in the
ordinary course for the full term of such Governmental Approval, if any, and
such revocation, rescission, suspension, modification or non-renewal has
resulted in or could reasonably be expected to result in a Material Adverse
Change;

8.12 Generic of Nuedexta. A commercial, generic version of Nuedexta (for the
treatment of pseudobulbar affect) becomes available; or

8.13 Lien Priority. Except for Liens permitted to be and in fact released or
terminated by Collateral Agent pursuant to this Agreement or the other Loan
Documents, any Lien created hereunder or by any other Loan Document shall at any
time fail to constitute a valid and perfected Lien on any of the Collateral
purported to be secured thereby, subject to no prior or equal Lien, other than
Permitted Liens which are permitted to have priority in accordance with the
terms of this Agreement.

 

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, and at the written direction of any Lender shall, 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

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

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

19

--------------------------------------------------------------------------------

(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 non-exclusive license to
enter and occupy any of its premises, without charge, as Collateral Agent deems
reasonably necessary 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;

(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);

(viii) for any Letters of Credit, demand that Borrower (i) deposit cash with
Bank in an amount equal to (x) if such Letters of Credit are denominated in
Dollars, then one hundred five percent (105%); and (y) if such Letters of Credit
are denominated in a Foreign Currency, then one hundred ten percent (110%), of
the Dollar Equivalent of the aggregate face amount of all Letters of Credit
remaining undrawn (plus all interest, fees, and costs due or to become due in
connection therewith (as estimated by Bank in its good faith business
judgment)), to secure all of the Obligations relating to such Letters of Credit,
as collateral security for the repayment of any future drawings under such
Letters of Credit, and Borrower shall forthwith deposit and pay such amounts,
and (ii) pay in advance all letter of credit fees scheduled to be paid or
payable over the remaining term of any Letters of Credit; and

(ix) terminate any FX Contracts.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

20

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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 Credit Extensions 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
Credit Extensions terminates.

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

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

21

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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.

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:

  

AVANIR PHARMACEUTICALS, INC.

20 Enterprise, Suite 200

Aliso Viejo, CA 92656

Attn: Christine Ocampo, CPA

Fax: (949) 643-6807

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

22

--------------------------------------------------------------------------------

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

Ropes & Gray LLP

Three Embarcadero Center

San Francisco, CA 94111

Attn: Ryan Murr

Fax: (415) 315-6026

If to Collateral Agent:   

OXFORD FINANCE LLC

133 North Fairfax Street

Alexandria, Virginia 22314

Attention: Legal Department

Fax: (703) 519-5225

with a copy to   

SILICON VALLEY BANK

38 Technology Drive West, Suite 150

Irvine, CA 92618

Attn: Brian Maver

Fax: (949) 790-9020

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

DLA Piper LLP (US)

4365 Executive Drive, Suite 1100

San Diego, California 92121-2133

Attn: Troy Zander

Fax: (858) 638-5086

 

11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER, AND JUDICIAL REFERENCE

California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower, Collateral Agent and each Lender each submit to the
exclusive jurisdiction of the State and Federal courts in Santa Clara County,
California; provided, however, that nothing in this Agreement shall be deemed to
operate to preclude Collateral Agent or any Lender from bringing suit or taking
other legal action in any other jurisdiction to realize on the Collateral or any
other security for the Obligations, or to enforce a judgment or other court
order in favor of Collateral Agent or any Lender. Borrower expressly submits and
consents in advance to such jurisdiction in any action or suit commenced in any
such court, and Borrower hereby waives any objection that it may have based upon
lack of personal jurisdiction, improper venue, or forum non conveniens and
hereby consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in,
or subsequently provided by Borrower in accordance with, Section 10 of this
Agreement and that service so made shall be deemed completed upon the earlier to
occur of Borrower’s actual receipt thereof or three (3) days after deposit in
the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT
AND EACH LENDER EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial
by jury is not enforceable, the parties hereto agree that any and all disputes
or controversies of any nature between them arising at any time

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

23

--------------------------------------------------------------------------------

shall be decided by a reference to a private judge, mutually selected by the
parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara
County, California Superior Court) appointed in accordance with California Code
of Civil Procedure Section 638 (or pursuant to comparable provisions of federal
law if the dispute falls within the exclusive jurisdiction of the federal
courts), sitting without a jury, in Santa Clara County, California; and the
parties hereby submit to the jurisdiction of such court. The reference
proceedings shall be conducted pursuant to and in accordance with the provisions
of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The
private judge shall have the power, among others, to grant provisional relief,
including without limitation, entering temporary restraining orders, issuing
preliminary and permanent injunctions and appointing receivers. All such
proceedings shall be closed to the public and confidential and all records
relating thereto shall be permanently sealed. If during the course of any
dispute, a party desires to seek provisional relief, but a judge has not been
appointed at that point pursuant to the judicial reference procedures, then such
party may apply to the Santa Clara County, California Superior Court for such
relief. The proceeding before the private judge shall be conducted in the same
manner as it would be before a court under the rules of evidence applicable to
judicial proceedings. The parties shall be entitled to discovery which shall be
conducted in the same manner as it would be before a court under the rules of
discovery applicable to judicial proceedings. The private judge shall oversee
discovery and may enforce all discovery rules and orders applicable to judicial
proceedings in the same manner as a trial court judge. The parties agree that
the selected or appointed private judge shall have the power to decide all
issues in the action or proceeding, whether of fact or of law, and shall report
a statement of decision thereon pursuant to California Code of Civil Procedure §
644(a). Nothing in this paragraph shall limit the right of any party at any time
to exercise self-help remedies, foreclose against collateral, or obtain
provisional remedies. The private judge shall also determine all issues relating
to the applicability, interpretation, and enforceability of this paragraph.

