Exhibit 10.1

 

 

 

 

Senior Secured Superpriority
Debtor-In-Possession Credit Agreement

 

by and among

 

Cantor Fitzgerald Securities,

 

as Agent,

 

THE LENDERS THAT ARE PARTY HERETO

 

as the Lenders,

 

and

 

PERNIX THERAPEUTICS HOLDINGS, INC.,

 

a Debtor and a Debtor-in-Possession,

 

as Borrower

 

Dated as of February 22, 2019

 

 

 

 

 

 

Table of Contents

 

Page

 

1.             DEFINITIONS AND CONSTRUCTION 1 1.1   Definitions 1
1.2   Accounting Terms 1 1.3   Code 2 1.4   Construction 2 1.5   Time References
3 1.6   Schedules and Exhibits 3 2.             LOANS AND TERMS OF PAYMENT 3
2.1   Loans. 3 2.2   [Reserved] 3 2.3   Borrowing Procedures and Settlements 3
2.4   Payments; Reductions of Commitments; Prepayments 5 2.5   Promise to Pay;
Promissory Notes 9 2.6   Interest Rates and Fees:  Rates, Payments, and
Calculations 10 2.7   Crediting Payments 11 2.8   Designated Account 11
2.9   Maintenance of Loan Account; Statements of Obligations 11
2.10   [Reserved] 11 2.11   [Reserved] 11 2.13   Capital Requirements 13
2.14   Priority and Liens Applicable to the Company 15 2.15   Payment of
Obligations 15 2.16   No Discharge; Survival of Claims 15 2.17   Incremental
Loans 16 3.            CONDITIONS; TERM OF AGREEMENT 17 3.1   Conditions
Precedent to the Closing Date Loans 17 3.2   Conditions Precedent to each
Delayed Draw Loan 17 3.3   Conditions Precedent to all Extensions of Credit 17
3.4   Conditions Precedent to each Incremental Loan 17 3.5   Maturity 18
3.6   Effect of Maturity 18 3.7   Conditions Subsequent 18 3.8   Early
Termination by Borrower 18

 

-i-

Table of Contents
(continued)

 

Page

 

4.            REPRESENTATIONS AND WARRANTIES 18 4.1   Due Organization and
Qualification; Subsidiaries 19 4.2   Due Authorization; No Conflict 19
4.3   Governmental Consents 20 4.4   Binding Obligations; Perfected Liens 20
4.5   Title to Assets; No Encumbrances; Intellectual Property 20
4.6   Litigation 21 4.7   Compliance with Laws 21 4.8   No Material Adverse
Effect 21 4.9   [Reserved] 21 4.10   Employee Benefits 21 4.11   Environmental
Condition 21 4.12   Complete Disclosure 22 4.13   Patriot Act 22
4.14   Indebtedness 22 4.15   Payment of Taxes 23 4.16   Margin Stock 23
4.17   Governmental Regulation 23 4.18   OFAC 23 4.19   Employee and Labor
Matters 23 4.20   Borrower as a Holding Company 24 4.21   Leases 24
4.22   Pernix Manufacturing, LLC 24 4.23   Pernix Ireland Pain 24 4.24   Certain
Intercompany Obligations 24 4.25   [Reserved] 25 4.26   Health Care and
Regulatory Matters. 25 4.27   FDA Regulatory Compliance. 26 4.28   Material
Contracts 27 4.29   Insurance 27 4.30   DIP Orders 27 5.            AFFIRMATIVE
COVENANTS 28

 

 

-ii-

Table of Contents
(continued)

 

Page

 

5.1   Financial Statements, Reports, Certificates 28 5.2   IP Security
Agreements 28 5.3   Existence 28 5.4   Maintenance of Properties 28 5.5   Taxes
29 5.6   Insurance 29 5.7   Inspection 29 5.8   Compliance with Laws 30
5.9   Environmental 30 5.10   Intellectual Property 30 5.11   Formation or
Acquisition of Subsidiaries 31 5.12   Further Assurances 31 5.13   Zohydro
Assets 32 5.14   Lender Meetings 32 5.15   Material Contracts 32
5.16   Compliance with Health Care Laws. 33 5.17   Use of Proceeds 34
5.18   Post-Closing Obligations 34 5.19   [Reserved] 34 5.20   Final DIP Order
34 5.21   Proceedings 34 5.22   Certain Bankruptcy Matters. 34 5.23   Assumption
and Rejection of Contracts and Leases 35 5.24   Obligations Regarding Sale
Process 35 6.            NEGATIVE COVENANTS. 35 6.1   Indebtedness and
Contingent Obligations 35 6.2   Liens 35 6.3   Restrictions on Fundamental
Changes and Sale and Leaseback Transactions 35 6.4   Disposal of Assets 36
6.5   Nature of Business 36 6.6   Prepayments and Amendments 36 6.7   Restricted
Payments 37

 

 

-iii-

Table of Contents
(continued)

 

Page

 

6.8   Accounting Methods 37 6.9   Investments 37 6.10   Transactions with
Affiliates 37 6.11   Use of Proceeds 38 6.12   Limitation on Issuance of Equity
Interests 38 6.13   Negative Pledge 38 6.14   Borrower and IP Subsidiaries 38
6.15   Burdensome Agreements 39 6.16   Agent’s Exercise of Rights and Remedies.
40 6.17   Additional Bankruptcy Matters 40 7.            PRODUCT-RELATED
CONTRACTS 40 8.            EVENTS OF DEFAULT 41 8.1   Payments 41
8.2   Covenants 41 8.3   Judgments 41 8.4   Voluntary Bankruptcy, etc. 42
8.5   Involuntary Bankruptcy, etc. 42 8.6   Default Under Other Agreements 42
8.7   Representations, etc. 42 8.8   Guaranty 42 8.9   Security Documents 42
8.10   Loan Documents 43 8.11   Change in Control 43 8.12   Section 364
Financing 43 8.13   Other Superpriority Claims and Liens 43 8.14   Dismissal or
Conversion of Cases 43 8.15   Automatic Stay 43 8.16   Modification to DIP
Orders, Etc. 44 8.17   Prepetition Payments 44 8.18   Compliance with Orders 44
8.19   Sale of Assets; Etc. 44 8.20   Reorganization Plan 44

 

 

-iv-

Table of Contents
(continued)

 

Page

 

8.21   Dissolution of Borrower or any Subsidiary 44 8.22   Case Administration
Procedures 44 8.23   Actions Contrary to the Agreement 45 8.24   Challenges. 45
8.25   Grant of Adequate Protection 45 8.26   Adequate Protection 45
8.27   Change of Venue 45 8.28   Sale Agreement 45 9.            RIGHTS AND
REMEDIES 45 9.1   Rights and Remedies 45 9.2   Remedies Cumulative 46
10.          WAIVERS; INDEMNIFICATION 46 10.1   Demand; Protest; etc. 46
10.2   The Lender Group’s Liability for Collateral 46 10.3   Indemnification 46
11.           NOTICES 47 12.           CHOICE OF LAW AND VENUE; JURY TRIAL
WAIVER; JUDICIAL REFERENCE PROVISION 48 13.           ASSIGNMENTS AND
PARTICIPATIONS; SUCCESSORS 50 13.1   Assignments and Participations 50
13.2   Successors 53 14.          AMENDMENTS; WAIVERS 53 14.1   Amendments and
Waivers 53 14.2   Replacement of Certain Lenders 54 14.3   No Waivers;
Cumulative Remedies 55 15.          AGENT; THE LENDER GROUP 55
15.1   Appointment and Authorization of Agent 55 15.2   Delegation of Duties 56
15.3   Liability of Agent 56 15.4   Reliance by Agent 57 15.5   Notice of
Default or Event of Default 57 15.6   Credit Decision 57 15.7   Costs and
Expenses; Indemnification 58

 

 

-v-

Table of Contents
(continued)

 

Page

 

15.8   Agent in Individual Capacity 58 15.9   Successor Agent 59 15.10   Lender
in Individual Capacity 59 15.11   Collateral Matters. 59 15.12   Restrictions on
Actions by Lenders; Sharing of Payments 61 15.13   Agency for Perfection 61
15.14   Payments by Agent to the Lenders 61 15.15   Concerning the Collateral
and Related Loan Documents 62 15.16   Confidentiality; Disclaimers by Lenders;
Other Reports and Information 62 15.17   Several Obligations; No Liability 62
16.   WITHHOLDING TAXES 62 16.1   Payments 62 16.2   Exemptions 63
16.3   Reductions 63 16.4   Refunds 64 17.   GENERAL PROVISIONS 64
17.1   Effectiveness 64 17.2   Section Headings 64 17.3   Interpretation 64
17.4   Severability of Provisions 64 17.5   [Reserved] 64 17.6   Debtor-Creditor
Relationship 65 17.7   Counterparts; Electronic Execution 65 17.8   Revival and
Reinstatement of Obligations; Certain Waivers 65 17.9   Confidentiality 65
17.10   Survival 67 17.11   Patriot Act 67 17.12   Integration 67

 

 

 

 

-vi-

EXHIBITS AND SCHEDULES

 

Exhibit A-1 Form of Assignment and Acceptance Exhibit B-1 Form of Notice of
Borrowing Exhibit I-1 Form of Intercompany Subordination Agreement Exhibit I-2
Form of Interim DIP Order Exhibit L-1 Form of LIBOR Notice Exhibit N-1 Form of
Note Exhibit P-1 Form of Perfection Certificate     Schedule A-1 Agent’s Account
Schedule A-2 Approved Budget Schedule A-3 Authorized Persons Schedule C-1
Commitments Schedule D-1 Designated Account Schedule G-1 Generics Assets
Schedule P-1 Permitted Investments Schedule P-2 Permitted Liens Schedule 1.1
Definitions Schedule 3.1 Conditions Precedent to Closing Date Loan Schedule 3.2
Conditions Precedent to Each Delayed Draw Loan Schedule 4.1(c) Capitalization of
Subsidiaries Schedule 4.1(d) Subscriptions, Options, Warrants, Calls Schedule
4.5 Intellectual Property Schedule 4.6(b) Litigation Schedule 4.11 Environmental
Matters Schedule 4.14 Permitted Indebtedness Schedule 4.15 Tax Related
Proceedings Schedule 4.26 Regulatory Disclosure Schedule 4.29 Insurance Schedule
5.1 Financial Statements, Reports, Certificates Schedule 5.18 Post-Closing
Obligations Schedule 5.22 Milestones

-vii-

Senior Secured Superpriority Debtor-In-Possession Credit Agreement

 

THIS Senior Secured Superpriority Debtor-In-Possession Credit Agreement (this
“Agreement”), is entered into as of February 22, 2019, by and among the lenders
identified on the signature pages hereof (each of such lenders, together with
its successors and permitted assigns, is referred to hereinafter as a “Lender”,
as that term is hereinafter further defined), Cantor Fitzgerald Securities, as
administrative agent for each member of the Lender Group (in such capacity,
together with its successors and assigns in such capacity, “Agent”) and Pernix
THERAPEUTICS HOLDINGS, INC., a Maryland corporation and a Debtor and a
Debtor-in-Possession (the “Borrower”).

 

WHEREAS, capitalized terms used in the preamble hereto and in these Recitals
shall have the respective meanings set forth for such terms in Schedule 1.1;

 

WHEREAS, the Borrower intends to file a voluntary petition with the Bankruptcy
Court initiating its case under Chapter 11 of the Bankruptcy Code on February
18, 2019 (the “Petition Date”) and continue in the possession of its assets and
in the management of its businesses pursuant to Sections 1107 and 1108 of the
Bankruptcy Code;

 

WHEREAS, the Borrower has requested that the Lenders provide a senior secured,
priming superpriority debtor-in-possession multi-draw term loan facility and the
Lenders are willing to do so on the terms and conditions set forth herein; and

 

NOW, THEREFORE, in consideration of the mutual agreements herein contained and
other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto hereby agree as follows:

 

1.             DEFINITIONS AND CONSTRUCTION.

 

1.1               Definitions. Capitalized terms used in this Agreement shall
have the meanings specified therefor on Schedule 1.1.

 

1.2               Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP; provided, that (i) if
Borrower notifies Agent that Borrower requests an amendment to any provision
hereof to eliminate the effect of any Accounting Change occurring after the
Closing Date or in the application thereof on the operation of such provision
(or if Agent notifies Borrower that the Required Lenders request an amendment to
any provision hereof for such purpose), regardless of whether any such notice is
given before or after such Accounting Change or in the application thereof, then
Agent and Borrower agree that they will negotiate in good faith amendments to
the provisions of this Agreement that are directly affected by such Accounting
Change with the intent of having the respective positions of the Lenders and
Borrower after such Accounting Change conform as nearly as possible to their
respective positions as of the date of this Agreement and, until any such
amendments have been agreed upon and agreed to by the Required Lenders, the
provisions in this Agreement shall be calculated as if no such Accounting Change
had occurred. When used herein, the term “financial statements” shall include
the notes and schedules thereto, and (ii) to the extent expressly required
pursuant to the provisions of this Agreement, certain calculations shall be made
on a pro forma basis. Whenever the term “Borrower” is used in respect of a
financial covenant or a related definition, it shall be understood to mean
Borrower and its Subsidiaries on a consolidated basis, unless the context
clearly requires otherwise. Notwithstanding anything to the contrary contained
herein, (a) all financial statements delivered hereunder shall be prepared, and
all financial covenants contained herein shall be calculated, without giving
effect to any election under the Financial Accounting Codification Section
825-10 (or any similar accounting principle) permitting a Person to value its
financial liabilities or

 

-1-

Indebtedness at the fair value thereof, and (b) the term “unqualified opinion”
as used herein to refer to opinions or reports provided by accountants shall
mean an opinion or report that is (i) unqualified, and (ii) does not include any
explanation, supplemental comment, or other comment concerning the ability of
the applicable Person to continue as a going concern or concerning the scope of
the audit.

 

1.3               Code. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein; provided, that to the extent that the Code is used to define any
term herein and such term is defined differently in different Articles of the
Code, the definition of such term contained in Article 9 of the Code shall
govern.

 

1.4               Construction. Unless the context of this Agreement or any
other Loan Document clearly requires otherwise, references to the plural include
the singular, references to the singular include the plural, the terms
“includes” and “including” are not limiting, and the term “or” has, except where
the context otherwise requires, the inclusive meaning represented by the phrase
“and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
provision of this Agreement or such other Loan Document, as the case may be.
Section, subsection, clause, schedule, and exhibit references herein are to this
Agreement unless otherwise specified. Any reference in this Agreement or in any
other Loan Document to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). The words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties. Any reference herein or in
any other Loan Document to the satisfaction, repayment, or payment in full of
the Obligations shall mean (a) the indefeasible payment or repayment in full in
cash of (i) the principal amount of, and interest accrued and unpaid with
respect to, all outstanding Loans, together with the payment of any premium
applicable to the repayment of the Loans, (ii) all Lender Group Expenses that
have accrued and are unpaid regardless of whether demand has been made therefor
and (iii) all fees or charges that have accrued hereunder or under any other
Loan Document and are unpaid, (b) the receipt by Agent of cash collateral in
order to secure any other contingent Obligations for which a claim or demand for
payment has been made on or prior to such time or in respect of matters or
circumstances known to Agent or a Lender at such time that are reasonably
expected to result in any loss, cost, damage, or expense (including attorneys’
fees and legal expenses), such cash collateral to be in such amount as Agent
reasonably determines is appropriate to secure such contingent Obligations, (c)
the payment or repayment in full in cash of all other outstanding Obligations
other than unasserted contingent indemnification Obligations and (d) the
termination of all of the Commitments of the Lenders. Any reference herein to
any Person shall be construed to include such Person’s successors and permitted
assigns. Any requirement of a writing contained herein or in any other Loan
Document shall be satisfied by the transmission of a Record. Any reference to
any law shall include all statutory and regulatory provisions consolidating,
amending, replacing or interpreting such law and any reference to any law, rule
or regulation shall, unless otherwise specified, refer to such law, rule or
regulation as amended, modified or supplemented from time to time. Any
references in this Agreement to “Articles” and/or “Sections” which make
reference to any particular piece of legislation or statute, including without
limitation, Bankruptcy Code, ERISA, IRC and/or the Code shall for greater
certainty mean the equivalent section in the applicable piece of legislation to
the extent that the context implies reference to such other similar or
equivalent legislation as is in effect from time to time in any other applicable
jurisdiction, as applicable. Furthermore, where any such reference is meant to
apply to such other similar or equivalent legislation where such other similar
or equivalent legislation has parallel or like concepts, then such references
shall import such parallel or like concepts from such other similar or
equivalent legislation, as applicable.

 

2

1.5               Time References. Unless the context of this Agreement or any
other Loan Document clearly requires otherwise, all references to time of day
refer to Eastern standard time or Eastern daylight saving time, as in effect in
New York, New York on such day. For purposes of the computation of a period of
time from a specified date to a later specified date, the word “from” means
“from and including” and the words “to” and “until” each means “to and
including”; provided that, with respect to a computation of fees or interest
payable to Agent or any Lender, such period shall in any event consist of at
least one full day.

 

1.6               Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.