 

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 and each Lender’s prior written consent (which may be granted
or withheld in Collateral Agent’s and each Lender’s discretion, subject to
Section 12.6). 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; provided, however, that any such Lender Transfer (other than a
transfer, pledge, sale or assignment to an Eligible Assignee) of its
obligations, rights, and benefits under this Agreement and the other Loan
Documents shall require the prior written consent of the Required Lenders (such
approved assignee, an “Approved Lender”). Borrower and Collateral Agent shall be
entitled to continue to deal solely and directly with such Lender in connection
with the interests so assigned until Collateral Agent shall have received and
accepted an effective assignment agreement in form satisfactory to Collateral
Agent executed, delivered and fully completed by the applicable parties thereto,
and shall have received such other information regarding such Eligible Assignee
or Approved Lender as Collateral Agent reasonably shall require. Notwithstanding
anything to the contrary contained herein, so long as no Event of Default has
occurred and is continuing, no Lender Transfer (other than a Lender Transfer
(i) in respect of the Warrants or (ii) in connection with (x) assignments by a
Lender due to a forced divestiture at the request of any regulatory agency; or
(y) upon the occurrence of a default, event of default or similar occurrence
with respect to a Lender’s own financing or securitization transactions) shall
be permitted, without Borrower’s consent, to any Person which is an Affiliate or
Subsidiary of Borrower, a direct competitor of Borrower or a vulture hedge fund,
each as determined by Collateral Agent.

12.2 Indemnification. Borrower agrees to indemnify, defend and hold Collateral
Agent and the Lenders and their respective directors, officers, employees,
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

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

24

--------------------------------------------------------------------------------

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 Time of Essence. Time is of the essence for the performance of all
Obligations in this Agreement.

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

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

12.6 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;

(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 12.6 or the
definitions of the terms used in this Section 12.6 insofar as the definitions
affect the substance of this Section 12.6; (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 Pro Rata Share,
Term Loan Commitment,

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

25

--------------------------------------------------------------------------------

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 12.10. 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 preceding sentence;

(iv) the provisions of the foregoing clauses (i), (ii) and (iii) are subject to
the provisions of any interlender or agency agreement among the Lenders and
Collateral Agent pursuant to which any Lender may agree to give its consent in
connection with any amendment, waiver or modification of the Loan Documents only
in the event of the unanimous agreement of all Lenders.

(b) Other than as expressly provided for in Section 12.6(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. 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.

12.7 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.

12.8 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. Without limiting the
foregoing, except as otherwise provided in Section 4.1, the grant of security
interest by Borrower in Section 4.1 shall survive until the termination of all
Bank Services Agreements. The obligation of Borrower in Section 12.2 to
indemnify each Lender and Collateral Agent, as well as the confidentiality
provisions in Section 12.9 below, shall survive until the statute of limitations
with respect to such claim or cause of action shall have run.

12.9 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, or in connection
with a Lender’s own financing or securitization transactions and upon the
occurrence of a default, event of default or similar occurrence with respect to
such financing or securitization transaction (it being understood that the
Persons to whom such disclosure is made will be (and hereby are) informed of the
confidential nature of such information); (b) to prospective transferees (other
than those identified in (a) above) or purchasers of any interest in a Term Loan
(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 following the occurrence of an Event of Default; 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 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 prior to
the disclosure by Borrower to the Lenders and/or Collateral Agent; (ii) becomes
part of the public domain, through no fault or omission by Lender and/or
Collateral Agent, after disclosure to the Lenders and/or Collateral Agent; or
(iii) 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

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

26

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disclosing the information. Collateral Agent and the Lenders may use
confidential information for any purpose in accordance with the terms of this
Agreement, including, without limitation, for the development of client
databases, reporting purposes, and market analysis, so long as neither the
Collateral Agent nor any Lender discloses Borrower’s identity or the identity of
any person associated with Borrower unless otherwise expressly permitted by this
Agreement. The provisions of the immediately preceding sentence shall survive
the termination of this Agreement. The agreements provided under this
Section 12.9 supersede all prior agreements, understanding, representations,
warranties, and negotiations between the parties about the subject matter of
this Section 12.9.

12.10 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.

12.11 Silicon Valley Bank as Agent. Collateral Agent hereby appoints Silicon
Valley Bank (“SVB”) as its agent (and SVB hereby accepts such appointment) for
the purpose of perfecting Collateral Agent’s Liens in assets which, in
accordance with Article 8 or Article 9, as applicable, of the Code can be
perfected by possession or control, including without limitation, all deposit
accounts maintained at SVB.

12.12 Cooperation of Borrower. If necessary, Borrower agrees to (a) execute any
documents (including new Secured Promissory Notes) reasonably required to
effectuate and acknowledge each assignment of a Term Loan Commitment or Loan to
an assignee in accordance with Section 12.1, (b) upon reasonable prior notice to
Borrower (unless an Event of Default has occurred), make Borrower’s management
available to meet with Collateral Agent and prospective participants and
assignees of the Term Loan Commitments or Credit Extensions (which meetings
shall be conducted no more often than twice every twelve months unless an Event
of Default has occurred and is continuing), and (c) 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 confidentiality provisions
of Section 12.9, 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.

12.13 Borrower Liability. Any Borrower may, acting singly, request Credit
Extensions hereunder. Each Borrower hereby appoints the other as agent for the
other for all purposes hereunder, including with respect to requesting Credit
Extensions hereunder. Each Borrower hereunder shall be jointly and severally
obligated to repay all Credit Extensions made hereunder, regardless of which
Borrower actually receives said Credit Extension, as if each Borrower hereunder
directly received all Credit Extensions. Each Borrower waives (a) any suretyship
defenses available to it under the Code or any other applicable law, including,
without limitation, the benefit of California Civil Code Section 2815 permitting
revocation as to future transactions and the benefit of California Civil Code
Sections 1432, 2809, 2810, 2819, 2839, 2845, 2847, 2848, 2849, 2850, and 2899
and 3433, and (b) any right to require Collateral Agent or any Lender to:
(i) proceed against any Borrower or any other person; (ii) proceed against or
exhaust any security; or (iii) pursue any other remedy. Collateral Agent and or
any Lender may exercise or not exercise any right or remedy it has against any
Borrower or any security it holds (including the right to foreclose by judicial
or non-judicial sale) without affecting any Borrower’s liability.
Notwithstanding any other provision of this Agreement or other related document,
each Borrower irrevocably waives all rights that it may have at law or in

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

27

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equity (including, without limitation, any law subrogating Borrower to the
rights of Collateral Agent and the Lenders under this Agreement) to seek
contribution, indemnification or any other form of reimbursement from any other
Borrower, or any other Person now or hereafter primarily or secondarily liable
for any of the Obligations, for any payment made by Borrower with respect to the
Obligations in connection with this Agreement or otherwise and all rights that
it might have to benefit from, or to participate in, any security for the
Obligations as a result of any payment made by Borrower with respect to the
Obligations in connection with this Agreement or otherwise. Any agreement
providing for indemnification, reimbursement or any other arrangement prohibited
under this Section shall be null and void. If any payment is made to a Borrower
in contravention of this Section, such Borrower shall hold such payment in trust
for Collateral Agent and the Lenders and such payment shall be promptly
delivered to Collateral Agent for application to the Obligations, whether
matured or unmatured.

 

13. DEFINITIONS

13.1 Definitions. As used in this Agreement, the following terms have the
following meanings:

“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.

“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.

“Agreement” is defined in the preamble hereof.

“Amortization Date” is July 1, 2013; provided that, upon the Interest-Only
Extension, the Amortization Date shall be January 1, 2014.

“Annual Projections” is defined in Section 6.2(a).

“Anti-Terrorism Laws” are any laws relating to terrorism or money laundering,
including 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.

“Approved Fund” is any (i) investment company, fund, trust, securitization
vehicle or conduit that is (or will be) engaged in making, purchasing, holding
or otherwise investing in commercial loans and similar extensions of credit in
the ordinary course of its business or (ii) any Person (other than a natural
person) which temporarily warehouses loans for any Lender or any entity
described in the preceding clause (i) and that, with respect to each of the
preceding clauses (i) and (ii), is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender or (c) a Person (other than a natural person) or an
Affiliate of a Person (other than a natural person) that administers or manages
a Lender.

“Approved Lender” is defined in Section 12.1.

“Bank Services” are any products, credit services, and/or financial
accommodations previously, now, or hereafter provided to Borrower or any of its
Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any
letters of credit, cash management services (including, without limitation,
merchant services, direct deposit of payroll, business credit cards, and check
cashing services), interest rate swap arrangements, and foreign exchange
services as any such products or services may be identified in Bank’s various
agreements related thereto (each, a “Bank Services Agreement”).

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

28

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“Bank” is defined in the preamble hereof.

“Basic Rate” is the per annum rate of interest (based on a year of three hundred
sixty (360) days) equal to the greater of (i) eight and ninety-five hundredths
percent (8.95%) and (ii) the sum of (a) the three (3) month U.S. LIBOR rate
reported in the Wall Street Journal three (3) Business Days prior to the Funding
Date of such Term Loan (which shall not be less than fifty seven hundredths
percent (0.57%)), plus (b) eight and thirty-eight hundredths percent (8.38%).

“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” is defined in the preamble hereof.

“Borrower’s Board of Directors” is the board of directors of Avanir
Pharmaceuticals, Inc.

“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. For the avoidance of doubt, the direct
purchase by Borrower or any of its Subsidiaries of any Auction Rate Securities,
or purchasing participations in, or entering into any type of swap or other
derivative transaction, or otherwise holding or engaging in any ownership
interest in any type of Auction Rate Security by Borrower or any of its
Subsidiaries shall be conclusively determined by the Lenders as an ineligible
Cash Equivalent, and any such transaction shall expressly violate each other
provision of this Agreement governing Permitted Investments. Notwithstanding the
foregoing, Cash Equivalents does not include and Borrower, and each of its
Subsidiaries, are prohibited from purchasing, purchasing participations in,
entering into any type of swap or other equivalent derivative transaction, or
otherwise holding or engaging in any ownership interest in any type of debt
instrument, including, without limitation, any corporate or municipal bonds with
a long-term nominal maturity for which the interest rate is reset through a
dutch auction and more commonly referred to as an auction rate security.

“Claims” are defined in Section 12.2.

“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of California; 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 California,
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.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

29

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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.

“Collateral Agent” is, Oxford, not in its individual capacity, but solely in its
capacity as agent on behalf of and for the benefit of the Lenders.

“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.

“Communication” is defined in Section 10.

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

“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 or the securities intermediary or commodity intermediary at which
Borrower or any of its Subsidiaries maintains a Securities Account or a
Commodity Account, Borrower and such Subsidiary, and Collateral Agent pursuant
to which Collateral Agent obtains control (within the meaning of the Code) for
the benefit of the Lenders 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 or authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret.

“Credit Extension” is any Term Loan or any other extension of credit by
Collateral Agent or Lenders for Borrower’s benefit.

“Default Rate” is defined in Section 2.3(b).

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

“Designated Deposit Account” is Borrower’s deposit account, account number
5W102D45, maintained with Bank of America, Merrill Lynch.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

30

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“Disbursement Letter” is that certain form attached hereto as Exhibit B-1.

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

“Effective Date” is defined in the preamble of this Agreement.