 

2.             LOANS AND TERMS OF PAYMENT.

 

2.1               Loans.

 

(a)                Subject to the terms and conditions and relying upon the
representations and warranties set forth herein and in the other Loan Documents,
each Lender agrees, severally and not jointly, to make to the Borrower on the
Closing Date (i) a loan in an aggregate amount not to exceed such Lender’s
Closing Date ABL Refinancing Commitment (the “Closing Date ABL Refinancing
Loan”) and (ii) a loan in an aggregate amount not to exceed such Lender’s
Closing Date General Purpose Commitment (the “Closing Date General Purpose Loan”
and together with the Closing Date ABL Refinancing Loan, the “Closing Date
Loans”).

 

(b)                Subject to the terms and conditions and relying upon the
representations and warranties set forth herein and in the other Loan Documents,
each Lender agrees, severally and not jointly, to make loans to the Borrower
from time to time after the Closing Date on any Business Day during the
Availability Period (each such Loan, a “Delayed Draw Loan”), in each case, in an
aggregate amount not to exceed such Lender’s Delayed Draw Commitment.

 

(c)                Amounts repaid or repaid in respect of Loans may not be
reborrowed. Each Loan shall be made as part of a Borrowing consisting of Loans
made by the Lenders ratably in accordance with their applicable Commitments;
provided that the failure of any Lender to make any Loan shall not in itself
relieve any other Lender of its obligation to lend hereunder (it being
understood, however, that no Lender shall be responsible for the failure of any
other Lender to make any Loan required to be made by such other Lender).

 

(d)                The outstanding principal amount of the Loans, together with
interest accrued and unpaid thereon, shall be due and payable on the Maturity
Date or, if earlier, on the date on which they are declared due and payable
pursuant to the terms of this Agreement.

 

2.2               [Reserved].

 

2.3               Borrowing Procedures and Settlements.

 

(a)                Procedure for Borrowings. Each Borrowing shall be made by a
written request in the form attached hereto as Exhibit B-1 (a “Notice of
Borrowing”) by an Authorized Person delivered to Agent and received by Agent no
later than 11:00 a.m. on the Business Day that is four (4) Business Days prior
to the requested Funding Date with respect to any Loan, specifying, in each
case, (A) the amount of such Borrowing, (B) the type of such Borrowing and (C)
the requested Funding Date (which shall be a Business Day); provided, that (i) a
Notice of Borrowing in respect of any Borrowing to be made on the Closing Date
may be delivered no later than 6:00 p.m. on the Business Day prior to the
Closing Date (or such later time as may be reasonably agreed by the Required
Lenders), (ii) Agent

 

3

may, at the direction of the Required Lenders in their sole discretion, elect to
accept as timely requests that are received later than 11:00 a.m. on the
applicable Business Day and (iii) no Notice of Borrowing shall be delivered to
any Lender during the hours of 9:00 a.m. through 4:00 p.m., New York City time,
on any Business Day. At Agent’s election, in lieu of delivering the
above-described written request, any Authorized Person may give Agent telephonic
notice of such request by the required time. In such circumstances, Borrower
agrees that any such telephonic notice will be confirmed in writing within one
(1) Business Day of the giving of such telephonic notice, but the failure to
provide such written confirmation shall not affect the validity of the request.
The Borrowing of any LIBOR Rate Loan shall be subject to the provisions of
Section 2.12.

 

(b)                Funding of Borrowings. After receipt of a request for a
Borrowing pursuant to Section ‎2.3(a), Agent shall promptly notify the Lenders
by telecopy, telephone, email, or other electronic form of transmission, of the
requested Borrowing; provided that no Notice of Borrowing shall be delivered to
any Lender during the hours of 9:00 a.m. through 4:00 p.m., New York City time,
on any Business Day. Each Lender shall make each Loan to be made by it hereunder
on the proposed Funding Date thereof by wire transfer of immediately available
funds by 2:00 p.m. on the Business Day that is the requested Funding Date to the
Designated Account or other applicable account in accordance with Section ‎3 or
otherwise in accordance with such other funding arrangements as mutually agreed
among the relevant parties; provided, that no Lender shall have an obligation to
make any Loan if (i) one or more of the applicable conditions precedent set
forth in Section ‎3 has not been or will not be satisfied on the requested
Funding Date for the applicable Borrowing unless such condition has been waived
in accordance with the applicable provisions of Section ‎3 or (ii) the requested
Borrowing would exceed the undrawn amount of such Lender’s Commitments on such
Funding Date or the amount authorized to be borrowed hereunder pursuant to the
applicable DIP Order. The Agent will make such Loans available to the Borrower
by promptly crediting the amounts so received, in like funds, to the Designated
Account or other applicable account in accordance with Section ‎3 or otherwise
in accordance with such other funding arrangements as mutually agreed among the
relevant parties. Nothing herein shall be deemed to obligate any Lender to
obtain the funds for its Loan in any particular place or manner or to constitute
a representation by any Lender that it has obtained or will obtain the funds for
its Loan in any particular place or manner.

 

(c)                [reserved].

 

(d)                [reserved].

 

(e)                [reserved].

 

(f)                 Notation. Agent, as a non-fiduciary agent for Borrower,
shall maintain a register showing the principal amount of the Loans, owing to
each Lender, and the interests therein of each Lender, from time to time and
such register shall, absent manifest error, conclusively be presumed to be
correct and accurate.

 

(g)                Defaulting Lenders.

 

(i)                 Notwithstanding the provisions of Section 2.4(b)(iii), Agent
shall not be obligated to transfer to a Defaulting Lender any payments made by
Borrower to Agent for the Defaulting Lender’s benefit or any proceeds of
Collateral that would otherwise be remitted hereunder to the Defaulting Lender,
and, in the absence of such transfer to the Defaulting Lender, Agent shall
transfer any such payments (A) first, to each Non-Defaulting Lender ratably in
accordance with their Pro Rata Share (but, in each case, only to the extent that
such Defaulting Lender’s portion of a Loan (or other funding obligation) was
funded by such other Non-Defaulting Lender), (B) to a suspense account
maintained by Agent, the proceeds of which shall be retained by Agent and may be
made available to be advanced to or

 

4

for the benefit of Borrower as such Defaulting Lender’s Pro Rata Share of any
Delayed Draw Loan required to be made pursuant to Section ‎2.1 from any
remaining Commitments (upon the request of Borrower and subject to the
conditions set forth in Sections ‎3.2 and ‎3.3) as if such Defaulting Lender had
made its portion of Loans (or other funding obligations) hereunder, and (C) from
and after the date on which the Commitments are cancelled or terminated and all
other Obligations have been paid in full, to such Defaulting Lender in
accordance with tier (H) of Section 2.4(b)(iii). Subject to the foregoing, Agent
may hold and, in its permitted discretion, re-lend to Borrower for the account
of such Defaulting Lender the amount of all such payments received and retained
by Agent for the account of such Defaulting Lender. Solely for the purposes of
voting or consenting to matters with respect to the Loan Documents (including
the calculation of Pro Rata Share in connection therewith), such Defaulting
Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall
be deemed to be zero; provided, that the foregoing shall not apply to any of the
matters governed by Section ‎14.1(a)(i) through ‎(iii). The provisions of this
Section ‎2.3(g) shall remain effective with respect to such Defaulting Lender
until the earlier of (x) the date on which all of the Non-Defaulting Lenders,
Agent and Borrower shall have waived, in writing, the application of this
Section ‎2.3(g) to such Defaulting Lender, or (y) the date on which such
Defaulting Lender makes payment of all amounts that it was obligated to fund
hereunder, pays to Agent all amounts owing by Defaulting Lender in respect of
the amounts that it was obligated to fund hereunder, and, if requested by Agent,
provides adequate assurance to Agent of its ability to perform its future
obligations hereunder. The operation of this Section ‎2.3(g) shall not be
construed to increase or otherwise affect the Commitment of any Lender, to
relieve or excuse the performance by such Defaulting Lender or any other Lender
of its duties and obligations hereunder, or to relieve or excuse the performance
by Borrower of its duties and obligations hereunder to Agent or to the Lenders
other than such Defaulting Lender. Any failure by a Defaulting Lender to fund
amounts that it was obligated to fund hereunder shall constitute a material
breach by such Defaulting Lender of this Agreement and shall entitle Borrower,
at its option, upon written notice to Agent, to arrange for a substitute Lender
to assume the Commitment of such Defaulting Lender, such substitute Lender to be
reasonably acceptable to Agent. In connection with the arrangement of such a
substitute Lender, the Defaulting Lender shall have no right to refuse to be
replaced hereunder, and agrees to execute and deliver a completed form of
Assignment and Acceptance in favor of the substitute Lender (and agrees that it
shall be deemed to have executed and delivered such document if it fails to do
so) subject only to being paid its share of the outstanding Obligations,
including all interest, fees, and other amounts that may be due and payable in
respect thereof); provided, that any such assumption of the Commitment of such
Defaulting Lender shall not be deemed to constitute a waiver of any of the
Lender Groups’ or Borrower’s rights or remedies against any such Defaulting
Lender arising out of or in relation to such failure to fund. In the event of a
direct conflict between the priority provisions of this Section ‎2.3(g) and any
other provision contained in this Agreement or any other Loan Document, it is
the intention of the parties hereto that such provisions be read together and
construed, to the fullest extent possible, to be in concert with each other. In
the event of any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of this Section ‎2.3(g) shall control and
govern.

 

(h)                Independent Obligations. All Loans shall be made by the
Lenders contemporaneously and in accordance with their Pro Rata Shares. It is
understood that (i) no Lender shall be responsible for any failure by any other
Lender to perform its obligation to make any Loan hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by
any other Lender to perform its obligations hereunder, and (ii) no failure by
any Lender to perform its obligations hereunder shall excuse any other Lender
from its obligations hereunder.

 

2.4               Payments; Reductions of Commitments; Prepayments.

 

(a)                Payments by Borrower.

 

5

(i)                 Except as otherwise expressly provided herein, all payments
made or remitted by Borrower under this Agreement or the other Loan Documents
shall be made to Agent’s Account for the account of the Lender Group and shall
be made in immediately available funds, no later than 2:00 p.m. on the date
specified herein. Any payment received by Agent later than 2:00 p.m. shall be
deemed to have been received (unless Agent, at the direction of the Required
Lenders in their sole discretion, elects to credit it on the date received) on
the following Business Day and any applicable interest or fee shall continue to
accrue until such following Business Day. Without limiting the generality of the
foregoing, Agent may require that any payments due under this Agreement be made
in the United States.

 

(ii)               Unless Agent receives notice from Borrower prior to the date
on which any payment is due to the Lenders that Borrower will not make such
payment in full as and when required, Agent may assume that Borrower has made
(or will make) such payment in full to Agent on such date in immediately
available funds and Agent may (but shall not be so required), in reliance upon
such assumption, distribute to each Lender on such due date an amount equal to
the amount then due such Lender. If and to the extent Borrower does not make
such payment in full to Agent on the date when due, each Lender severally shall
repay to Agent on demand such amount distributed to such Lender, together with
interest thereon at the Defaulting Lender Rate for each day from the date such
amount is distributed to such Lender until the date repaid; provided that such
interest shall be an obligation of the Borrower and shall be payable by the
Borrower upon demand.

 

(b)                Apportionment and Application.

 

(i)                 So long as no Application Event has occurred and is
continuing and except as otherwise provided herein with respect to Defaulting
Lenders, all principal and interest payments received by Agent shall be
apportioned ratably among the Lenders (according to the unpaid principal balance
of the Obligations to which such payments relate held by each Lender) and all
payments of fees and expenses received by Agent (other than fees or expenses
that are for Agent’s separate account) shall be apportioned ratably among the
Lenders having a Pro Rata Share of the type of Commitment or Obligation to which
a particular fee or expense relates.

 

(ii)               Subject to Section 2.4(b)(v) and Section ‎2.4(d), all
payments to be made hereunder by Borrower shall be remitted to Agent and all
such payments, and all proceeds of Collateral received by Agent, shall be
applied, so long as no Application Event has occurred and is continuing and
except as otherwise provided herein with respect to Defaulting Lenders, to
reduce the balance of the Loans outstanding and, thereafter, to Borrower (to be
wired to the Designated Account) or such other Person entitled thereto under
applicable law.

 

(iii)             At any time that an Application Event has occurred and is
continuing and except as otherwise provided herein with respect to Defaulting
Lenders, all payments remitted to Agent and all proceeds of Collateral received
by Agent shall be applied as follows:

 

A.                 first, to pay any Lender Group Expenses (including cost or
expense reimbursements) or indemnities then due to Agent from the Loan Parties
under the Loan Documents, until paid in full,

 

B.                 second, to pay any fees or premiums then due to Agent from
the Loan Parties under the Loan Documents until paid in full,

 

C.                 third, ratably, to pay any Lender Group Expenses (including
cost or expense reimbursements) or indemnities then due to any of the Lenders
from the Loan Parties under the Loan Documents, until paid in full,

 

6

D.                 fourth, ratably, to pay any fees or premiums then due to any
of the Lenders under the Loan Documents until paid in full,

 

E.                  fifth, ratably, to pay interest accrued in respect of the
Loans until paid in full,

 

F.                  sixth, ratably, to pay the principal of all Loans until paid
in full,

 

G.                 seventh, to pay any other Obligations other than Obligations
owed to Defaulting Lenders,

 

H.                 eighth, ratably to pay any Obligations owed to Defaulting
Lenders; and

 

I.                    ninth, to Borrower (to be wired to the Designated Account)
or such other Person entitled thereto under applicable law.

 

(iv)              Agent promptly shall distribute to each Lender, pursuant to
the applicable wire instructions received from each Lender in writing, such
funds as it may be entitled to receive.

 

(v)                In each instance, so long as no Application Event has
occurred and is continuing, Section ‎2.4(b)(ii) shall not apply to any payment
made by Borrower to Agent and specified by Borrower to be for the payment of
specific Obligations then due and payable (or prepayable) under any provision of
this Agreement or any other Loan Document.

 

(vi)              For purposes of Section ‎2.4(b), “paid in full” of a type of
Obligation means payment in cash or immediately available funds of all amounts
owing on account of such type of Obligation, including interest accrued after
the commencement of any Insolvency Proceeding, default interest, interest on
interest, and expense reimbursements, irrespective of whether any of the
foregoing would be or is allowed or disallowed in whole or in part in any
Insolvency Proceeding.

 

(vii)            In the event of a direct conflict between the priority
provisions of this Section ‎2.4 and any other provision contained in this
Agreement or any other Loan Document, it is the intention of the parties hereto
that such provisions be read together and construed, to the fullest extent
possible, to be in concert with each other. In the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, if the conflict
relates to the provisions of Section ‎2.3(g) and this Section ‎2.4, then the
provisions of Section ‎2.3(g) shall control and govern, and if otherwise, then
the terms and provisions of this Section ‎2.4 shall control and govern.

 

(c)                Termination of Commitments.

 

(i)                 Scheduled Termination of Commitments. Upon the making of the
Closing Date Loans on the Closing Date, the Closing Date Commitments shall
terminate in full and be reduced to $0 on the Closing Date. Upon the making of
each Delayed Draw Loan, Delayed Draw Commitments in an amount equal to the
principal amount of such Delayed Draw Loans shall terminate on the date of such
Borrowing. Unless previously terminated in full, all unused Commitments shall
terminate on the last Business Day of the Availability Period. Any Incremental
Commitment shall terminate as set forth in the applicable Incremental Agreement.

 

(ii)               Optional Termination and Reduction of Commitments. The
Borrower

 

7

may at any time terminate, or from time to time reduce, the Commitments;
provided that each reduction of the Commitments shall be in an amount that is an
integral multiple of $1,000,000.

 

The Borrower shall notify the Agent in writing of any election to terminate or
reduce the Commitments under Section ‎2.4(c)(ii) at least three (3) Business Day
prior to the effective date of such termination or reduction, specifying such
election and the effective date thereof. Promptly following receipt of any
notice, the Agent shall advise the Lenders of the contents thereof. Each notice
delivered by the Borrower pursuant to this Section ‎2.4(c)(ii) shall be
irrevocable; provided that a notice of termination of the Commitments delivered
by the Borrower may state that such notice is conditioned upon other
transactions, in which case such notice may be revoked by the Borrower (by
written notice to the Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the Commitments
shall be permanent and may not be reinstated. Each reduction of the Commitments
shall be made ratably among the Lenders in accordance with each Lender’s Pro
Rata Share; provided that if any Lender is a Defaulting Lender at such time as
the Borrower elects to terminate or reduce the Commitments hereunder, the
Borrower may (in its discretion) apply all or any portion of the Commitments to
be reduced, to the Commitment of any one or more Defaulting Lenders specified by
the Borrower before applying any remaining reduction ratably to all other
Lenders.

 

(d)                Prepayments.

 

(i)                 Optional Prepayments. Borrower shall have the right at any
time and from time to time to prepay any Borrowing in whole or in part, without
premium or penalty, subject to prior notice in accordance with
Section ‎2.4(d)(i)(A).