“Eligible Assignee” is (i) a Lender, (ii) an Affiliate of a Lender, (iii) an
Approved Fund and (iv) any commercial bank, savings and loan association or
savings bank or any other entity which is an “accredited investor” (as defined
in Regulation D under the Securities Act of 1933, as amended) and which extends
credit or buys loans as one of its businesses, including insurance companies,
mutual funds, lease financing companies and commercial finance companies, in
each case, which either (A) has a rating of BBB or higher from Standard & Poor’s
Rating Group and a rating of Baa2 or higher from Moody’s Investors Service, Inc.
at the date that it becomes a Lender or (B) has total assets in excess of Five
Billion Dollars ($5,000,000,000.00), and in each case of clauses (i) through
(iv), which, through its applicable lending office, is capable of lending to
Borrower without the imposition of any withholding or similar taxes; provided
that notwithstanding the foregoing, “Eligible Assignee” shall not include,
unless an Event of Default has occurred and is continuing, (i) Borrower or any
of Borrower’s Affiliates or Subsidiaries or (ii) a direct competitor of Borrower
or a vulture hedge fund, each as determined by Collateral Agent. Notwithstanding
the foregoing, (x) in connection with assignments by a Lender due to a forced
divestiture at the request of any regulatory agency, the restrictions set forth
herein shall not apply and Eligible Assignee shall mean any Person or party and
(y) in connection with a Lender’s own financing or securitization transactions,
the restrictions set forth herein shall not apply and Eligible Assignee shall
mean any Person or party providing such financing or formed to undertake such
securitization transaction and any transferee of such Person or party upon the
occurrence of a default, event of default or similar occurrence with respect to
such financing or securitization transaction; provided that no such sale,
transfer, pledge or assignment under this clause (y) shall release such Lender
from any of its obligations hereunder or substitute any such Person or party for
such Lender as a party hereto until Collateral Agent shall have received and
accepted an effective assignment agreement from such Person or party in form
satisfactory to Collateral Agent executed, delivered and fully completed by the
applicable parties thereto, and shall have received such other information
regarding such Eligible Assignee as Collateral Agent reasonably shall require.

“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.

“Event of Default” is defined in Section 8.

“Foreign Subsidiary” is defined in Section 6.12.

“Final Payment” is a payment (in addition to and not a substitution for the
regular monthly payments of principal plus accrued interest) 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 an
amount equal to the original principal amount of such Term Loan multiplied by
the Final Payment Percentage, payable to Lenders in accordance with their
respective Pro Rata Shares.

“Final Payment Percentage” is seven percent (7.00%).

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

“Funding Date” is the first date on or after June 1, 2012 on which all
conditions precedent set forth in Section 3 have been satisfied or waived and a
Credit Extension is made to or on account of Borrower, which date shall be a
Business Day.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

31

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“FX Contract” is any foreign exchange contract by and between Borrower and Bank
under which Borrower commits to purchase from or sell to Bank a specific amount
of Foreign Currency on a specified date.

“GAAP” is generally accepted accounting principles in the United States of
America, as in effect from time to time and in accordance with the applicable
rules and regulations promulgated by the Securities and Exchange Commission. If
at any time any change in GAAP (including the adoption of IFRS) would affect the
computation of any financial ratio or requirement set forth in any Loan
Document, and either Borrower or the Required Lenders shall so request,
Collateral Agent, the Lenders and Borrower shall negotiate in good faith to
amend such ratio or requirement to preserve the original intent thereof in light
of such change in GAAP (subject to the approval of the Required Lenders);
provided that, until so amended, (A) such ratio or requirement shall continue to
be computed in accordance with GAAP prior to such change therein and
(B) Borrower shall provide to Collateral Agent and the Lenders financial
statements and other documents required under this Agreement or as reasonably
requested hereunder setting forth a reconciliation between calculations of such
ratio or requirement made before and after giving effect to such change in GAAP.
Without limiting the foregoing, capital leases shall continue to be classified
and accounted for on a basis consistent with that reflected in Borrower’s
audited financial statements (for periods prior to the Effective Date) for all
purposes of this Agreement, notwithstanding any change in GAAP relating thereto,
unless the parties hereto shall enter into a mutually acceptable amendment
addressing such changes, as provided for above.

“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, 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.

“Guarantor” is any Person providing a Guaranty in favor of Collateral Agent.

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

“IFRS” are the International Financial Reporting Standards, a collection of
guidelines and rules set by the International Accounting Standards Board
(www.iasb.org) which are applicable to the circumstances as of the date of
determination.

“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.

“Indemnified Person” is defined in Section 12.2.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

32

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“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, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

“Insolvent” means not Solvent.

“Intellectual Property” means all of Borrower’s or any Subsidiary’s 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; and

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

“Interest-Only Extension” is the achievement by Borrower, for the reporting
period ending April 30, 2013, of actual revenues to projected revenues (as
reflected in the Annual Projections), on a trailing twelve (12) month basis, of
at least [**].

“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, 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, payment
or capital contribution to any Person.

“Key Person” is each of Borrower’s (i) President and Chief Executive Officer,
who is Keith Katkin as of the Effective Date, (ii) Vice President Finance, Chief
Compliance Officer, who is Christine Ocampo as of the Effective Date, (iii) Sr.
Vice President, Research & Development, who is Joao Siffert as of the Effective
Date and (iv) Sr. Vice President, Sales and Marketing, who is Rohan Palekar as
of the Effective Date.

“Lender” is any one of the Lenders.

“Lenders” are the Persons identified on Schedule 1.1 hereto and each 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.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

33

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“Letter of Credit” is a standby or commercial letter of credit issued by Bank
upon request of Borrower based upon an application, guarantee, indemnity, or
similar agreement.

“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 Warrants, the Perfection
Certificates, each Compliance Certificate, each Disbursement Letter, each Loan
Payment/Advance Request Form and any Bank Services Agreement, the Post Closing
Letter, each Guaranty, 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.