 

(A)       Notice and Terms of Optional Prepayment. Borrower shall notify the
Agent by delivery of a notice of prepayment executed by an Authorized Person of
any prepayment hereunder not later than 11:00 a.m., at least three (3) Business
Days prior to the date of prepayment. Each such notice shall be irrevocable and
shall specify the prepayment date, the principal amount of each Borrowing or
portion thereof to be prepaid; provided that a notice of prepayment delivered by
Borrower may state that such notice is conditioned upon other transactions, in
which case such notice may be revoked by the Borrower (by written notice to the
Agent on or prior to the specified effective date) if such condition is not
satisfied. Promptly following receipt of any such notice relating to a
Borrowing, the Agent shall advise the applicable Lenders of the contents
thereof. Each prepayment of a Borrowing shall be applied ratably to the Loans.
Prepayments shall be accompanied by accrued interest to the extent required by
Section ‎2.6(d). Each prepayment hereunder shall be in an amount that is an
integral multiple of $1,000,000 (or such lesser amount or integral to repay all
outstanding Loans).

 

(ii)               Mandatory Prepayments.

 

(A)        In the event (x) Borrower and its Subsidiaries receive any Net Cash
Proceeds in any fiscal year from Non-Exclusive Licenses made pursuant to clause
(d) of the definition of “Permitted Dispositions” under this Agreement and (y)
if, at any time, the accumulated Excess Proceeds equal or exceed $50,000, then a
prepayment of 100% of the aggregate Net Cash Proceeds (to the extent
constituting Excess Proceeds) shall be required to be applied in accordance with
clause (D) below.

 

(B)       In the event that Borrower and its Subsidiaries receive any Net Cash
Proceeds in excess of $25,000 (including all or a portion of any cash deposits
or proceeds from any escrow agreement or other security of credit enhancements
provided by or on behalf of a purchaser or the purchasers under any Sale
Agreement that the Borrower and its Subsidiaries receive (and have the right to
retain pursuant to the terms of any Sale Agreement, as applicable)

 

8

from sales or dispositions of Collateral pursuant to clause (q) of the
definition of “Permitted Dispositions” under this Agreement or any other sale,
transfer or disposition outside of the Ordinary Course of Business (other than
any Non-Exclusive License), 100% of such Net Cash Proceeds shall be required to
be applied in accordance with clause (D) below.

 

(C)  If the aggregate amount required to be paid on any date pursuant to clause
(A) or (B) above is less than $50,000, the Borrower may defer any payments
required pursuant to such clause until the first date on which the aggregate Net
Cash Proceeds required to be applied pursuant to such clause equals or exceeds
$50,000 (at which time all theretofore unapplied amounts pursuant to such clause
shall be required to be applied).

 

(D)  Any prepayment required pursuant to clauses (A) through (B) above shall be
applied to obligations under this Agreement in the following manner:  all
prepayment amounts shall first, be offered to prepay the accrued and unpaid
interest with respect to the Loans hereunder, second, be offered to prepay the
outstanding principal amount of the Loans hereunder (with the balance, if any,
to reduce permanently any unused Commitments hereunder) in accordance with the
provisions of this clause (D), third, be applied as required pursuant to the DIP
Orders and fourth, be made available to the Borrower for general corporate
purposes in accordance with the Approved Budget.  The offer to prepay under
clauses first and second shall be made as follows:  within three (3) Business
Days after the occurrence of any prepayment event described in clauses (A) and
(B) above, the Borrower shall make an offer to apply all applicable prepayment
amounts to prepay the accrued and unpaid interest and outstanding principal
amount of the Loans hereunder (with the balance, if any, to reduce permanently
any unused Commitments hereunder) on the date that is three (3) Business Days
after the offer date (a “Prepayment Date”); provided that any prepayment as a
result of the closing under any Sale Agreement shall be applied substantially
concurrently with such closing. Any Lender may elect not to accept its pro rata
portion of any such prepayment amount  pursuant to clause second above (the
“Declined Amount”) by delivering a written notice thereof to the Agent at least
one Business Day prior to the applicable Prepayment Date, which Declined Amount
shall then be applied in accordance with clauses third and fourth above.

 

2.5           Promise to Pay; Promissory Notes.

 

(a)                      Borrower agrees to pay the Lender Group Expenses on the
earlier of (i) the first day of the month following the date on which the
applicable Lender Group Expenses were first incurred or (ii) the date on which
demand therefor is made by Agent (it being acknowledged and agreed that any
charging of such costs, expenses or Lender Group Expenses to the Loan Account
pursuant to the provisions of Section ‎2.6(d) shall be deemed to constitute a
demand for payment thereof for the purposes of this subclause (ii)). Borrower
promises to pay all of the Obligations (including principal, interest, premiums,
if any, fees, costs, and expenses (including Lender Group Expenses)) in full on
the Maturity Date or, if earlier, on the date on which the Obligations become
due and payable pursuant to the terms of this Agreement. Borrower agrees that
its obligations contained in the first sentence of this Section ‎2.5(a) shall
survive payment or satisfaction in full of all other Obligations.

 

(b)                      Any Lender may request that any portion of its
Commitments or the Loans made by it be evidenced by one or more promissory notes
(each a “Note”), in substantially the form attached hereto as Exhibit N-1. In
such event, Borrower shall execute and deliver to such Lender the requested Note
payable to the order of such Lender in a form furnished by Agent and reasonably
satisfactory to Borrower. Thereafter, the portion of the Commitments and Loans
evidenced by such Note and interest thereon shall at all times be represented by
one or more Notes in such form payable to the order of the payee named therein.

 

9

2.6               Interest Rates and Fees: Rates, Payments, and Calculations.

 

(a)                Interest Rates. Except as provided in Section ‎2.6(c), the
Obligations shall bear interest (from the date of incurrence through but
excluding the date of repayment or prepayment (whether by acceleration or
otherwise)) as follows:

 

(i)                 if the relevant Obligation is a LIBOR Rate Loan, at a per
annum rate equal to the LIBOR Rate plus 6.00%, and

 

(ii)               otherwise, at a per annum rate equal to the Base Rate plus
5.00% per annum.

 

(b)                Fees. With respect to each New Money General Purpose Loan,
the Borrower shall pay to Agent, for the account of each Lender holding a New
Money General Purpose Loan, a fee in an amount equal to 1.00% per annum on such
Lender’s New Money General Purpose Loan, which fee with respect to any New Money
General Purpose Loan shall be fully earned on the Funding Date of such New Money
General Purpose Loan, and which shall be due and payable on the earlier of (i)
the Maturity Date and (ii) the termination of the Commitments and payment or
other discharge of the outstanding principal amount of all Loans.

 

(c)                Default Rate. Automatically upon the occurrence and during
the continuation of an Event of Default (unless waived by the Required Lenders),
all Obligations that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest at a per annum rate equal to two (2) percentage
points above the per annum rate otherwise applicable thereunder.

 

(d)                [Reserved].

 

(e)                Computation. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 365/366 day year, for the actual
number of days elapsed in the period during which the interest or fees accrue.

 

(f)                 Intent to Limit Charges to Maximum Lawful Rate. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Borrower and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, that, anything contained herein to the
contrary notwithstanding, if such rate or rates of interest or manner of payment
exceeds the maximum allowable under applicable law, then, ipso facto, as of the
date of this Agreement, Borrower is and shall be liable only for the payment of
such maximum amount as is allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.

 

(g)                Payment. All interest and all other fees payable hereunder or
under any of the other Loan Documents shall be due and payable in cash, in
arrears, on the Interest Payment Date (or, if earlier, the Maturity Date) and,
with respect to accrued and unpaid interest on any Loan being prepaid or repaid,
the date of such prepayment or repayment, and (ii) all costs and expenses
payable hereunder or under any of the other Loan Documents, and all Lender Group
Expenses shall be due and payable on the earlier of (x) the first day of the
month following the date on which the applicable costs, expenses, or Lender
Group Expenses were first incurred or (y) the date on which demand therefor is
made by Agent (it being acknowledged and agreed that any charging of such costs,
expenses or Lender Group Expenses to the Loan Account pursuant to the provisions
of the following sentence shall be deemed to

 

10

constitute a demand for payment thereof for the purposes of this subclause (y)).
Borrower hereby authorize Agent, from time to time without prior notice to
Borrower, to charge to the Loan Account (A) as and when due and payable, all
fees payable hereunder or under any of the other Loan Documents, (B) as and when
incurred or accrued, all Lender Group Expenses, and (C) as and when due and
payable all other payment obligations payable under any Loan Document. All
amounts (including interest, fees, costs, expenses, Lender Group Expenses, or
other amounts payable hereunder or under any other Loan Document) shall
constitute Obligations hereunder, and shall initially accrue interest at the
rate then applicable to Loans.

 

2.7               Crediting Payments. The receipt of any payment item by Agent
shall not be required to be considered a payment on account unless such payment
item is a wire transfer of immediately available federal funds made to Agent’s
Account or unless and until such payment item is honored when presented for
payment. Should any payment item not be honored when presented for payment, then
Borrower shall be deemed not to have made such payment and interest shall be
calculated accordingly. Anything to the contrary contained herein
notwithstanding, any payment item shall be deemed received by Agent only if it
is received into Agent’s Account in Dollars on a Business Day on or before 2:00
p.m. If any payment item is received into Agent’s Account on a non-Business Day
or after 2:00 p.m. on a Business Day (unless Agent, at the direction of the
Required Lenders in their sole discretion, elects to credit it on the date
received), it shall be deemed to have been received by Agent as of the opening
of business on the immediately following Business Day.

 

2.8               Designated Account. Agent and any other member of the Lender
Group is authorized to make the Loans under this Agreement based upon telephonic
or other instructions received from anyone purporting to be an Authorized Person
or, without instructions, if pursuant to Section ‎2.6(d). Borrower agrees to
establish and maintain the Designated Account with the Designated Account Bank
for the purpose of receiving the proceeds of the Loans requested by Borrower and
made by Agent or the Lenders hereunder. Unless otherwise agreed by Agent and
Borrower, any Loan requested by Borrower and made by Agent or the Lenders
hereunder shall be made to the Designated Account.

 

2.9               Maintenance of Loan Account; Statements of Obligations. Agent
shall maintain an account on its books in the name of Borrower (the “Loan
Account”) on which Borrower will be charged with all Loans made by Agent or the
Lenders to Borrower or for Borrower’s account and with all other payment
Obligations hereunder or under the other Loan Documents, including, accrued
interest, fees and expenses, and Lender Group Expenses. In accordance with
Section ‎2.7, the Loan Account will be credited with all payments received by
Agent from Borrower or for Borrower’s account. Agent shall make available to
Borrower monthly statements regarding the Loan Account, including the principal
amount of the Loans, interest accrued hereunder, fees accrued or charged
hereunder or under the other Loan Documents, and a summary itemization of all
charges and expenses constituting Lender Group Expenses accrued hereunder or
under the other Loan Documents, and each such statement, absent manifest error,
shall be conclusively presumed to be correct and accurate and constitute an
account stated between Borrower and the Lender Group unless, within 30 days
after Agent first makes such a statement available to Borrower, Borrower shall
deliver to Agent written objection thereto describing the error or errors
contained in such statement.

 

2.10            [Reserved].

 

2.11            [Reserved].

 

2.12            LIBOR Option.

 

(a)                Interest. In lieu of having interest charged at the rate
based upon the Base Rate, Borrower shall have the option, subject to Section
2.12(b) below (the “LIBOR Option”) to have

 

11

interest on all or a portion of the Loans be charged (whether at the time when
made (unless otherwise provided herein), upon conversion from a Base Rate Loan
to a LIBOR Rate Loan, or upon continuation of a LIBOR Rate Loan as a LIBOR Rate
Loan) at a rate of interest based upon the LIBOR Rate. Interest on LIBOR Rate
Loans shall be payable on the earliest of (i) the last day of the Interest
Period applicable thereto; provided, that, subject to the following clause (ii),
in the case of any Interest Period greater than one month in duration, interest
shall be payable at one-month intervals after the commencement of the applicable
Interest Period and on the last day of such Interest Period, and (ii) the
Maturity Date. On the last day of each applicable Interest Period, unless
Borrower has properly exercised the LIBOR Option with respect thereto, the
interest rate applicable to such LIBOR Rate Loan automatically shall convert to
the rate of interest then applicable to Base Rate Loans of the same type
hereunder. At any time that an Event of Default has occurred and is continuing,
Borrower no longer shall have the option to request that Loans bear interest at
a rate based upon the LIBOR Rate.

 

(b)                LIBOR Election.

 

(i)            Borrower may, at any time and from time to time, so long as no
Event of Default has occurred and is continuing, elect to exercise the LIBOR
Option by notifying Agent prior to 11:00 a.m. at least three Business Days prior
to the commencement of the proposed Interest Period (or, if the LIBOR Option is
exercised in respect of the Closing Date Loans, prior to 6:00 p.m. on the
Business Day prior to the Closing Date (or such later time as may be reasonably
agreed by the Required Lenders)) (the “LIBOR Deadline”). Notice of Borrower’s
election of the LIBOR Option for a permitted portion of the Loans and an
Interest Period pursuant to this Section shall be made by delivery to Agent of a
LIBOR Notice (or, if the LIBOR Option is exercised in respect of the Closing
Date Loans, a Notice of Borrowing) received by Agent before the LIBOR Deadline,
or by telephonic notice received by Agent before the LIBOR Deadline (to be
confirmed by delivery to Agent of a LIBOR Notice received by Agent prior to 5:00
p.m. on the same day). Promptly upon its receipt of each such LIBOR Notice,
Agent shall provide a copy thereof to each of the affected Lenders.

 

(ii)          Each LIBOR Notice shall be irrevocable and binding on Borrower. In
connection with each LIBOR Rate Loan, Borrower shall indemnify, defend, and hold
Agent and the Lenders harmless against any loss, cost, or expense actually
incurred by Agent or any Lender as a result of (A) the payment of any principal
of any LIBOR Rate Loan other than on the last day of an Interest Period
applicable thereto (including as a result of an Event of Default), (B) the
conversion of any LIBOR Rate Loan other than on the last day of the Interest
Period applicable thereto, or (C) the failure to borrow, convert, continue or
prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered
pursuant hereto (such losses, costs, or expenses, “Funding Losses”). A
certificate of Agent or a Lender delivered to Borrower setting forth in
reasonable detail any amount or amounts that Agent or such Lender is entitled to
receive pursuant to this Section 2.12 shall be conclusive absent manifest error.
Borrower shall pay such amount to Agent or the Lender, as applicable, within 30
days of the date of its receipt of such certificate. If a payment of a LIBOR
Rate Loan on a day other than the last day of the applicable Interest Period
would result in a Funding Loss, Agent may, in its sole discretion at the request
of Borrower, hold the amount of such payment as cash collateral in support of
the Obligations until the last day of such Interest Period and apply such
amounts to the payment of the applicable LIBOR Rate Loan on such last day, it
being agreed that Agent has no obligation to so defer the application of
payments to any LIBOR Rate Loan and that, in the event that Agent does not defer
such application, Borrower shall be obligated to pay any resulting Funding
Losses.

 

(iii)        Borrower may only exercise the LIBOR Option for proposed LIBOR Rate
Loans of at least $1,000,000.

 

(c)                Conversion. Borrower may convert LIBOR Rate Loans to Base
Rate Loans at

 

12

any time; provided, that in the event that LIBOR Rate Loans are converted or
prepaid on any date that is not the last day of the Interest Period applicable
thereto, including as a result of any prepayment through the required
application by Agent of any payments or proceeds of Collateral in accordance
with Section 2.4(b) or for any other reason, including early termination of the
term of this Agreement or acceleration of all or any portion of the Obligations
pursuant to the terms hereof, Borrower shall indemnify, defend, and hold Agent
and the Lenders and their Participants harmless against any and all Funding
Losses in accordance with Section 2.12 (b)(ii).

 

(d)                Special Provisions Applicable to LIBOR Rate.

 

(i)            The LIBOR Rate may be adjusted by Agent with respect to any
Lender on a prospective basis to take into account any additional or increased
costs to such Lender of maintaining or obtaining any eurodollar deposits or
increased costs, in each case, due to changes in applicable law occurring
subsequent to the commencement of the then applicable Interest Period, including
any Changes in Law (including any changes in tax laws (except changes (a) with
respect to any Taxes governed by Section 16 of this Agreement and (b) with
respect to any Excluded Taxes) and changes in the reserve requirements imposed
by the Board of Governors, which additional or increased costs would increase
the cost of funding or maintaining loans bearing interest at the LIBOR Rate;
provided that Borrower shall not be required to compensate a Lender pursuant to
this Section for any additional or increased costs arising more than 180 days
prior to the date that such Lender notifies Borrower of the circumstances giving
rise to such additional or increased costs and of such Lender’s intention to
claim compensation therefor; provided further that if such claim arises by
reason of circumstances that is retroactive or if the effects of such
circumstances were not reasonably known to such Lender during such 180-day
period referred to above, then the 180-day period referred to above shall be
extended to include the period of retroactive effect thereof or the date such
effects of such circumstances became known or would have reasonably been known
to such Lender, as applicable. In any such event, the affected Lender shall give
Borrower and Agent notice of such a determination and adjustment and Agent
promptly shall transmit the notice to each other Lender and, upon its receipt of
the notice from the affected Lender, Borrower may, by notice to such affected
Lender (A) require such Lender to furnish to Borrower a statement setting forth
in reasonable detail the basis for adjusting such LIBOR Rate and the method for
determining the amount of such adjustment, or (B) repay the LIBOR Rate Loans of
such Lender with respect to which such adjustment is made (together with any
amounts due under Section 2.12(b)(ii)).

 

(ii)          In the event that any change in market conditions or any Change in
Law shall at any time after the date hereof, in the reasonable opinion of any
Lender, make it unlawful or impractical for such Lender to fund or maintain
LIBOR Rate Loans or to continue such funding or maintaining, or to determine or
charge interest rates at the LIBOR Rate, (x) such Lender shall give notice of
such changed circumstances to Agent and Borrower and Agent promptly shall
transmit the notice to each other Lender, (y) in the case of any LIBOR Rate
Loans of such Lender that are outstanding, the date specified in such Lender’s
notice shall be deemed to be the last day of the Interest Period of such LIBOR
Rate Loans, and interest upon the LIBOR Rate Loans of such Lender thereafter
shall accrue interest at the rate then applicable to Base Rate Loans, and (z)
Borrower shall not be entitled to elect the LIBOR Option until such Lender
determines that it would no longer be unlawful or impractical to do so.

 

(e)                No Requirement of Matched Funding. Anything to the contrary
contained herein notwithstanding, neither Agent, nor any Lender, nor any of
their Participants, is required actually to acquire eurodollar deposits to fund
or otherwise match fund any Obligation as to which interest accrues at the LIBOR
Rate.

 

2.13            Capital Requirements.

 

13

(a)                If, after the date hereof, any Lender determines that (i) any
Change in Law regarding capital or reserve requirements for banks or bank
holding companies, or (ii) compliance by such Lender, or its parent bank holding
companies, with any guideline, request or directive of any Governmental
Authority regarding capital adequacy (whether or not having the force of law),
has the effect of reducing the return on such Lender’s, or such holding
companies’ capital as a consequence of such Lender’s commitments hereunder to a
level below that which such Lender, or such holding companies could have
achieved but for such Change in Law or compliance (taking into consideration
such Lender’s, or such holding companies’ then existing policies with respect to
capital adequacy and assuming the full utilization of such entity’s capital) by
any amount deemed by such Lender to be material, then such Lender may notify
Borrower and Agent thereof. Following receipt of such notice, Borrower agrees to
pay such Lender on demand the amount of such reduction of return of capital as
and when such reduction is determined, payable within 30 days after presentation
by such Lender of a statement in the amount and setting forth in reasonable
detail such Lender’s calculation thereof and the assumptions upon which such
calculation was based (which statement shall be deemed true and correct absent
manifest error). In determining such amount, such Lender may use any reasonable
averaging and attribution methods. Failure or delay on the part of any Lender to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender’s right to demand such compensation; provided that Borrower shall
not be required to compensate a Lender pursuant to this Section for any
reductions in return incurred more than 180 days prior to the date that such
Lender notifies Borrower of such Change in Law giving rise to such reductions
and of such Lender’s intention to claim compensation therefor; provided further
that if such claim arises by reason of the Change in Law that is retroactive or
if the effects of such Change in Law were not reasonably known to such Lender
during such 180-day period referred to above, then the 180-day period referred
to above shall be extended to include the period of retroactive effect thereof
or the date such effects of such Change in Law became known or would have
reasonably been known to such Lender, as applicable. Borrower shall not be
required to pay any amount to any Person under this Section ‎2.13(a) in respect
of any Taxes governed by Section ‎16 of this Agreement or any Excluded Taxes.

 

(b)                If any Lender requests additional or increased costs referred
to in Section 2.12(d)(i) or amounts under Section ‎2.13(a) or sends a notice
under Section 2.12(a)(ii) (such Lender, an “Affected Lender”), then such
Affected Lender shall use reasonable efforts to promptly designate a different
one of its lending offices or to assign its rights and obligations hereunder to
another of its offices or branches, if (i) in the reasonable judgment of such
Affected Lender, such designation or assignment would eliminate or reduce
amounts payable pursuant to Section 2.12(d)(i) or Section ‎2.13(a), as
applicable, or would eliminate the illegality or impracticability of funding or
maintaining LIBOR Rate Loans and (ii) in the reasonable judgment of such
Affected Lender, such designation or assignment would not subject it to any
material unreimbursed cost or expense and would not otherwise be materially
disadvantageous to it. Borrower agrees to pay all reasonable out-of-pocket costs
and expenses incurred by such Affected Lender in connection with any such
designation or assignment. If, after such reasonable efforts, such Affected
Lender does not so designate a different one of its lending offices or assign
its rights to another of its offices or branches so as to eliminate Borrower’s
obligation to pay any future amounts to such Affected Lender pursuant to Section
2.12(d)(i) or Section ‎2.13(a), as applicable, or to enable Borrower to obtain
LIBOR Rate Loans, then Borrower (without prejudice to any amounts then due to
such Affected Lender under Section 2.12(d)(i) or Section ‎2.13(a), as
applicable) may, unless prior to the effective date of any such assignment the
Affected Lender withdraws its request for such additional amounts under Section
2.12(d)(i) or Section ‎2.13(a), as applicable, or indicates that it is no longer
unlawful or impractical to fund or maintain LIBOR Rate Loans, substitute a
Lender reasonably acceptable to Agent to purchase the Obligations owed to such
Affected Lender and such Affected Lender’s Commitments hereunder (a “Replacement
Lender”), and if such Replacement Lender agrees to such purchase, such Affected
Lender shall assign to the Replacement Lender its Obligations and Commitments,
and upon such purchase by the Replacement

 

14

Lender, which such Replacement Lender shall be deemed to be a “Lender” for
purposes of this Agreement and such Affected Lender shall cease to be a “Lender”
for purposes of this Agreement.

 

(c)                Notwithstanding anything herein to the contrary, the
protection of Sections 2.12(d) and ‎2.13 shall be available to each Lender (as
applicable) regardless of any possible contention of the invalidity or
inapplicability of the law, rule, regulation, judicial ruling, judgment,
guideline, treaty or other change or condition which shall have occurred or been
imposed, so long as it shall be customary for lenders affected thereby to comply
therewith. Notwithstanding any other provision herein, no Lender shall demand
compensation pursuant to this Section ‎2.13 if it shall not at the time be the
general policy or practice of such Lender (as the case may be) to demand such
compensation in similar circumstances under comparable provisions of other
credit agreements, if any.

 

2.14            Priority and Liens Applicable to the Company. The Borrower
hereby covenants, represents and warrants that, upon the execution of this
Agreement and upon the entry of the Interim DIP Order (and when applicable, the
Final DIP Order), subject in each case, to the Carve Out:

 

(a)                the Obligations of the Loan Parties, pursuant to Section
364(c)(1) of the Bankruptcy Code, shall be entitled to Superpriority Claim
status in the Cases, subject only to the Carve Out to the extent provided in the
applicable DIP Order, and any payments or proceeds on account of such
Superpriority Claim shall be distributed in accordance with Section 2.4(b)(iii);

 

(b)                the Obligations of the Loan Parties, pursuant to Section
364(c)(2) of the Bankruptcy Code, shall be secured by a perfected first priority
Lien on all Collateral that is not subject to valid, perfected, enforceable and
non-avoidable liens as of the Petition Date;

 

(c)                the Obligations of the Loan Parties, pursuant to section
364(d)(1) of the Bankruptcy Code, shall at all times be secured by a valid,
binding, continuing, enforceable, fully-perfected first priority senior priming
security interest in and Lien upon all pre- and post-petition property of the
Loan Parties, whether now existing or hereafter acquired, of the same nature,
scope and type as the Prepetition Collateral. Such security interests and Liens
shall be senior in all respects to the interests in such property of the
Prepetition Revolving Secured Parties and Nalpropion (collectively, the “Primed
Liens”), in each case arising from their respective current and future Liens;
and

 

(d)                the Obligations of the Loan Parties, pursuant to Section
364(c)(3) of the Bankruptcy Code, shall be secured by a valid, binding,
continuing, enforceable, fully-perfected Lien on all Collateral that is subject
to any Permitted Prior Lien, which Lien securing the Obligations shall be junior
only to Permitted Prior Liens on such Collateral.

 

2.15            Payment of Obligations. Subject to the provisions of Section
9.1, upon the maturity (whether by acceleration or otherwise) of any of the
Obligations of the Loan Parties under this Agreement or any of the other Loan
Documents, the Agent and the Lenders shall be entitled to immediate payment of
such Obligations without further application to or order of the Bankruptcy
Court.

 

2.16            No Discharge; Survival of Claims. Each Loan Party agrees that to
the extent that the Obligations hereunder have not been satisfied in full (a)
its Obligations arising hereunder shall not be discharged by the entry of any
order of the Bankruptcy Court confirming a Reorganization Plan (and the
Borrower, pursuant to Section 1141(d)(4) of the Bankruptcy Code, hereby waives
any such discharge) and (b) the Superpriority Claim granted to the Agent and the
Lenders pursuant to the DIP Orders and described in Section 2.14(a) and the
Liens granted to the Agent pursuant to the DIP Orders and described in Section
2.14(b) through (d) shall not be affected in any manner by the entry of any
order of the Bankruptcy Court confirming a Reorganization Plan, other than the
discharge and release of such Liens and upon full satisfaction as provided for
herein.

 

15

2.17            Incremental Loans.

 

(a)                At any time during the period from and after the Closing Date
through but excluding the final day of the Availability Period, the Borrower may
(but subject to the conditions set forth in clauses ‎(b) and (c) below),
increase the principal amount of the Delayed Draw Commitments by an amount in
the aggregate for all such increases in term loan commitments not to exceed
$5,000,000 (each such increase, an “Incremental Facility” and the loans and
commitments thereunder, “Incremental Loans” and “Incremental Commitments”).
Incremental Facilities may be provided by any Lender (it being understood that
no Lender shall be obligated to increase its Commitments or participate in any
Incremental Facility) or, solely to the extent consented to by the Initial
Lenders (or, if no Initial Lenders are party to this Agreement at such time, the
Required Lenders) in their sole discretion, any prospective lender who is
reasonably satisfactory to Agent and Borrower.

 

(b)                Each of the following shall be conditions precedent to any
Incremental Facility:

 

(i)                 Borrower has obtained the commitment of one or more Lenders
(or, solely to the extent consented to by the Initial Lenders (or, if no Initial
Lenders are party to this Agreement at such time, the Required Lenders) in their
sole discretion, other prospective lenders) reasonably satisfactory to Agent and
Borrower to provide the applicable Incremental Facility and any such Lenders (or
prospective lenders) shall have executed and delivered to the Agent and the
Borrower such documentation as may be reasonably required by the Agent to
evidence and effectuate such Incremental Facility (an “Incremental Agreement”
and the date of the effectiveness of such Incremental Agreement the “Incremental
Date”), in form and substance satisfactory to the Initial Lenders (or, if no
Initial Lenders are party to this Agreement at such time, the Required Lenders),
to which such Lenders (or prospective lenders), Borrower, and Agent are party,
and

 

(ii)               each of the conditions precedent set forth in Section ‎3.4
and any other conditions mutually agreed to in the Incremental Agreement are
satisfied.

 

On the Incremental Date of such Incremental Agreement, each Lender party thereto
and not previously a party to this Agreement shall become a Lender for all
purposes in connection with this Agreement. Any Incremental Agreement may, with
the consent of Agent, Borrower and the Lenders or prospective lenders agreeing
to the proposed Incremental Facility, effect such amendments to this Agreement
and the other Loan Documents as may be necessary or appropriate to effectuate
the provisions of this Section ‎2.17.

 

(c)                The terms and provisions of the Loans made pursuant to any
Incremental Facility shall be identical to the Delayed Draw Loans, except as
otherwise mutually agreed in the Incremental Agreement.

 

(d)                      Unless otherwise specifically provided herein, all
references in this Agreement and any other Loan Document to Loans shall be
deemed, unless the context otherwise requires, to include Loans made pursuant to
any Incremental Facility pursuant to this Section ‎2.17.

 

The Incremental Loans established pursuant to this Section ‎2.17 shall
constitute Loans under, and shall be entitled to all the benefits afforded by,
this Agreement and the other Loan Documents, and shall, without limiting the
foregoing, benefit equally and ratably from any guarantees and the security
interests created by the Loan Documents. Borrower shall take any actions
reasonably required by Agent to ensure and demonstrate that the Liens and
security interests granted by the Loan Documents continue to be perfected under
the Code or otherwise after giving effect to the establishment of any such
Incremental Facility.

 

16

3.                   CONDITIONS; TERM OF AGREEMENT.

 

3.1               Conditions Precedent to the Closing Date Loans. The
effectiveness of this Agreement and the obligation of each Lender to make the
Closing Date Loans provided for hereunder is subject to the fulfillment, to the
satisfaction of each Lender, of each of the conditions precedent set forth on
Schedule 3.1 (the making of such Closing Date Loans by a Lender being
conclusively deemed to be its satisfaction or waiver of the conditions precedent
unless the Agent has received written notice from such Lender prior to the
Closing Date specifying its objection thereto), as well as the conditions set
forth in Section ‎3.3.

 

3.2               Conditions Precedent to each Delayed Draw Loan. The obligation
of each Lender to make each Delayed Draw Loan provided for hereunder is subject
to the fulfillment, to the satisfaction of the Required Lenders, of each of the
conditions precedent set forth on Schedule 3.2 (the making of such Delayed Draw
Loan by a Lender being conclusively deemed to be its satisfaction or waiver of
the conditions precedent unless the Agent received written notice from such
Lender prior to the applicable Funding Date specifying its objection thereto),
as well as the conditions set forth in Section ‎3.3.

 

3.3               Conditions Precedent to all Extensions of Credit. The
obligation of the Lender Group (or any member thereof) to make any Loan
hereunder (or to extend any other credit hereunder) at any time shall be subject
to the following conditions precedent:

 

(a)                the representations and warranties of Borrower or its
Subsidiaries contained in this Agreement or in the other Loan Documents shall be
true and correct in all material respects (except 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) on and as
of the date of such Loan, as though made on and as of such date (except to the
extent that such representations and warranties relate solely to an earlier
date, in which case such representations and warranties shall be true and
correct in all material respects (except 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) as of such earlier
date);

 

(b)                no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;

 

(c)                in the case of any Loan to be made on or following the date
of entry of the Final DIP Order, all “second day orders” approving on a final
basis any “first day” orders intended to be entered before the entry of the
Final DIP Order, including a final cash management order and any order
establishing procedures for the administration of the Cases and/or approval of
significant transactions, including, without limitation, asset sale procedures,
regardless of when filed or entered, shall have been entered by the Bankruptcy
Court and shall be reasonably satisfactory in form and substance to the Agent;
and

 

(d)                the amount of such Loan, together with all other applicable
Loans then outstanding, shall not exceed the amount authorized by the Interim
DIP Order or the Final DIP Order, as applicable.

 

3.4               Conditions Precedent to each Incremental Loan. The obligation
of a Lender to make any Incremental Loan provided for hereunder is subject to
the fulfillment, to the satisfaction of, or waiver by, such Lender, of each of
the conditions precedent set forth on Schedule 3.2 and any other conditions
mutually agreed to in the Incremental Agreement (the making of such Incremental
Loan by a Lender being conclusively deemed to be its satisfaction or waiver of
the conditions precedent unless the Agent received written notice from such
Lender prior to the applicable Funding Date specifying its objection thereto),
as well as the conditions set forth in Section ‎3.3.

 

17

3.5               Maturity. Subject to Section ‎9.1, this Agreement shall
continue in full force and effect for a term ending on the Maturity Date.

 

3.6               Effect of Maturity. On the Maturity Date, all commitments of
the Lender Group to provide additional credit hereunder shall automatically be
terminated and all of the Obligations immediately shall become due and payable
without notice or demand and Borrower shall be required to repay all of the
Obligations in full. No termination of the obligations of the Lender Group
(other than payment in full of the Obligations and termination of the
Commitments) shall relieve or discharge any Loan Party of its duties,
obligations, or covenants hereunder or under any other Loan Document and Agent’s
Liens in the Collateral shall continue to secure the Obligations and shall
remain in effect until all Obligations have been paid in full and the
Commitments have been terminated. When all of the Obligations have been paid in
full and the Lender Group’s Commitments have been terminated irrevocably, Agent
will, at Borrower’s sole expense, execute and deliver any termination
statements, lien releases, discharges of security interests, and other similar
discharge or release documents (and, if applicable, in recordable form) as are
reasonably necessary to release, as of record, Agent’s Liens and all notices of
security interests and liens previously filed by Agent.

 

3.7               Conditions Subsequent. The obligation of the Lender Group (or
any member thereof) to continue to make Loans (or otherwise extend credit
hereunder) is subject to the fulfillment, on or before the date applicable
thereto (or such longer date as the Required Lenders may agree), of the
conditions subsequent described in Section 5.18 (the failure by Borrower to so
perform or cause to be performed such conditions subsequent as and when required
by the terms thereof (after giving effect to any extensions agreed to by the
Required Lenders), shall constitute an Event of Default).