“Loan Payment/Advance Request Form” is that certain form attached hereto as
Exhibit B-2.

“Material Adverse Change” is (a) a material impairment in the perfection or
priority of Collateral Agent’s Lien in the Collateral or in the value of such
Collateral; (b) a material adverse change in the business, operations or
financial condition of Borrower or any Subsidiary; or (c) a material impairment
of the prospect of repayment of any portion of the Obligations.

“Maturity Date” is twenty-nine (29) months after the Amortization Date.

“Obligations” are all of Borrower’s obligations to pay when due any debts,
principal, interest, Lenders’ Expenses, the Final Payment, 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), or otherwise, including, without
limitation, all obligations relating to letters of credit (including
reimbursement obligations for drawn and undrawn letters of credit), cash
management services, and foreign exchange contracts, if any, 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 (other than the Warrants).

“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,
extensions and continuations-in-part of the same.

“Payment Date” is the first (1st) calendar day of each calendar month which is a
Business Day, commencing on July 1, 2012.

“Perfection Certificate” and “Perfection Certificates” is defined in
Section 5.1.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

34

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“Permitted Indebtedness” is:

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

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

(c) Subordinated Debt;

(d) unsecured Indebtedness to trade creditors 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 Two Hundred Fifty Thousand
Dollars ($250,000.00) 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 or any of it’s Subsidiaries’
business;

(g) extensions, refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness (a) through (e) 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;

(h) guarantees by Borrower or any of its Subsidiaries in respect of Indebtedness
of Borrower or any of its Subsidiaries otherwise permitted hereunder;

(i) unsecured Indebtedness constituting Permitted Investments;

(j) unsecured Indebtedness in respect of any cash management services, netting
services, automatic clearinghouse arrangements, overdraft protections, employee
credit card programs and other cash management and similar arrangements in the
ordinary course of business and any guarantees thereof; in an aggregate amount
not to exceed One Hundred Thousand Dollars ($100,000.00) at any time during the
term hereof;

(k) Indebtedness consisting of obligations in respect of performance, bid,
appeal and surety bonds and performance and completion guarantees and similar
obligations provided by Borrower or any of its Subsidiaries or obligations in
respect of letters of credit, bank guarantees or similar instruments related
thereto, in each case in the ordinary course of business; not to exceed One
Hundred Fifty Thousand Dollars ($150,000.00) in the aggregate during the term of
this Agreement; and

(l) Indebtedness incurred by the Borrower or any of its Subsidiaries in respect
of letters of credit, bank guarantees, bankers’ acceptances, warehouse receipts
or similar instruments issued or created in the ordinary course of business or
consistent with past practice, including in respect of workers compensation
claims, health, disability or other employee benefits or property, casualty or
liability insurance or self-insurance or other Indebtedness with respect to
reimbursement-type obligations regarding workers compensation claims; not to
exceed One Hundred Fifty Thousand Dollars ($150,000.00) in the aggregate during
the term of this Agreement.

“Permitted Investments” are:

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

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

35

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(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 Borrower’s Board of Directors and provided to
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 accepted 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;

(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) non-cash Investments consisting of joint ventures or strategic alliances in
the ordinary course of Borrower’s business consisting of the non-exclusive
licensing of technology, the development of technology or the providing of
technical support;

(j) Investments by Parent in Avanir Holding Company for royalty fees payable by
Avanir Holding Company to Center for Neurologic Study, consistent with past
practice and the Annual Projections; and

(k) Investments by Parent in any Subsidiary of Parent (without duplication with
the Investment described in subclause (j), above), not to exceed Ten Thousand
Dollars ($10,000.00) in the aggregate in any year during the term of this
Agreement.

“Permitted Licenses” are (A) licenses of over-the-counter software that is
commercially available to the public; (B) non-exclusive and 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), (i) no Event of Default has occurred
or is continuing at the time of such license; (ii) 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; (iii) in the case of any exclusive license, (x) Borrower
delivers twenty (20) days’ prior written notice and a brief summary of the terms
of the proposed license to Collateral Agent and the Lenders and delivers to
Collateral Agent and the Lenders copies of the final executed licensing
documents in connection with the exclusive license promptly upon consummation
thereof, (y) any such license is made in connection with a bona fide corporate
collaboration or partnership, and is approved by Borrower’s (or the applicable
Subsidiary’s) board of directors, and (z) any such license could not result in a
legal transfer of title of the licensed property but may be exclusive in
respects other than territory and may be exclusive as to territory only as to
discrete geographical areas outside of the United States; and (iv) all upfront
payments, royalties, milestone payments or other proceeds arising from the
licensing agreement that are payable to Borrower or any of its Subsidiaries are
paid to a Deposit Account that is governed by a Control Agreement; and
(C) licenses determined in the sole reasonable judgment of the Collateral Agent
to be Permitted Licenses.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

36

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“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;

(d) 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;

(e) 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);

(f) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (c), 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;

(g) 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;

(h) banker’s liens, rights of setoff and Liens in favor of financial
institutions incurred made 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(b) hereof;

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

(j) Liens consisting of Permitted Licenses;

(k) deposits to secure (A) the performance of bids, trade contracts,
governmental contracts and leases (other than Indebtedness for borrowed money),
statutory obligations, surety and customs bonds,

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

37

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performance bonds and other obligations of a like nature (including those to
secure health, safety and environmental obligations) and (B) stay and appeal
bonds; in each case of (A) and (B), incurred in the ordinary course of business,
and securing an aggregate amount not in excess of One Hundred Fifty Thousand
Dollars ($150,000.00); and

(l) Liens in favor of customs and revenue authorities arising as a matter of law
to secure payment of customs duties in connection with the importation of goods
in the ordinary course of business.

“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.

“Post Closing Letter” is that certain Post Closing Letter dated as of the
Effective Date by and among Collateral Agent, the Lenders and Borrower.