 

3.8               Early Termination by Borrower. Borrower has the option, at any
time upon ten (10) Business Days prior written notice to Agent, to terminate
this Agreement and terminate the Commitments hereunder by repaying to Agent all
of the Obligations in full. The foregoing notwithstanding, (a) Borrower may, by
written notice to Agent, rescind termination notices relative to proposed
payments in full of the Obligations with the proceeds of third party
Indebtedness if the closing for such issuance or incurrence does not happen on
or before the date of the proposed termination and the termination notice was
stated to be conditional upon such closing (in which case, a new notice shall be
required to be sent in connection with any subsequent termination), and (b)
Borrower may extend the date of termination at any time with the consent of the
Required Lenders if the termination notice was stated to be conditional upon the
occurrence of a specified event, which event has not yet occurred (which consent
shall not be unreasonably withheld or delayed to the extent not exceeding an
aggregate period of an additional five Business Days).

 

4.                   REPRESENTATIONS AND WARRANTIES.

 

In order to induce the Lender Group to enter into this Agreement, Borrower makes
the following representations and warranties to the Lender Group which shall be
true, correct, and complete, in all material respects (except 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), as of the Closing Date, and shall be true, correct, and complete, in
all material respects (except 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), as of the date of the making of
each Loan made thereafter, as though made on and as of the date of such Loan
(except to the extent that such representations and warranties relate solely to
an earlier date, in which case such representations and warranties shall be true
and correct in all material respects (except 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) as of such earlier
date) and such representations and warranties shall survive the execution and
delivery of

 

18

this Agreement:

 

4.1               Due Organization and Qualification; Subsidiaries.

 

(a)                Each of the Loan Parties and their Subsidiaries (i) is duly
organized or incorporated, as applicable, and existing and (to the extent such
concept is applicable in such jurisdiction) in good standing under the laws of
the jurisdiction of its organization, (ii) is qualified to do business in any
jurisdiction where the failure to be so qualified could reasonably be expected
to result in a Material Adverse Effect, and (iii) has all requisite power and
authority to own and operate its properties, to carry on its business as now
conducted and as proposed to be conducted, to enter into the Loan Documents to
which it is a party and to carry out the transactions contemplated thereby.

 

(b)                None of the Loan Parties or their Subsidiaries is subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its or any of its Subsidiaries’ Equity Interests or any
security convertible into or exchangeable for any of its or any of its
Subsidiaries’ Equity Interests.

 

(c)                Set forth on Schedule 4.1(c) (as such Schedule may be updated
from time to time to reflect changes resulting from transactions permitted under
this Agreement), is a complete and accurate list of each Loan Party’s direct and
indirect Subsidiaries, showing: (i) the number of shares of each class of common
and preferred Equity Interests authorized for each of such Subsidiaries, (ii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by Borrower and (iii) identification of whether such
Subsidiary is a Guarantor. All of the outstanding Equity Interests of each such
Subsidiary has been validly issued and is fully paid and non-assessable.

 

(d)                Except as set forth on Schedule 4.1(d), there are no
subscriptions, options, warrants, or calls relating to any shares of Borrower’s
or any of its Subsidiaries’ Equity Interests, including any right of conversion
or exchange under any outstanding security or other instrument.

 

4.2               Due Authorization; No Conflict.

 

(a)                Subject to entry of the Interim DIP Order (or the Final DIP
Order, when applicable), as to each Loan Party, the execution, delivery, and
performance by such Loan Party of the Loan Documents to which it is a party have
been duly authorized by all necessary action on the part of such Loan Party.

 

(b)                Subject to entry of the Interim DIP Order (or the Final DIP
Order, when applicable), as to each Loan Party, the execution, delivery, and
performance by such Loan Party of the Loan Documents to which it is a party do
not and will not (i) violate any material provision of Requirements of Law
applicable to any Loan Party or its Subsidiaries, the Governing Documents of any
Loan Party or its Subsidiaries, or any order, judgment, or decree of any court
or other Governmental Authority binding on any Loan Party or its Subsidiaries,
(ii) conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under (A) the Stalking Horse Sale Agreement or
(B) any Material Contract, except to the extent for purposes of this clause (B),
any such conflict, breach or default could not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect, (iii) result in or
require the creation or imposition of any Lien of any nature whatsoever upon any
assets of any Loan Party, other than Permitted Collateral Liens, (iv) require
any approval of any holder of Equity Interests of a Loan Party or any approval
or consent of any Person under any Material Contract of any Loan Party or any
Subsidiary, other than consents or approvals that have been obtained and that
are still in force and effect and except, in the case of any Material Contract
(other than the debt documents referred to in subclause (ii)(A) above), for
consents or approvals, the failure to obtain could not individually or in the
aggregate reasonably be expected to cause a Material

 

19

Adverse Effect or (v) or materially adversely affect any Health Care Permit.

 

4.3               Governmental Consents. Subject to entry of the Interim DIP
Order (or the Final DIP Order, when applicable), the execution, delivery, and
performance by each Loan Party of the Loan Documents to which such Loan Party is
a party and the consummation of the transactions contemplated by the Loan
Documents do not and will not require any registration with, consent, or
approval of, or notice to, or other action with or by, any Governmental
Authority, other than registrations, consents, approvals, notices, or other
actions that have been obtained and that are still in force and effect and
except for filings and recordings with respect to the Collateral not yet
required to be made pursuant to the terms of this Agreement or the other Loan
Documents, or otherwise delivered to Agent for filing or recordation, as of the
Closing Date.

 

4.4               Binding Obligations; Perfected Liens.

 

(a)                Subject to entry of the Interim DIP Order (or the Final DIP
Order, when applicable), each Loan Document has been duly executed and delivered
by each Loan Party that is a party thereto and is the legally valid and binding
obligation of such Loan Party, enforceable against such Loan Party in accordance
with its respective terms and the DIP Orders, except as enforcement may be
limited by equitable principles or by bankruptcy, insolvency, examinership,
reorganization, moratorium, or similar laws relating to or limiting creditors’
rights generally.

 

(b)                Subject to entry of the Interim DIP Order (or the Final DIP
Order, when applicable), Agent’s Liens are validly created, perfected and first
priority Liens, or will be perfected, with the priority required by this
Agreement, within any applicable timeframes as set forth in the Loan Documents
(except, in the case of perfection of any Lien, to the extent none of the Loan
Parties are required to take any further steps or actions pursuant to any Loan
Document to perfect such Lien), subject only to Permitted Collateral Liens.

 

4.5               Title to Assets; No Encumbrances; Intellectual Property. Each
of the Loan Parties and its Subsidiaries has (a) good, sufficient and legal
title to (in the case of fee interests in Real Property), (b) valid leasehold
interests in (in the case of leasehold interests in real or personal property),
and (c) good and marketable title to (in the case of all other personal
property), all of their respective assets reflected in their most recent
financial statements delivered to the Initial Lenders prior to the Closing Date
or delivered pursuant to Section ‎5.1, as applicable, in each case except for
assets disposed of since the date of such financial statements to the extent
permitted hereby. All of such assets are free and clear of Liens except for
Permitted Liens. Each of Borrower and its Subsidiaries (if any) owns, or
possesses the right to use, all of the Intellectual Property that is reasonably
necessary for the operation of their respective businesses as conducted, except
for those for which the failure to own or possess the right to use could not
reasonably be expected to result in a Material Adverse Effect. As of the Closing
Date, a complete and correct list of all of (x) the registrations and
applications for Intellectual Property applicable to any of the Products or
otherwise owned by any of the Loan Parties or its Subsidiaries and (y) licenses
of Intellectual Property (including Patent Licenses) applicable to any of the
Products is set forth on Schedule 4.5. To Borrower’s knowledge, the operation of
Borrower’s and each of its Subsidiaries’ respective businesses, by Borrower or
any of its Subsidiaries as currently conducted, does not infringe upon or
otherwise violate any Intellectual Property owned by any other Person, except
as, either individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect. No claim or litigation alleging that the
Intellectual Property owned or used by Borrower or any of its Subsidiaries, or
the conduct of any Borrower’s or any of its Subsidiaries’ businesses, infringe
or otherwise violate the Intellectual Property of any Person, is pending or, to
knowledge of Borrower, threatened in writing, which, either individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.
To Borrower’s knowledge, no Person has infringed or misappropriated or is

 

20

currently infringing or misappropriating any Intellectual Property owned by any
of the Loan Parties or their Subsidiaries, in each case, that either
individually or in the aggregate could reasonably be expected to result in a
Material Adverse Effect. No Loan Party holds any assets as the trustee of any
trust.

 

4.6               Litigation.

 

(a)                Except for the Cases, there are no actions, suits, or
proceedings pending or, to the knowledge of Borrower, after due inquiry,
threatened in writing against a Loan Party or any of its Subsidiaries that
either individually or in the aggregate could reasonably be expected to result
in a Material Adverse Effect.

 

(b)                Schedule 4.6(b) sets forth a complete and accurate
description of each of the actions, suits, or proceedings with asserted
liabilities in excess of, or that could reasonably be expected to result in
liabilities in excess of $2,000,000 that, as of the Closing Date, is pending or,
to the knowledge of Borrower, after due inquiry, threatened against a Loan Party
or any of its Subsidiaries.

 

(c)                To the knowledge of the Loan Parties, there is no pending or
threatened Health Care Proceeding commenced, brought, conducted or heard by or
before, or otherwise involving, any Governmental Authority or arbitrator against
or affecting any Loan Party or any Subsidiary of any Loan Party, except to the
extent such pending or threatened Health Care Proceeding could not reasonably be
expected to result in a Material Adverse Effect. No Loan Party or Subsidiary has
received written notice of any such Health Care Proceeding against or affecting
such Loan Party or any Subsidiary of such Loan Party.

 

4.7               Compliance with Laws. No Loan Party nor any of its
Subsidiaries is: (a) in violation of any applicable laws, rules, regulations,
executive orders, or codes (including Environmental Laws) that, individually or
in the aggregate, could reasonably be expected to result in a Material Adverse
Effect, or (b) subject to or in default with respect to any final judgments,
writs, injunctions, decrees, rules or regulations of any court or any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality or any other Governmental Authority, domestic or
foreign, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.

 

4.8               No Material Adverse Effect. All historical financial
statements relating to the Loan Parties and their Subsidiaries that have been
delivered by Borrower to Agent have been prepared in accordance with GAAP
(except, as expressly noted therein and/or in the case of unaudited financial
statements, for the lack of footnotes and being subject to year-end audit
adjustments) and present fairly in all material respects, the Loan Parties’ and
their Subsidiaries’ consolidated financial condition as of the date thereof and
results of operations for the period then ended. Since September 30, 2018, no
event, circumstance, or change has occurred that has or could reasonably be
expected to result in a Material Adverse Effect with respect to the Loan Parties
and their Subsidiaries.

 

4.9               [Reserved].

 

4.10            Employee Benefits. No Loan Party, none of their Subsidiaries,
nor any of their ERISA Affiliates maintains or contributes to, or within the
last six years has contributed to, any Benefit Plan or Multiemployer Plan.

 

4.11            Environmental Condition. Except as set forth on Schedule 4.11,
(a) to Borrower’s knowledge, no Loan Party’s nor any of its Subsidiaries’
properties or assets has ever been used by a Loan Party, its Subsidiaries, or by
previous owners or operators in the disposal of, or to produce, store, handle,
treat, release, or transport, any Hazardous Materials, where such disposal,
production, storage, handling, treatment, release or transport was in violation,
in any material respect, of any applicable Environmental

 

21

Law, (b) to Borrower’s knowledge, after due inquiry, no Loan Party’s nor any of
its Subsidiaries’ properties or assets has ever been designated or identified in
any manner pursuant to any Environmental Law as a Hazardous Materials disposal
site or as a location at which any material Remedial Action is required pursuant
to any Environmental Law, (c) no Loan Party nor any of its Subsidiaries has
received notice that an Environmental Lien has attached to any revenues or to
any Real Property owned or operated by a Loan Party or its Subsidiaries or that
any such Environmental Lien has caused such Real Property to be subject to any
material restrictions on the ownership, occupancy, use of transferability of
such Real Property by any Loan Party or any of its Subsidiaries, (d) except to
the extent such Loan Party or Subsidiary has set aside on its books financial
reserves as required by GAAP (or such other generally accepted accounting
principles as may be applicable in the relevant jurisdiction), to Borrower’s
knowledge, there are no releases of Hazardous Materials at, on, under, from or
affecting any Real Property, or other Environmental Liabilities, that are
reasonably expected to form the basis of a material Environmental Action against
any Loan Party or any of its Subsidiaries and (e) no Loan Party nor any of its
Subsidiaries nor any of their respective facilities or operations is subject to
any outstanding Environmental Action or any written order, consent decree, or
settlement agreement with any Person relating to any Environmental Law or
Environmental Liability that individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.

 

4.12            Complete Disclosure. All factual information taken as a whole
(other than forward-looking information and projections and information of a
general economic nature and general information about Borrower’s industry)
furnished by or on behalf of a Loan Party or its Subsidiaries in writing to
Agent or any Lender (including all information contained in the Schedules hereto
or in the other Loan Documents) for purposes of or in connection with this
Agreement or the other Loan Documents, and all other such factual information
taken as a whole (other than forward-looking information and projections and
information of a general economic nature and general information about
Borrower’s industry) hereafter furnished by or on behalf of a Loan Party or its
Subsidiaries in writing to Agent or any Lender will be, true and accurate, in
all material respects, on the date as of which such information is dated or
certified and not incomplete by omitting to state any fact necessary to make
such information (taken as a whole) not misleading in any material respect at
such time in light of the circumstances under which such information was
provided. As of the date on which any Projections are delivered to Agent and/or
the Lenders, such Projections represent Borrower’s good faith estimate, on the
date such Projections are delivered, of the Loan Parties’ and their
Subsidiaries’ future performance for the periods covered thereby based upon
assumptions believed by Borrower to be reasonable at the time of the delivery
thereof to Agent and/or Lenders (it being understood that such Projections are
subject to uncertainties and contingencies, many of which are beyond the control
of the Loan Parties and their Subsidiaries, that no assurances can be given that
such Projections will be realized, and that actual results may differ in a
material manner from such Projections).

 

4.13            Patriot Act. To the extent applicable, each Loan Party is in
compliance, in all material respects, with the (a) Trading with the Enemy Act,
as amended, and each of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any
other enabling legislation or executive order relating thereto, (b) Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA Patriot Act of 2001) (the “Patriot Act”) and (c) any
other applicable Anti-Terrorism Laws. No part of the proceeds of the loans made
hereunder will be used by any Loan Party or any of their Affiliates, directly or
indirectly, for any payments to any governmental official or employee, political
party, official of a political party, candidate for political office, or anyone
else acting in an official capacity, in order to obtain, retain or direct
business or obtain any improper advantage, in violation of the United States
Foreign Corrupt Practices Act of 1977, as amended.

 

4.14            Indebtedness. Set forth on Schedule 4.14 is a true and complete
list of all Indebtedness

 

22

of each Loan Party and each of its Subsidiaries outstanding immediately prior to
the Closing Date that is to remain outstanding immediately after giving effect
to the closing hereunder on the Closing Date and such Schedule accurately sets
forth the aggregate principal amount of such Indebtedness as of the Closing
Date.

 

4.15            Payment of Taxes. Except as otherwise permitted under Section
‎5.5, all income and other material tax returns and reports of each Loan Party
and its Subsidiaries required by any Governmental Authority to be filed by any
of them have been timely filed with the appropriate Governmental Authority, and
all income and other material taxes shown on such tax returns to be due and
payable and all material assessments, fees and other governmental charges upon a
Loan Party and its Subsidiaries and upon their respective assets, income,
businesses and franchises that are due and payable have been paid to the
appropriate Governmental Authority when due and payable. Each Loan Party and
each of its Subsidiaries have made adequate provision in accordance with GAAP
for all taxes not yet due and payable. Borrower does not know of any proposed
tax assessment against a Loan Party or any of its Subsidiaries that is not being
actively contested by such Loan Party or such Subsidiary diligently, in good
faith, and by appropriate proceedings; provided such reserves or other
appropriate provisions, if any, as shall be required in conformity with GAAP
shall have been made or provided therefor. Except as set forth on Schedule 4.15,
as of the Closing Date, there is no unstayed action, suit, proceeding,
investigation (solely in the case of investigations, known to Borrower), audit,
or claim now pending or, to the knowledge of Borrower, threatened by any
authority regarding any material taxes relating to Borrower or any of its
Subsidiaries. Except as set forth on Schedule 4.15, neither the Borrower nor any
of its Subsidiaries has entered into a currently effective agreement or waiver
extending, or having the effect of extending, any statute of limitations
relating to the payment or collection of any material taxes of the Borrower or
any of its Subsidiaries.

 

4.16            Margin Stock. No Loan Party nor any of its Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin Stock. No
part of the proceeds of the loans made to Borrower will be used to purchase or
carry any Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any Margin Stock or for any purpose that violates the
provisions of Regulation T, U or X of the Board of Governors.

 

4.17            Governmental Regulation. No Loan Party is a “registered
investment company” or a company “controlled” by a “registered investment
company” or a “principal underwriter” of a “registered investment company” as
such terms are defined in the Investment Company Act of 1940. No Loan Party is
required to be registered under the Investment Company Act of 1940.

 

4.18            OFAC. No Loan Party nor any of its Subsidiaries is in violation
of any of the country or list based economic and trade sanctions administered
and enforced by OFAC. No Loan Party nor any of its Subsidiaries (a) is a
Sanctioned Person or a Sanctioned Entity, (b) has its assets located in
Sanctioned Entities, or (c) derives revenues from investments in, or
transactions with Sanctioned Persons or Sanctioned Entities. No proceeds of any
Loan made hereunder will be used to fund any operations in, finance any
investments or activities in, or make any payments to, a Sanctioned Person or a
Sanctioned Entity.

 

4.19            Employee and Labor Matters. There is (i) no unfair labor
practice complaint pending or, to the knowledge of Borrower, threatened against
Borrower or its Subsidiaries before any Governmental Authority and no grievance
or arbitration proceeding pending or threatened against Borrower or its
Subsidiaries which arises out of or under any collective bargaining agreement
and that could reasonably be expected to result in a Material Adverse Effect,
(ii) no strike, labor dispute, slowdown, stoppage or similar action or grievance
pending or threatened in writing against Borrower or

 

23

its Subsidiaries that could reasonably be expected to result in a Material
Adverse Effect or (iii) as of the Closing Date, to the knowledge of Borrower,
after due inquiry, no union representation question existing with respect to the
employees of Borrower or its Subsidiaries and no union organizing activity
taking place with respect to any of the employees of Borrower or its
Subsidiaries. None of Borrower or its Subsidiaries has incurred any liability or
obligation under the Worker Adjustment and Retraining Notification Act or
similar state law, which remains unpaid or unsatisfied. The hours worked and
payments made to employees of Borrower and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other applicable legal
requirements, except to the extent such violations could not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
All material payments due from Borrower or its Subsidiaries on account of wages
and employee health and welfare insurance and other benefits have been paid or
accrued as a liability on the books of Borrower, except where the failure to do
so could not, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.

 

4.20            Borrower as a Holding Company. Borrower is a holding company and
does not have any material liabilities (other than liabilities permitted by this
Agreement arising under the Loan Documents and liabilities permitted by the
Prepetition Revolving Credit Agreement that were outstanding as of the Petition
Date), own any material assets (other than Equity Interests of its Subsidiaries
and the Treximet Intercompany Note) or engage in any operations or business, in
each case, other than in respect of agreements in the Ordinary Course of
Business pursuant to which Borrower is party rather than the relevant operating
Subsidiary, including, (A) licenses, sub-licenses and co-promotion agreements
for products distributed by any Subsidiary of Borrower, (B)  marketing of
products distributed by any Subsidiary of Borrower, (C) agreements with pharmacy
benefit managers and managed care organizations related to rebates on products
distributed by any Subsidiary of Borrower, (D) agreements with distributors that
provide for the payment of fees and/or rebates in respect of products
distributed by any Subsidiary of Borrower and (E) similar commercial agreements
and transactions (including intercompany cash management arrangements), in each
case, in the Ordinary Course of Business.

 

4.21            Leases. Each Loan Party and its Subsidiaries enjoy peaceful and
undisturbed possession under all leases material to their business and to which
they are parties or under which they are operating, and, subject to Permitted
Protests, all of such material leases are valid and subsisting and no default by
the applicable Loan Party or its Subsidiaries exists under any of them, except
as could not reasonably be expected to result in a Material Adverse Effect.

 

4.22            Pernix Manufacturing, LLC. Pernix Manufacturing, LLC does not
engage in any business activity or have any material assets or liabilities
(including any Indebtedness) other than (i) the performance of its rights and
obligations under or in connection with its organizational documents or any Loan
Document and (ii) liabilities and actions incidental to maintaining its
existence and complying with applicable laws.

 

4.23            Pernix Ireland Pain. Except as disclosed in public filings of
the Borrower with the SEC prior to the Closing Date or in the Disclosure Letter
(as defined in the Stalking Horse Sale Agreement), Pernix Ireland Pain (i) does
not have any material assets (other than assets constituting Prepetition Term
Collateral), and (ii) does not have any material liabilities (including any
Indebtedness) other than (x) the performance of its rights and obligations under
or in connection with its organizational documents, any Loan Document, any
Prepetition Term Financing Document, Nalpropion’s organizational documents or
any Sale Agreement entered into in compliance with this Agreement, and (y)
liabilities and actions incidental to maintaining its existence and complying
with applicable laws.

 

4.24            Certain Intercompany Obligations. None of the Loan Parties owe
any Indebtedness or any other material liabilities or obligations to any
Subsidiary that is not a Loan Party, except to the extent

 

24

that the payment and discharge thereof and exercise of remedies in respect
thereof is fully subordinated and junior to the prior payment in full in cash of
the Obligations and termination of the Commitments.

 

4.25            [Reserved].

 

4.26            Health Care and Regulatory Matters.

 

(a)                Compliance with Health Care Laws; Health Care Permits. Each
Loan Party and each of their respective Subsidiaries is in compliance with all
Health Care Laws, Registrations and requirements of Government Drug Rebate
Programs applicable to it and its assets, business or operations, except to the
extent (x) related to certain DESI Program Products and (y) that any
noncompliance, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect. Except as disclosed with respect to
DESI Program Products or as disclosed in Schedule 4.26 or in public filings of
Borrower with the SEC prior to the Closing Date, (i) each Loan Party and each of
their Subsidiaries (x) holds in full force and effect (without default,
violation or noncompliance) all Health Care Permits necessary for it to own,
lease, sublease or operate its assets or to conduct its business and operations
as presently conducted (including to include its Products in any Government Drug
Rebate Program in which it participates), except to the extent where such
failure to be in full force and effect or such default, material violation or
material noncompliance, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect and (y) to the extent prudent and
customary in the industry in which it is engaged, has obtained and maintains
accreditation from all generally recognized accreditation agencies, (ii) to the
knowledge of each Loan Party, no circumstance exists or event has occurred which
could reasonably be expected to result in the suspension, revocation,
termination, restriction, limitation, modification or non-renewal of any Health
Care Permit that could reasonably be expected to have a Material Adverse Effect,
(iii) the Products provided by any Loan Party or Subsidiary are qualified for
participation in the Government Drug Rebate Programs, and each Loan Party and
each of their Subsidiaries is entitled to participate in the Government Drug
Rebate Programs and (iv) no Loan Party or any of its Subsidiaries directly
bills, receives reimbursement from, or otherwise participates as a provider or
supplier in the Medicare or any Medicaid program.

 

(b)                Rebates. Except to the extent a failure to do so would not
reasonably be expected to result in a Material Adverse Effect, each Loan Party
and each of their respective Subsidiaries has timely filed or caused to be
timely filed all reports that it is required to file under applicable
Requirements of Law with respect to Government Drug Rebate Programs. No Loan
Party is aware of any claims, actions or appeals pending before any
administrative contractor, intermediary or carrier or any other Governmental
Authority with respect to any such reports filed by such Loan Party or
Subsidiary, or any claim made by any Governmental Authority in connection with
any audit of such reports.

 

(c)                Material Statements. No Loan Party nor any of their
Subsidiaries, nor any officer, affiliate, employee or agent of any Loan Party or
any Subsidiary of any Loan Party, has made an untrue statement of a material
fact or fraudulent statement to any Governmental Authority, failed to disclose a
material fact that must be disclosed to any Governmental Authority, or committed
an act, made a statement or failed to make a statement that, at the time such
statement, disclosure or failure to disclose occurred, would constitute a
violation of any Health Care Law that could reasonably be expected to have a
Material Adverse Effect.

 

(d)                Exclusion. Except (1) as disclosed in public filings of the
Borrower with the SEC prior to the Closing Date or (2) where any of the
following would not reasonably be expected to result in a Material Adverse
Effect, no Loan Party nor any of their Subsidiaries, nor, to the knowledge of
any Loan Party, any owner, officer, director, partner, agent or managing
employee or Person with a “direct or indirect ownership interest” (as that
phrase is defined in 42 C.F.R. § 420.201) in any Loan Party

 

25

or any Subsidiary of any Loan Party, has (i) had a civil monetary penalty
assessed pursuant to 42 U.S.C. § 1320a-7; (ii) been suspended, debarred or
excluded from participation in Medicare, Medicaid or any other federal or state
healthcare program; (iii) been convicted (as that term is defined in 42 C.F.R.
§1001.2) of any of those offenses described in 42 U.S.C. §1320a-7b or 18 U.S.C.
§§669, 1035, 1347 or 1518, including any of the following categories of
offenses: (A) criminal offenses relating to the delivery of an item or service
under any federal health care program (as that term is defined in 42 U.S.C.
§1320a-7b) or healthcare benefit program (as that term is defined in 18 U.S.C.
§24b), (B) criminal offenses under federal or state law relating to patient
neglect or abuse in connection with the delivery of a healthcare item or
service, (C) criminal offenses under laws relating to fraud and abuse, theft,
embezzlement, false statements to third parties, money laundering, kickbacks,
breach of fiduciary responsibility or other financial misconduct in connection
with the delivery of a healthcare item or service or with respect to any act or
omission in a program operated by or financed in whole or in part by any
federal, state or local governmental agency, (D) laws relating to the
interference with or obstruction of any investigations into any criminal
offenses described in this clause ‎‎(d), or (E) criminal offenses under laws
relating to the unlawful manufacturing, distribution, prescription or dispensing
of a controlled substance; or (iv) been involved or named in a complaint made or
any other action taken pursuant to the False Claims Act under 31 U.S.C.
§§3729-3731 or qui tam action brought pursuant to 31 U.S.C. §3729 et seq.

 

(e)                HIPAA. Except to the extent that failure to do so would not
reasonably be expected to result in a Material Adverse Effect, each Loan Party
and each of their respective Subsidiaries is in compliance with HIPAA. Further,
in each contractual arrangement that is subject to HIPAA, the relevant Loan
Party and each of its respective Subsidiaries has: (i) entered into a written
business associate agreement (as such term is defined under the HIPAA
regulations) that substantially meets the requirements of HIPAA; (ii) at all
times complied in all material respects with such business associate agreements
in respect of the HIPAA privacy or security standards; and (iii) to such Loan
Party or Subsidiary’s knowledge, at no time experienced or had a material
unauthorized use or disclosure of Protected Health Information (as defined in
the HIPAA regulations) or privacy or security breach or other privacy or
security incident within the meaning of HIPAA.

 

(f)                 Corporate Integrity Agreement. Except as disclosed in public
filings of the Borrower with the SEC prior to the Closing Date, no Loan Party
nor any of their Subsidiaries, nor any owner, officer, director, partner, agent
or managing employee of any Loan Party or any Subsidiary of any Loan Party, is a
party to or bound by any individual integrity agreement, corporate integrity
agreement, corporate compliance agreement, deferred prosecution agreement,
consent order, consent decree, settlement agreement, or other formal or informal
agreement with any Governmental Authority concerning compliance with Health Care
Laws, any Government Drug Rebate Programs or the requirements of any Health Care
Permit.

 

4.27            FDA Regulatory Compliance.

 

(a)                Except as disclosed with respect to DESI Program Products or
as disclosed in Schedule 4.26 or in public filings of the Borrower with the SEC
prior to the Closing Date and (2) as would not reasonably be expected to result
in a Material Adverse Effect, (i) each Loan Party and each of their Subsidiaries
has, and it and its Products are in conformance with, all Registrations, (ii)
all Registrations are valid and in full force and effect; (iii) to the knowledge
of each Loan Party, neither the FDA nor any comparable Governmental Authority is
considering limiting, suspending, or revoking any such Registration; (iv) the
Loan Parties and each of their Subsidiaries have fulfilled and performed their
obligations under each Registration, and no event has occurred or condition or
state of facts exists which would constitute a breach or default under, or would
cause revocation or termination of, any such Registration; and (v) all reports,
documents, claims, permits, adverse event reports, complaints, notices,
registrations and applications required to be filed, maintained or furnished to
the FDA or any other

 

26

Regulatory Authority by a Loan Party or any of its Subsidiaries have been so
filed, maintained or furnished.

 

(b)                Each Loan Party and each of their Subsidiaries are conducting
their business and operations in compliance with all applicable Health Care
Laws, except to the extent that any noncompliance, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
Except (1) with respect to DESI Program Products or as disclosed in Schedule
4.26 or in public filings of the Borrower with the SEC prior to the Closing Date
and (2) as would not reasonably be expected to result in a Material Adverse
Effect, (i) no Loan Party nor any of their Subsidiaries is subject to any
obligation arising under an administrative or regulatory action, proceeding,
investigation or inspection by or on behalf of the FDA or any comparable
Governmental Authority, warning letter, Form FDA-483, untitled letter, notice of
violation letter, consent decree, request for information or other notice,
response or commitment made to or with the FDA or any comparable Governmental
Authority, in each case, in respect of such Loan Party or its Subsidiary, and no
such obligation has been threatened and (ii) no Loan Party or Subsidiary thereof
has received written notice from a Governmental Authority that any Product
designed, developed, investigated, manufactured, prepared, assembled, packaged,
tested, labeled, distributed, sold or marketed by or on behalf of any Loan Party
or any of their Subsidiaries that are subject to the jurisdiction of the FDA or
any comparable Governmental Authority are not being designed, developed,
investigated, manufactured, prepared, assembled, packaged, tested, labeled,
distributed, sold and marketed in compliance with the Health Care Laws.

 

(c)       Except as would not reasonably be expected to be result in a Material
Adverse Effect, all pre-clinical and clinical investigations conducted or
sponsored by or on behalf of any Loan Party or any of their Subsidiaries are
being and have been conducted in compliance with all applicable Health Care Laws
including (i) FDA standards for the design, conduct, performance, monitoring,
auditing, recording, analysis and reporting of clinical trials contained in
Title 21 parts 50, 54, 56, 312 and 314 of the Code of Federal Regulations, and
(ii) federal and state Requirements of Law restricting the collection, use and
disclosure of individually identifiable health information and personal
information.

 

(d)       Except (i) as disclosed in public filings of the Borrower with the SEC
prior to the Closing Date or (ii) as would not reasonably be expected to be
result in a Material Adverse Effect, neither any Loan Party nor any of their
Subsidiaries has voluntarily or involuntarily initiated, conducted or issued,
caused to be initiated, conducted or issued, or received written notice of any
material recall, field corrective action, market withdrawal or replacement,
safety alert, warning, “dear doctor” letter, investigator notice, or other
notice or action to wholesalers, distributors, retailers, healthcare
professionals or patients relating to an alleged lack of safety, efficacy or
regulatory compliance of any Product or is currently considering initiating,
conducting or issuing any recall of any Product.

 

4.28            Material Contracts. Except for matters which, either
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, each Material Contract of any Loan Party or
Subsidiary (other than those that have expired at the end of their normal terms)
(a) is in full force and effect and is binding upon and enforceable against the
applicable Loan Party or its Subsidiary and, to Borrower’s knowledge, after due
inquiry, each other Person that is a party thereto in accordance with its terms,
(b) has not been otherwise amended or modified (other than amendments or
modifications permitted by Section 6.6(b)), and (c) is not in default due to the
action or inaction of the applicable Loan Party or its Subsidiary.

 

4.29            Insurance. Schedule 4.29 lists all insurance policies maintained
by or on behalf of the Loan Parties as of the Closing Date.

 

4.30            DIP Orders. On the date of the making of the Closing Date Loans,
the Interim DIP

 

27

Order will have been entered and will not have been stayed, amended in a
material manner, vacated, reversed or rescinded except as approved by the Agent
and the Required Lenders, in each case in their sole discretion. On the date of
the making of any Loan, the Interim DIP Order (or the Final DIP Order, when
applicable) shall have been entered and shall not have been amended in a
material manner, stayed, vacated or rescinded except as approved by the Agent
and the Required Lenders, in each case in their sole discretion. Upon the
maturity (whether by the acceleration or otherwise) of any of the Obligations of
the Loan Parties hereunder and under the other Loan Documents, the Lenders
shall, subject to the provisions of Section 9.1 and the DIP Orders, be entitled
to immediate payment of such Obligations, and to enforce the remedies provided
for hereunder, without further application to or order by the Bankruptcy Court.

 

5.                   AFFIRMATIVE COVENANTS.

 

Borrower covenants and agrees that, until termination of all of the Commitments
and payment in full of the Obligations (other than contingent indemnification
obligations for which no claim has been asserted):

 

5.1               Financial Statements, Reports, Certificates. Borrower (a) will
deliver to Agent each of the financial statements, reports, notices and other
items set forth on Schedule 5.1 no later than the times specified therein, (b)
agrees that no Loan Party or Subsidiary of a Loan Party will have a fiscal year
different from that of Borrower and (c) agrees to maintain, and cause its
Subsidiaries to maintain, a system of accounting that enables Borrower to
produce financial statements in accordance with GAAP. Borrower will also
deliver, or cause the other Debtors to deliver, to Agent (i) as soon as
practicable in advance of filing with the Bankruptcy Court or delivering to the
Committee, the Final DIP Order and all other proposed orders and pleadings
related to the Loans and the Loan Documents, any Reorganization Plan and/or any
disclosure statement related thereto (unless such advance notice is impossible
or impracticable under the circumstances, in which case the Borrower will
deliver, or cause the other Debtors to deliver, such copies no later than
substantially simultaneously with the filing with the Bankruptcy Court or
delivering to the Committee) and (ii) substantially simultaneously with the
filing with the Bankruptcy Court or delivering to the Committee, as the case may
be, all other notices, filings, motions, pleadings or other information
concerning the financial condition of Borrower or any of its Subsidiaries or
other Indebtedness of the Loan Parties or any of their Subsidiaries or any
request for relief under Section 363, 365, 1113 or 1114 of the Bankruptcy Code
or Section 9019 of the Federal Rules of Bankruptcy Procedure that may be filed
with the Bankruptcy Court or delivered to the Committee.