“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

“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 respective Term Loans, Lenders
holding one hundred percent (100%) of the aggregate outstanding principal
balance of the Term Loans, or (ii) at any time from and after any Original
Lender has assigned or transferred any interest in its Term Loans, Lenders
holding, sixty-six percent (66%) or more of the aggregate outstanding principal
balance of the Term Loans, plus, in respect of this clause (ii), (A) each
Original Lender that has not assigned or transferred any portion of its
respective Term Loan, (B) each assignee of an Original Lender provided such
assignee was assigned or transferred and continues to hold one hundred percent
(100%) of the assigning Original Lender’s interest in the Term Loans and (C) any
Person or party providing financing to an Original Lender or formed to undertake
a securitization transaction with respect to an Original Lender and any
transferee of such Person or party upon the occurrence of a default, event of
default or similar occurrence with respect to such financing or securitization
transaction (in each case in respect of clauses (A), (B) and (C) of this clause
(ii), whether or not such Lender is included within the Lenders holding
sixty-six percent (66%) of the Terms Loans). For purposes of this definition
only, a Lender shall be deemed to include itself, and any Lender that is an
Affiliate or Approved Fund of such Lender.

“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.

“Secured Promissory Note” is defined in Section 2.4.

“Secured Promissory Note Record” is a record maintained by each Lender with
respect to the outstanding Obligations owed by Borrower to Lender and credits
made thereto.

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

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

38

--------------------------------------------------------------------------------

“Shares” is one hundred percent (100%) of the issued and outstanding capital
stock, membership units or other securities owned or held of record by Borrower,
in any Subsidiary; provided that, in the event Borrower, demonstrates to
Collateral Agent’s reasonable satisfaction, that a pledge of more than sixty
five percent (65%) of the Shares of a Subsidiary of Borrower which is not an
entity organized under the laws of the United States or any territory thereof,
creates a present and existing adverse tax consequence to Borrower under the
U.S. Internal Revenue Code, “Shares” shall mean sixty-five percent (65%) of the
issued and outstanding capital stock, membership units or other securities owned
or held of record by Borrower in such Subsidiary.

“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.

“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
reasonably 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 one or more of Affiliates of such Person.

“Term Loan” is defined in Section 2.2(a) hereof.

“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 connected with
and symbolized by such trademarks.

“Transfer” is defined in Section 7.1.

“Warrants” are those certain Warrants to Purchase Stock dated as of the
Effective Date, or any date thereafter, issued by Borrower in favor of each
Lender or such Lender’s Affiliates.

[Balance of Page Intentionally Left Blank]

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

39

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

 

BORROWER:     BORROWER: AVANIR PHARMACEUTICALS, INC.     AVANIR ACQUISITION
CORP. By  

/s/ Christine Ocampo

    By  

/s/ Christine Ocampo

Name:   Christine Ocampo     Name:   Christine Ocampo

Title:   Vice President of Finance     Title:   Vice President of Finance

 

BORROWER:     BORROWER: AVANIR HOLDING COMPANY     XENEREX BIOSCIENCES By  

/s/ Christine Ocampo

    By  

/s/ Christine Ocampo

Name:   Christine Ocampo     Name:   Christine Ocampo

Title:   Vice President of Finance     Title:   Vice President of Finance

 

COLLATERAL AGENT AND LENDER:     LENDER: OXFORD FINANCE LLC     SILICON VALLEY
BANK By  

/s/ T. A. Lex

    By  

/s/ Kurt Miklinski

Name:   T. A. Lex     Name:   Kurt Miklinski

Title:   Chief Operating Officer     Title:   Vice President

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

--------------------------------------------------------------------------------

SCHEDULE 1.1

Lenders and Commitments

 

Term Loans

 

Lender

   Term Loan Commitment      Commitment Percentage  

OXFORD FINANCE LLC

   $ 22,500,000         75.00%   

SILICON VALLEY BANK

   $ 7,500,000         25.00%      

 

 

    

 

 

 

TOTAL

   $ 30,000,000         100.00%      

 

 

    

 

 

 

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

--------------------------------------------------------------------------------

EXHIBIT A

Description of Collateral

The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal 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 (except as noted below), 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 does not include any
(i) Intellectual Property; provided, however, the Collateral shall include all
Accounts and all proceeds of Intellectual Property. If a judicial authority
(including a U.S. Bankruptcy Court) would hold that a security interest in the
underlying Intellectual Property is necessary to have a security interest in
such Accounts and such property that are proceeds of Intellectual Property, then
the Collateral shall automatically, and effective as of the Effective Date,
include the Intellectual Property to the extent necessary to permit perfection
of Collateral Agent’s security interest in such Accounts and such other property
of Borrower that are proceeds of the Intellectual Property; (ii) more than sixty
five percent (65%) of the issued and outstanding voting capital stock of any
Subsidiary of Borrower that is incorporated or organized in a jurisdiction other
than the United States or any state or territory thereof, if Debtor demonstrates
to 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; and (iii) any (x) equipment subject to a Lien described in clause (c) of
the definition of Permitted Liens or (y) license or contract, in each case if
the granting of a Lien in such equipment, license or contract is prohibited by
or would constitute a default under the agreement governing such equipment,
license or contract (but (A) only to the extent such prohibition is enforceable
under applicable law and (B) other than to the extent that any such term would
be rendered ineffective pursuant to Section 9 407(a) (or any other Section) of
Division 9 of the Code); provided that upon the termination, lapsing or
expiration of any such prohibition, such equipment, license or contract, as
applicable, shall automatically be subject to the security interest granted in
favor of Lender hereunder and become part of the “Collateral.”