 

5.2               IP Security Agreements. In order to facilitate filings with
the United States Patent and Trademark Office and the United States Copyright
Office, and any other intellectual property registry in any other applicable
jurisdiction Agent may reasonably request, each Loan Party or Subsidiary of a
Loan Party that owns registered Patents, Trademarks or Copyrights shall execute
and deliver to Agent one or more short form Intellectual Property security
agreements, or supplements thereto, in appropriate form for filing and in a
format acceptable to the Agent in its reasonable discretion, to further evidence
Agent’s Lien on such Intellectual Property pursuant to the other applicable Loan
Documents.

 

5.3               Existence. Except as otherwise permitted under Section ‎6.3 or
Section ‎6.4, Borrower will, and will cause each of its Subsidiaries to, at all
times preserve and keep in full force and effect such Person’s valid existence
and (where applicable) good standing in its jurisdiction of organization and,
except as could not reasonably be expected to result in a Material Adverse
Effect, good standing with respect to all other jurisdictions in which it is
qualified to do business and any rights, franchises, permits, licenses,
accreditations, authorizations, or other approvals material to their businesses.

 

5.4               Maintenance of Properties. Borrower will, and will cause each
of its Subsidiaries to, maintain and preserve all of its assets that are
necessary or useful in the proper conduct of its business in good working order
and condition, ordinary wear, tear, casualty, and condemnation and Permitted

 

28

Dispositions excepted (and except where the failure to do so could not
reasonably be expected to result in a Material Adverse Effect).

 

5.5               Taxes. In accordance with the Bankruptcy Code and subject to
any required approval at the Bankruptcy Court, Borrower will, and will cause
each of its Subsidiaries to, pay in full before delinquency or before the
expiration of any extension period all federal and all other material
governmental assessments and taxes imposed, levied, or assessed against it, or
any of its assets or in respect of any of its income, businesses, or franchises,
except to the extent that (a) the validity of such governmental assessment or
tax is the subject of a Permitted Protest and so long as, in the case of an
assessment or tax that has or may become a Lien against any of the Collateral,
such contest proceedings conclusively operate to stay the sale of any portion of
the Collateral to satisfy such assessment or tax or (b) the failure to pay could
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. Borrower will and will cause each of its Subsidiaries to make
timely payment or deposit of all material tax payments and withholding taxes
required of it and them by applicable law, including those laws concerning state
disability, and local, state, and federal income taxes (and any foreign
equivalent thereof).

 

5.6               Insurance. Borrower will, at Borrower’s expense, maintain
insurance respecting each of Borrower’s and its Subsidiaries’ assets wherever
located, covering liabilities, losses, damages and other risks and hazards as
are customarily are insured against by other Persons engaged in same or similar
businesses and similarly situated and located. All such policies of insurance
shall be with financially sound and reputable insurance companies reasonably
acceptable to Agent (it being agreed that, as of the Closing Date, each of
Navigators Specialty Insurance Company, Chubb Custom Insurance Company,
Ironshore Specialty Insurance Company, Federal Insurance Company and Lloyd’s of
London is acceptable to Agent) and in such amounts as is carried generally in
accordance with sound business practice by companies in similar businesses
similarly situated and located and, in any event, in amount, adequacy, and scope
reasonably satisfactory to the Required Lenders (it being agreed that the
amount, adequacy, and scope of the policies of insurance of Borrower in effect
as of the Closing Date are acceptable to the Required Lenders). All property
insurance policies covering the Collateral are to be made payable to Agent for
the benefit of Agent and the Lenders, as their interests may appear, in case of
loss, pursuant to a standard loss payable endorsement with a standard
non-contributory “lender” or “secured party” clause and are to contain such
other provisions as Agent may reasonably require to fully protect the Lenders’
interest in the Collateral and to any payments to be made under such policies.
All certificates of property and general liability insurance are to be delivered
to Agent, with the loss payable (but only in respect of Collateral) and
additional insured endorsements in favor of Agent and shall provide for not less
than 30 days (10 days in the case of non-payment) prior written notice to Agent
of the exercise of any right of cancellation. If Borrower or its Subsidiaries
fails to maintain such insurance, Agent may arrange for such insurance, but at
Borrower’s expense and without any responsibility on Agent’s part for obtaining
the insurance, the solvency of the insurance companies, the adequacy of the
coverage, or the collection of claims. Borrower shall give Agent prompt notice
of any loss exceeding $250,000 covered by their or their Subsidiaries’ casualty
or business interruption insurance. Upon the occurrence and during the
continuance of an Event of Default, Agent shall have the sole right to file
claims under any property and general liability insurance policies in respect of
the Collateral, to receive, receipt and give acquittance for any payments that
may be payable thereunder, and to execute any and all endorsements, receipts,
releases, assignments, reassignments or other documents that may be necessary to
effect the collection, compromise or settlement of any claims under any such
insurance policies.

 

5.7               Inspection. Borrower will, and will cause each of its
Subsidiaries to, permit Agent, any Lender, and each of their respective duly
authorized representatives or agents to visit any of its properties and inspect
any of its assets or books and records, to examine and make copies of its books
and records, and to discuss its affairs, finances, and accounts with, and to be
advised as to the same by, its officers and

 

29

employees (provided an authorized representative of Borrower shall be allowed to
be present) at such reasonable times and intervals as Agent or any Lender, as
applicable, may designate and, so long as no Default or Event of Default has
occurred and is continuing, with reasonable prior notice to Borrower and during
regular business hours; provided that, so long as no Event of Default has
occurred and is continuing, Agent and the Lenders taken as a whole shall not
exercise such rights at the Borrower’s expense more often than one time during
any calendar year.

 

5.8               Compliance with Laws. Borrower will, and will cause each of
its Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations, and orders of any Governmental Authority, other than laws, rules,
regulations, and orders the non-compliance with which, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

 

5.9               Environmental. Borrower will, and will cause each of its
Subsidiaries to,

 

(a)                Keep any property either owned or operated by Borrower or its
Subsidiaries free of any Environmental Liens or post bonds or other financial
assurances sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens,

 

(b)                Comply, in all material respects, with Environmental Laws and
provide to Agent documentation of any material non-compliance which Agent
reasonably requests,

 

(c)                Promptly notify Agent of any release of which Borrower has
knowledge of a Hazardous Material in any reportable quantity from or onto
property owned or operated by Borrower or its Subsidiaries and take any Remedial
Actions required to abate said release under, or otherwise to come into
compliance with, in all material respects, applicable Environmental Law,

 

(d)                Promptly, but in any event within five (5) Business Days of
its receipt thereof, provide Agent with written notice of any of the following:
(i) notice that an Environmental Lien has been filed against any of the real or
personal property of Borrower or its Subsidiaries, (ii) written notice of
commencement of any material Environmental Action filed against or written
notice that a material Environmental Action will be filed against, Borrower or
its Subsidiaries, and (iii) written notice of a material violation, citation, or
other administrative order from a Governmental Authority, and

 

(e)                If Borrower or any of its Subsidiaries, or any tenant or
occupant of any Real Property owned, leased or operated by Borrower or any of
its Subsidiaries, causes or permits any intentional or unintentional act or
omission resulting in the presence or release of any Hazardous Material (except
in compliance with applicable Environmental Laws), Borrower agrees to undertake,
and/or to cause any of its Subsidiaries, and use commercially reasonable efforts
to cause its tenants or occupants to undertake, at their sole expense, any clean
up, removal, remedial or other action required pursuant to Environmental Laws to
remove and clean up any Hazardous Materials from any Real Property except where
the failure to do so has not resulted in, and could not reasonably be expected
to result in, a Material Adverse Effect.

 

5.10            Intellectual Property. Each Loan Party and each of its
Subsidiaries shall have the duty, with respect to Intellectual Property that is
necessary in or material to the conduct of such Loan Party’s or such
Subsidiary’s business, to use commercially reasonable efforts to protect and
diligently enforce and defend such of its Intellectual Property, including (A)
to diligently enforce and defend, including promptly suing for infringement,
misappropriation, or dilution and to recover any and all damages for such
infringement, misappropriation, or dilution, and filing for opposition,
interference, and cancellation against conflicting Intellectual Property rights
of any Person, (B) to prosecute diligently any trademark application or service
mark application that is part of the Trademarks pending as of the date hereof or
hereafter until the termination of this Agreement, (C) to prosecute diligently
any patent application that is

 

30

part of the Patents pending as of the date hereof or hereafter until the
termination of this Agreement, (D) to take all reasonable and necessary action
to preserve and maintain all of such Loan Party’s or such Subsidiary’s
Trademarks, Patents, Copyrights, Intellectual Property licenses (including
Patent Licenses), and its rights therein, including paying all maintenance fees
and filing of applications for renewal, affidavits of use, and affidavits of
noncontestability, and (E) to require all employees, consultants, and
contractors of each Loan Party or Subsidiary who were involved in the creation
or development of such Intellectual Property to sign agreements containing
assignment of Intellectual Property rights and obligations of confidentiality.
Each Loan Party and each of its Subsidiaries shall take the steps described in
this Section 5.10 with respect to all new or acquired Intellectual Property to
which it is now or later becomes entitled that is necessary in or material to
the conduct of such Loan Party’s or such Subsidiary’s business. Each Loan Party
and each of its Subsidiaries shall take reasonable steps to maintain the
confidentiality of, and otherwise protect and enforce its rights in, the
Intellectual Property that is necessary in or material to the conduct of such
Loan Party’s or such Subsidiary’s business.

 

5.11            Formation or Acquisition of Subsidiaries. Borrower will, at the
time that any of its Subsidiaries forms or incorporates any other direct or
indirect Subsidiary (other than with respect to a Subsidiary to which the
Required Lenders shall agree otherwise in writing) or acquires any direct or
indirect Subsidiary (other than with respect to a Subsidiary to which the
Required Lenders shall agree otherwise in writing) after the Closing Date,
within 20 days of such formation, incorporation or acquisition (or such later
date as permitted by the Required Lenders in their sole discretion) (a) cause
such new Subsidiary to provide to Agent a “Grantor Joinder” to the Guaranty and
Security Agreement, together with such other security agreements, as well as
appropriate financing statements, all in form and substance reasonably
satisfactory to the Required Lenders (including being sufficient to grant Agent
a first priority Lien (subject to Permitted Collateral Liens) in and to the
types of assets of such newly formed, incorporated or acquired Subsidiary
included as “Collateral” under the Guaranty and Security Agreement); and (b)
provide to Agent all other documentation, including one or more opinions of
counsel reasonably satisfactory to the Required Lenders, which, in their
opinion, is appropriate with respect to the execution and delivery of the
applicable documentation referred to above. Any document, agreement, or
instrument executed or issued pursuant to this Section 5.11 shall constitute a
Loan Document. The foregoing shall also apply to Pernix Ireland Pain and Pernix
Manufacturing, LLC, as applicable, as if such entity were a new Subsidiary, to
the extent such entity is required to become a Guarantor pursuant to the
provisos to the definition of “Guarantors.”

 

5.12            Further Assurances. (a) Borrower will, and will cause each of
its Subsidiaries to, at any time upon the reasonable request of Agent or the
Required Lenders, execute or deliver to Agent any and all financing statements,
fixture filings, security agreements, pledges, assignments, opinions of counsel,
and all other documents (together with any security documents executed pursuant
to Section 5.11, the “Additional Documents”) that the Agent or Required Lenders
may reasonably request in form and substance reasonably satisfactory to the
Required Lenders, to create, perfect, ensure the enforceability of and continue
perfected or to better perfect Agent’s Liens in all of the assets of Borrower
and its Subsidiaries of the type that constitute “Collateral” or any similar
term (as defined in the Guaranty and Security Agreement or in any Additional
Document) (whether now owned or hereafter arising or acquired, tangible or
intangible, real or personal), or enable the Agent to apply for any
registration, or give any notification in connection with the Agent’s Lien in
the Collateral so that the Lien has the priority required by the Agent and in
order to fully consummate all of the transactions contemplated hereby and under
the other Loan Documents; provided that the foregoing shall not apply if the
costs to the Loan Parties of providing such documents are unreasonably excessive
(as determined by the Required Lenders in consultation with Borrower) in
relation to the benefits to Agent and the Lenders of the security afforded
thereby. To the maximum extent permitted by applicable law, Borrower and each
other Loan Party hereby authorizes Agent to execute any such Additional
Documents in the applicable Loan Party’s name and authorizes Agent to file such
executed Additional Documents in any appropriate filing office;

 

31

provided that Agent shall not exercise such authority unless Borrower or any
other Loan Party refuses or fails to execute or deliver any reasonably requested
Additional Documents within a reasonable period of time following the request to
do so or an Event of Default exists. In furtherance of, and not in limitation
of, the foregoing, each Loan Party shall take such actions as Agent or the
Required Lenders may reasonably request from time to time to ensure that the
Obligations are guaranteed by the Guarantors and are secured by a first priority
perfected Lien on all assets of Borrower and the other Loan Parties (if any) of
a type that constitute “Collateral” or any similar term (as defined in the
Guaranty and Security Agreement or in any Additional Document).

 

(b)       Upon entry into any Material Contract after the Closing Date,
involving aggregate consideration payable to or by the Borrower or any of its
Subsidiaries of $500,000 or more, the Borrower shall promptly (and in any event
within 10 Business Days of entry thereto) notify the Agent thereof and after
reasonably request by Agent, and, in the case of such a Material Contract of a
Loan Party, shall serve a notice of assignment, substantially in the form of
Schedule 5 to the Guaranty and Security Agreement, on each of the other parties
to such Material Contract and shall use reasonable endeavors to procure that,
within 30 days of the date of such notice (or such later date as the Agent may
agree in its sole discretion), each of those other parties acknowledges that
notice, substantially in the form of Schedule 5 to the Guaranty and Security
Agreement.

 

(c)       Upon entry into any material Insurance (as defined in the Guaranty and
Security Agreement) involving aggregate coverage of $500,000 or more for the
assets of the Borrower or any of its Subsidiaries, the Borrower shall promptly
(and in any event within 10 Business Days of the execution and delivery by the
Borrower or other applicable Loan Party of the contracts evidencing such
Insurance (as defined in the Guaranty and Security Agreement)) notify the Agent
thereof and after reasonably request by Agent, shall serve a notice of
assignment, substantially in the form of Schedule 6 to the Guaranty and Security
Agreement, on each of the other parties to such Insurance (as defined in the
Guaranty and Security Agreement) and shall use reasonable endeavors to procure
that, within 30 days of the date of such notice (or such later date as the Agent
may agree in its sole discretion), each of those other parties acknowledges that
notice, substantially in the form of Schedule 6 to the Guaranty and Security
Agreement.

 

5.13            Zohydro Assets. Borrower shall ensure, and shall cause its
Subsidiaries to ensure, at all times that either the Agent or the Prepetition
Term Agent maintains a perfected first-priority lien on the Borrower’s and each
of its Subsidiaries’ right, title and interest in, to and under Zohydro Assets.

 

5.14            Lender Meetings. Borrower will, at the reasonable request of
Agent or of the Required Lenders and upon reasonable prior notice, hold a
meeting or conference call (at a mutually agreeable location and time or, in the
case of a conference call, at a mutually agreeable time) with all Lenders who
choose to participate in such meeting or call at which meeting or call shall be
reviewed the financial results and the financial condition of Borrower and its
Subsidiaries and the Approved Budget and any proposed modifications thereto or
variances therefrom.

 

5.15            Material Contracts.

 

(a)       Each Loan Party will, and each Loan Party will cause its Subsidiaries
to, comply with all terms and conditions of and fulfill all obligations under
each Material Contract to which any of them is a party, except to the extent the
failure to so comply would not result in a Material Adverse Effect. Upon the
occurrence of a breach of any such Material Contract by any other party thereto,
which is not cured as provided therein, each Loan Party will act in a
commercially reasonable way in determining whether and how to enforce its, or
its Subsidiary’s, as applicable, rights and remedies thereunder.

 

32

(b)       Subject to entry of the Interim DIP Order (or the Final DIP Order,
when applicable), each Loan Party will not, and each Loan Party will not permit
any of its Subsidiaries to: (i) forgive, release or reduce any payment, or delay
or postpone any payment, owed to any Loan Party or any of their respective
Affiliates under or in respect of any Material Contract or (ii) amend, modify,
restate, cancel, supplement, terminate or waive any provision of any Material
Contract, grant any consent thereunder or agree to do any of the foregoing, in
each case, to the extent such forgiveness, release, reduction, delay,
postponement, amendment, modification, restatement, cancellation, supplement,
termination, waiver, grant or agreement would reasonably be expected to result
in a Material Adverse Effect.