Pursuant to the terms of a certain negative pledge arrangement with Collateral
Agent and the Lenders, Borrower has agreed not to encumber any of its
Intellectual Property.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

--------------------------------------------------------------------------------

EXHIBIT B-1

Form of Disbursement Letter

[see attached]

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

--------------------------------------------------------------------------------

DISBURSEMENT LETTER

            , 2012

The undersigned, being the duly elected and acting Vice President, Finance and
Chief Compliance Officer of AVANIR PHARMACEUTICALS, INC., a Delaware corporation
with offices located at 20 Enterprise, Suite 200, Aliso Viejo, CA 92656 (for
itself and on behalf of each Borrower under the Loan Agreement, “Borrower”),
does hereby certify, as Vice President, Finance and Chief Compliance Officer of
Borrower, and not in her individual capacity, to OXFORD FINANCE LLC (“Oxford”
and “Lender”), as collateral agent (the “Collateral Agent”) in connection with
that certain Loan and Security Agreement dated as of May 7, 2012, by and among
Borrower, Collateral Agent and the Lenders from time to time party thereto (the
“Loan Agreement”; with other capitalized terms used below having the meanings
ascribed thereto in the Loan Agreement) that:

1. The representations and warranties made by Borrower in Section 5 of the Loan
Agreement and in the other Loan Documents are true and correct in all material
respects as of the date hereof; 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.

2. No event or condition has occurred that would constitute an Event of Default
under the Loan Agreement or any other Loan Document.

3. Borrower is in compliance with the covenants and requirements contained in
Sections 4, 6 and 7 of the Loan Agreement.

4. All conditions referred to in Section 3 of the Loan Agreement to the making
of the Loan to be made on or about the date hereof have been satisfied or waived
by Collateral Agent.

5. No Material Adverse Change has occurred.

6. The undersigned is a Responsible Officer.

[Balance of Page Intentionally Left Blank]

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

--------------------------------------------------------------------------------

7. The proceeds of the Term Loan shall be disbursed as follows:

 

Disbursement from Oxford:

  

Loan Amount

    $ 22,500,000.00   

Plus:

  

—Deposit Received

    $ 150,000.00   

Less:

  

—Facility Fee

   ($ 150,000.00 ) 

[—Interim Interest

   ($              )] 

—Lender’s Legal Fees

   ($              )* 

Net Proceeds due from Oxford:

    $        

 

 

 

Disbursement from SVB:

  

Loan Amount

    $ 7,500,000.00   

Plus:

  

—Deposit Received

    $ 0.00   

Less:

  

[—Interim Interest

   ($              )] 

Net Proceeds due from SVB:

    $        

 

 

 

TOTAL TERM LOAN NET PROCEEDS FROM LENDERS

    $        

 

 

 

8. The Term Loan shall amortize in accordance with the Amortization Table
attached hereto.

9. The aggregate net proceeds of the Term Loans shall be transferred to the
Designated Deposit Account as follows:

 

Account Name:

   AVANIR PHARMACEUTICALS, INC.

Bank Name:

   Bank of America, Merrill Lynch

Bank Address:

  

 

Account Number:

   5W102D45

ABA Number:

  

 

[Balance of Page Intentionally Left Blank]

 

* Legal fees and costs are through the Effective Date. Post-closing legal fees
and costs, payable after the Effective Date, to be invoiced and paid
post-closing.

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

--------------------------------------------------------------------------------

Dated as of the date first set forth above.

 

BORROWER: AVANIR PHARMACEUTICALS, INC., for itself and on behalf of each
Borrower By  

 

Name:  

 

Title:

 

 

COLLATERAL AGENT AND LENDER:

OXFORD FINANCE LLC

By  

 

Name:  

 

Title:

 

 

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

--------------------------------------------------------------------------------

AMORTIZATION TABLE

(Term Loan)

[see attached]

 

[**] =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

30933351_1Schedules (or similar attachments) referred to and listed herein shall
have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any
omitted schedule (or similar attachment) will be furnished to the Commission
upon request.

 

--------------------------------------------------------------------------------

EXHIBIT B-2

Loan Payment/Advance Request Form

DEADLINE FOR SAME DAY PROCESSING IS NOON PACIFIC TIME*

 

Fax To:    Date:                                  

 

LOAN PAYMENT:                      AVANIR PHARMACEUTICALS, INC.    
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.      Deadline for same day
processing is noon, Pacific Time            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 C

Compliance Certificate

 

TO:   

OXFORD FINANCE LLC, as Collateral Agent and Lender

SILICON VALLEY BANK, as Lender

   FROM:    AVANIR PHARMACEUTICALS, INC., for itself and on behalf of all
Borrowers   

The undersigned authorized officer (“Officer”) of AVANIR PHARMACEUTICALS, INC.
(for itself and on behalf of all Borrowers under the Loan Agreement,
“Borrower”), hereby certifies, as an Officer of Borrower, and not in his or her
individual capacity, that in accordance with the terms and conditions of the
Loan and Security Agreement dated as of May 7, 2012, 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),

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

(ii) There are no Events of Default, except as noted below;

(iii) 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 (i), 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.

(iv) 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;

(v) 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    Monthly within 35 days       Yes    No    N/A 2)    Annual (CPA
Audited) statements    Within 180 days after FYE       Yes    No    N/A 3)   
Annual Financial Projections/Budget (prepared on a monthly basis)   
Annually (within 60 days of FYE), and when revised       Yes    No    N/A

--------------------------------------------------------------------------------

4)    A/R & A/P agings    If applicable       Yes    No    N/A 5)    8-K, 10-K
and 10-Q Filings    Within 5 days of filing       Yes    No    N/A 6)   
Compliance Certificate    Monthly within 35 days       Yes    No    N/A 7)    IP
Report    When required       Yes    No    N/A 8)    Total amount of Borrower’s
cash and cash equivalents at the last day of the measurement period      
$                Yes    No    N/A 9)    Total amount of Borrower’s Subsidiaries’
cash and cash equivalents at the last day of the measurement period      
$                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

Financial Covenants

 

     Covenant        Requirement    Actual   

Compliance

1)    Performance to Plan; Revenues (trailing three months)      EITHER:      
         (A)   At least [**] of projections:    Projected: $                  
           Actual: $                                      %    Yes    No        
OR                (B)   Cash in controlled Collateral Accounts of at least 1.5x
outstanding Obligations   

Cash in controlled Collateral Accounts: $            

Amount of outstanding Obligations: $            

                                              x    Yes    No

--------------------------------------------------------------------------------

Other Matters

 

1)   Have there been any changes in management 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 One Hundred Thousand Dollars
($100,000.00)?   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

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.)

AVANIR PHARMACEUTICALS, INC., for itself and on behalf of all Borrowers

 

By:    

Name:  

 

Title:  

 

Date:  

 

 

LENDER USE ONLY Received by:  

 

      Date:  

 

Verified by:  

 

      Date:  

 

Compliance Status:    Yes      No  

--------------------------------------------------------------------------------

EXHIBIT D

Form of Secured Promissory Note

[see attached]

--------------------------------------------------------------------------------

SECURED PROMISSORY NOTE

(Term Loan)

 

$_______                Dated:                     , 2012

FOR VALUE RECEIVED, the undersigned, AVANIR PHARMACEUTICALS, INC., a Delaware
corporation, AVANIR ACQUISITION CORP., a Delaware corporation, AVANIR HOLDING
COMPANY, a California corporation and XENEREX BIOSCIENCES, a California
corporation, each with offices located at 20 Enterprise, Suite 200, Aliso Viejo,
CA 92656 (collectively, “Borrower”) HEREBY PROMISES TO PAY to the order of
[OXFORD FINANCE LLC][SILICON VALLEY BANK] (“Lender”) the principal amount of
[            ] MILLION DOLLARS ($            ) or such lesser amount as shall
equal the outstanding principal balance of the Term Loan made to Borrower by
Lender, plus interest on the aggregate unpaid principal amount of such Term
Loan, at the rates and in accordance with the terms of the Loan and Security
Agreement dated May 7, 2012 by and among Borrower, Lender, Oxford Finance LLC,
as Collateral Agent, and the other Lenders from time to time party thereto (as
amended, restated, supplemented or otherwise modified from time to time, the
“Loan Agreement”). If not sooner paid, the entire principal amount and all
accrued and unpaid interest hereunder shall be due and payable on the Maturity
Date as set forth in the Loan Agreement. Any capitalized term not otherwise
defined herein shall have the meaning attributed to such term in the Loan
Agreement.

Principal, interest and all other amounts due with respect to the Term Loan, are
payable in lawful money of the United States of America to Lender as set forth
in the Loan Agreement and this Secured Promissory Note (this “Note”). The
principal amount of this Note and the interest rate applicable thereto, and all
payments made with respect thereto, shall be recorded by Lender and, prior to
any transfer hereof, endorsed on the grid attached hereto which is part of this
Note.

The Loan Agreement, among other things, (a) provides for the making of a secured
Term Loan by Lender to Borrower, and (b) contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events.

This Note may not be prepaid except as set forth in Section 2.2 (c) and
Section 2.2(d) of the Loan Agreement.

This Note and the obligation of Borrower to repay the unpaid principal amount of
the Term Loan, interest on the Term Loan and all other amounts due Lender under
the Loan Agreement is secured under the Loan Agreement.

Presentment for payment, demand, notice of protest and all other demands and
notices of any kind in connection with the execution, delivery, performance and
enforcement of this Note are hereby waived.

Borrower shall pay all reasonable fees and expenses in accordance with the terms
set forth in the Loan Agreement, including, without limitation, reasonable
attorneys’ fees and costs, incurred by Lender in the enforcement or attempt to
enforce any of Borrower’s obligations hereunder not performed when due.

This Note shall be governed by, and construed and interpreted in accordance
with, the internal laws of the State of California.

The ownership of an interest in this Note shall be registered on a record of
ownership maintained by Lender or its agent. Notwithstanding anything else in
this Note to the contrary, the right to the principal of, and stated interest
on, this Note may be transferred only if the transfer is registered on such
record of ownership and the transferee is identified as the owner of an interest
in the obligation. Borrower shall be entitled to treat the registered holder of
this Note (as recorded on such record of ownership) as the owner in fact thereof
for all purposes and shall not be bound to recognize any equitable or other
claim to or interest in this Note on the part of any other person or entity.

[Balance of Page Intentionally Left Blank]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of
its officers thereunto duly authorized on the date hereof.

 

BORROWER: AVANIR PHARMACEUTICALS, INC.

By:  

 

Name:  

 

Title:  

 

AVANIR ACQUISITION CORP.

By:  

 

Name:  

 

Title:  

 

AVANIR HOLDING COMPANY

By:  

 

Name:  

 

Title:  

 

XENEREX BIOSCIENCES

By:  

 

Name:  

 

Title:  

 

--------------------------------------------------------------------------------

LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL

 

Date

 

Principal

Amount

 

Interest Rate

   Scheduled
Payment Amount    Notation By

--------------------------------------------------------------------------------

EXHIBIT A TO UCC FINANCING STATEMENT

Description of Collateral

The Collateral consists of all assets of the Debtor other than the Debtor’s
Intellectual Property; provided, however, the Collateral shall include all
proceeds of Intellectual Property.

As used herein, the following defined terms have the respective meanings:

“Intellectual Property” means all of Debtor’s 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 Debtor;

(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; and

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

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

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

“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 Debtor connected with
and symbolized by such trademarks.

Pursuant to the terms of a certain negative pledge arrangement with the secured
party, Debtor has agreed not to encumber any of its Intellectual Property.