 

5.16            Compliance with Health Care Laws.

 

(a)                Each Loan Party and each of their respective Subsidiaries
will comply with all applicable Health Care Laws, except (i) to the extent that
any noncompliance, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect or (ii) as disclosed with respect to
the DESI Program Products or as disclosed in Schedule 4.26 or in public filings
of the Borrower with the SEC prior to the Closing Date.

 

(b)                Except (1) with respect to DESI Program Products or as
disclosed in Schedule 4.26 or in public filings of the Borrower with the SEC
prior to the Closing Date and (2) as would not reasonably be expected to result
in a Material Adverse Effect, each Loan Party and each of their respective
Subsidiaries shall (i) obtain, maintain and preserve, and cause each of its
Subsidiaries to obtain, maintain and preserve, and take all necessary action to
timely renew, all material Health Care Permits and Registrations which are
necessary or useful in the proper conduct of its business; (ii) be and remain in
material compliance with all requirements for participation in, and for
licensure required to provide the goods or services that are reimbursable by any
Governmental Authority to any Person; (iii) with relation to any Persons
providing services for or on behalf of any Loan Party or Subsidiary thereof
(either as an employee or independent contractor), (A) not use the services of
such Persons who are not, to the Loan Parties’ knowledge, in compliance with all
applicable Health Care Laws in the performance of their duties and (B) cause
such Persons to maintain in full force and effect all professional licenses and
other Health Care Permits required to perform such duties; and (iv) keep and
maintain all records required to be maintained by any Governmental Authority or
otherwise under any Health Care Law. All Products designed, developed,
investigated, manufactured, prepared, assembled, packaged, tested, labeled,
distributed, sold or marketed by or on behalf of any Loan Party or any of their
Subsidiaries that are subject to the jurisdiction of the FDA or any comparable
Governmental Authority shall be designed, developed, investigated, manufactured,
prepared, assembled, packaged, tested, labeled, distributed, sold and marketed
in compliance with the Health Care Laws.

 

(c)                Each Loan Party and each of their respective Subsidiaries
that, in each case, actively engages in the marketing of Products, shall
maintain a corporate and health care regulatory compliance program (“RCP”) which
addresses the requirements of Health Care Laws, including HIPAA, and includes at
least the following components: (i) standards of conduct and procedures that
describe compliance policies regarding laws with an emphasis on prevention of
fraud and abuse; (ii) a specific officer within high-level personnel identified
as having overall responsibility for compliance with such standards and
procedures; (iii) training and education programs which effectively communicate
the compliance standards and procedures to employees and agents, including fraud
and abuse laws; (iv) auditing and monitoring systems and reasonable steps for
achieving compliance with such standards and procedures including publicizing a
reporting system to allow employees and other agents to anonymously report
criminal or suspect conduct and potential compliance problems; (v) disciplinary
guidelines and consistent enforcement of compliance policies including
discipline of individuals responsible for the failure to detect violations of
the RCP; and (vi) mechanisms to

 

33

immediately respond to detected violations of the RCP. Each Loan Party and each
of their respective Subsidiaries shall modify such RCPs from time to time, as
may be necessary to ensure continuing compliance with all applicable Health Care
Laws. Upon request, the Agent (and/or its consultants) shall be permitted to
review such RCPs.

 

(d)                Borrower shall provide to Agent upon request, an accurate,
complete and current list of all third party rebate agreements with respect to
the business of the Loan Parties and their Subsidiaries.

 

5.17            Use of Proceeds. Borrower shall, and shall cause its
Subsidiaries to, use the proceeds of (i) the Closing Date ABL Refinancing Loan
to repay all outstanding loans under the Prepetition Revolving Credit Agreement,
together with all accrued and unpaid interest on such loans and the accrued and
unpaid unused line fee thereunder on the Closing Date and (ii) the Closing Date
General Purpose Loans to pay the fees, costs and expenses incurred in connection
with this Agreement, the other Loan Documents and the transactions contemplated
hereby and for general corporate purposes, in each case, consistent with the
Approved Budget, subject to Permitted Variances. Borrower shall, and shall cause
its Subsidiaries to, use the proceeds of each Delayed Draw Loan for working
capital and general corporate purposes consistent with the Approved Budget,
subject to Permitted Variances.

 

5.18            Post-Closing Obligations. Subject to Section 3.7 (with respect
to grace periods, notice periods and extensions provided for therein), the Loan
Parties shall execute and deliver the documents and complete the tasks set forth
on Schedule 5.18, in each case within the time periods specified therefor.

 

5.19            [Reserved].

 

5.20            Final DIP Order. Not later than the earlier of (i) the
expiration of the Interim DIP Order and (ii) 45 days after the entry of the
Interim DIP Order, the Final DIP Order shall have been entered by the Bankruptcy
Court and shall be in full force and effect and, after such entry, shall not
have been (A) vacated, stayed or reversed or (B) modified or amended in a
material manner except as otherwise agreed to in writing by the Agent and the
Required Lenders in their reasonable discretion.

 

5.21            Proceedings. Within fifteen days after the end of each calendar
month, deliver to the Agent a schedule of any unstayed proceeding not previously
disclosed involving any alleged liability of, or claims against, any Loan Party
or Subsidiary thereof, equal to or greater than $500,000, and promptly after
request by the Agent, such other information as may be reasonably requested by
the Agent to enable the Agent and its counsel to evaluate any such proceedings.

 

5.22            Certain Bankruptcy Matters.

 

(a)                Borrower shall, and shall cause its Subsidiaries to, ensure
that each of the Milestones is achieved in accordance with the applicable timing
referred to in Schedule 5.22; provided, that such timing may be extended upon
mutual agreement between Borrower and the Lenders or to the extent necessary to
accommodate the Bankruptcy Court’s availability. All orders entered in
accordance with the Milestones shall in each case be in form and substance
reasonably satisfactory to the Agent and the Lenders.

 

(b)                Borrower and each of the other Debtors shall comply in all
material respects with all of the requirements and obligations set forth in the
orders approving the Debtors’ “first day” and “second day” relief obtained in
any of the Cases, including complying with the requirements of the cash
management order in all material respects.

 

(c)                Borrower and each of the other Debtors shall cause all
payments required to be

 

34

made under the Interim DIP Order and the Final DIP Order to be made in
accordance therewith and pursuant thereto.

 

5.23            Assumption and Rejection of Contracts and Leases. Borrower shall
provide reasonable advance notice to the Agent prior to any assumption or
rejection of any of the Debtors’ material contracts or material non-residential
real property leases or any other Transferred Contract (as defined in the
Stalking Horse Sale Agreement) pursuant to Section 365 of the Bankruptcy Code.

 

5.24            Obligations Regarding Sale Process. The Loan Parties (a) shall,
and shall cause their respective Subsidiaries to, diligently prosecute the sale
motion referred to in Schedule 5.22 (and any other sale motion seeking approval
of an Acceptable Alternative Sale Agreement) and take all commercially
reasonable steps to obtain entry of the Sale Order by the applicable Milestone
and the Sale Procedures Order within the time frame contemplated in such sale
motion and (b) shall not, and shall not permit their respective Subsidiaries to,
(i) withdraw such sale motion (except in connection with the filing of a new
sale motion under Section 363 of the Bankruptcy Code seeking approval of a
Replacement Sale Agreement, which motion shall be filed within one Business Day
of entering into any such Replacement Sale Agreement) or (ii) agree to, cause or
permit any amendment, restatement, supplement or other modification to, or
waiver of, any Sale Agreement, the Sale Order or the Sale Procedures Order that
could reasonably be expected to be adverse to the Secured Parties (it being
understood and agreed that any amendment, restatement, supplement or other
modification to, or waiver of, any Sale Agreement, the Sale Order or the Sale
Procedures Order that (x) provides for a closing date for any sale transaction
later than the Maturity Date or (y) changes the form of consideration for any
assets being disposed of shall be considered adverse) without in each case
obtaining the prior written consent of the Required Lenders to such amendment,
restatement, supplement or other modification or waiver.

 

6.                   NEGATIVE COVENANTS.

 

Borrower covenants and agrees that, until termination of all of the Commitments
and payment in full of the Obligations (other than contingent indemnification
obligations for which no claim has been asserted):

 

6.1               Indebtedness and Contingent Obligations. Borrower will not,
and will not permit any of its Subsidiaries to, create, incur, assume, suffer to
exist, guarantee, or otherwise become or remain, directly or indirectly, liable
with respect to (i) any Indebtedness, except for Permitted Indebtedness or (ii)
any Contingent Obligations, except for Permitted Contingent Obligations.

 

6.2               Liens. (a) Borrower will not, and will not permit any of its
Subsidiaries to create, incur, assume, or suffer to exist, directly or
indirectly, any Lien on any of its property or assets, of any kind, whether now
owned or hereafter acquired, or any income or profits therefrom, except for
Permitted Liens and (b) notwithstanding the foregoing, each Loan Party will not,
and each Loan Party will not permit any of its Subsidiaries to, create, assume
or suffer to exist any consensual Lien securing Indebtedness for borrowed money
on the Core Assets or the Zohydro Assets, except pursuant to clause (a) (to the
extent constituting Collateral) of the definition of Permitted Liens or
otherwise to the extent expressly permitted by the Interim DIP Order or the
Final DIP Order entered in compliance with this Agreement.

 

6.3               Restrictions on Fundamental Changes and Sale and Leaseback
Transactions. Borrower will not, and will not permit any of its Subsidiaries to
do any of the following, except in compliance with Section 6.4:

 

(a)                enter into any merger, consolidation, reorganization or
recapitalization,

 

(b)                liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution),

 

35

(c)                suspend or cease operating a substantial portion of its or
their business, except as expressly permitted pursuant to clause ‎(a) above or
pursuant to a transaction permitted under Section ‎6.4.

 

(d)                form any new Subsidiary without the prior written consent of
the Required Lenders; provided, that, to the extent the Required Lenders provide
consent with respect to the formation of any new Subsidiary, such new Subsidiary
shall become a Guarantor pursuant Section 5.11, or

 

(e)                enter into any arrangement with any Person whereby, in a
substantially contemporaneous transaction, a Loan Party or any Subsidiary of any
Loan Party sells or transfers all or substantially all of its right, title and
interest in an asset and, in connection therewith, acquires or leases back the
right to use such asset.

 

6.4               Disposal of Assets. Other than Permitted Dispositions or
transactions expressly permitted by Sections ‎6.3 or ‎6.9, Borrower will not,
and will not permit any of its Subsidiaries to convey, sell, lease, license,
assign, transfer, abandon or otherwise dispose of (or enter into an agreement to
convey, sell, lease, license, assign, transfer, abandon or otherwise dispose of)
any of its or their assets (whether in one transaction or a series of related
transactions).

 

6.5               Nature of Business. Borrower will not, and will not permit any
of its Subsidiaries to make any material change in the nature of its or their
business as conducted by Borrower and its Subsidiaries on the date hereof or
acquire any properties or assets that are not reasonably related to the conduct
of such business activities; provided, that the foregoing shall not prevent
Borrower and its Subsidiaries from engaging in any business that is reasonably
related or ancillary to the then-current business of Borrower and its
Subsidiaries.

 

6.6               Prepayments and Amendments. Borrower will not, and will not
permit any of its Subsidiaries to,

 

(a)                Directly or indirectly, do any of the following:

 

(i)                 optionally prepay, redeem, defease, purchase or otherwise
acquire any Indebtedness of Borrower or its Subsidiaries, other than:

 

(A)       the Obligations in accordance with this Agreement, and

 

(B)       the Adequate Protection Obligations to the extent the DIP Orders
expressly permit such payment to be made without further consent of the Agent or
any Lender;

 

(ii)               make any payment on account of Indebtedness that has been, or
was required to be, contractually subordinated in right of payment to the
Obligations unless such payment is (x) permitted at such time under the
subordination terms and conditions, (y) in accordance with the Approved Budget,
subject to Permitted Variances, and (z) not prohibited by the DIP Orders, or

 

(b)                Directly or indirectly, amend, modify, or change any of the
terms or provisions of any of the following:

 

(i)                 any agreement, instrument, document, indenture, or other
writing evidencing or concerning any Indebtedness other than (1) the Obligations
in accordance with this Agreement, (2) Permitted Intercompany Advances (subject
to the Intercompany Subordination

 

36

Agreement or other subordination provisions referred to in the definition of
Permitted Intercompany Advances), (3) Indebtedness permitted under clauses (c)
and (j) of the definition of Permitted Indebtedness,

 

(ii)               the Governing Documents of any Loan Party or any of its
Subsidiaries if the effect thereof, either individually or in the aggregate,
could reasonably be expected to be adverse to the interests of the Agent or the
Lenders, or

 

(iii)             other than as consented to by the Required Lenders (such
consent not to be unreasonably withheld, delayed or conditioned), any Nalpropion
Document (as defined in the Prepetition Term Credit Agreement) if the effect of
such amendment, change or modification, individually or in the aggregate, (x)
would amend, modify, change and/or add any material obligation of the Borrower
or any of its Subsidiaries thereunder in a manner adverse to the interests of
the Agent or the Lenders or (y) could reasonably be expected to be materially
adverse to the interests of the Agent or the Lenders or the Prepetition Term
Secured Parties.

 

(c)                Directly or indirectly make any payment on account of any
Indebtedness, liabilities, or other obligations of any Loan Party that are owing
or due to any Subsidiary that is not a Loan Party, other than with the consent
of the Required Lenders.

 

6.7               Restricted Payments. Borrower will not, and will not permit
any of its Subsidiaries to make any Restricted Payment; provided, that, so long
as (i) it is permitted by law and (ii) no Default or Event of Default shall have
occurred and be continuing or would result therefrom,

 

(a)                any Subsidiary of Borrower may make dividends or
distributions to Borrower,

 

(b)                any non-Loan Party Subsidiary may make dividends or
distributions to a Loan Party,

 

(c)                any Loan Party may make dividends or distributions to another
Loan Party, and

 

(d)                payments owed by a Loan Party expressly permitted by Section
‎6.6(a), to the extent (i) in accordance with the Approved Budget, subject to
Permitted Variances, and (ii) not prohibited by the DIP Orders.

 

6.8               Accounting Methods. Borrower will not, and will not permit any
of its Subsidiaries to modify or change its fiscal year or its method of
accounting (other than as may be required to conform to GAAP).

 

6.9               Investments. Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly, make or acquire any Investment or incur
any liabilities (including contingent obligations) for or in connection with any
Investment except for Permitted Investments.

 

6.10            Transactions with Affiliates. Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly, enter into, permit to
exist or renew or extend any transaction or arrangement (including, without
limitation, the purchase, sale, lease, conveyance, transfer, assignment,
distribution, abandonment or exchange of property or assets, or the rendering of
any service) with any Affiliate of Borrower or any of its Subsidiaries except
for:

 

(a)                transactions (other than the payment of management,
consulting, monitoring, or advisory fees) in the Ordinary Course of Business
between Borrower or its Subsidiaries, on the one hand, and any Affiliate of
Borrower or its Subsidiaries, on the other hand (other than transactions

 

37

involving any payment to or sale, transfer or disposition of asset to any Person
other than (x) a Loan Party or (y) pursuant to the DIP Orders, Nalpropion), so
long as such transactions (A) are fully disclosed to Agent prior to the
consummation thereof, if they involve one or more payments by Borrower or its
Subsidiaries in excess of $500,000 for any single transaction or series of
related transactions, (B) are no less favorable, taken as a whole, to Borrower
or its Subsidiaries, as applicable, than would be obtained in an arm’s length
transaction with a non-Affiliate and (C) pursuant to and in accordance with the
DIP Orders or the cash management order entered by the Bankruptcy Court;
provided that any transaction or series of transactions pursuant to this clause
(a) with an aggregate value in excess of $1,000,000 must first be approved by a
majority of the Board of Directors of Borrower who are disinterested in the
subject matter of the transaction pursuant to a board resolution delivered to
the Agent and the Lenders at least two business days prior to the consummation
of such transaction,

 

(b)                so long as it has been approved by Borrower’s or its
applicable Subsidiary’s Board of Directors (or comparable governing body) in
accordance with applicable law, any indemnity provided for the benefit of
directors (or comparable managers) of Borrower or its applicable Subsidiary,

 

(c)                so long as it has been approved by Borrower or its applicable
Subsidiary’s Board of Directors (or comparable governing body) in accordance
with applicable law, the payment of reasonable compensation, severance, or
employee benefit arrangements to employees, officers, and outside directors of
Borrower and its Subsidiaries in the Ordinary Course of Business and consistent
with industry practice,

 

(d)                transactions by and between or among the Loan Parties, in
each case subject to, and to the extent permitted by, the terms of this
Agreement and the other Loan Documents,

 

(e)                transactions expressly permitted by Section 6.7 or 6.9, and

 

(f)                 the Transactions or transactions in relation to the Loan
Documents.

 

6.11            Use of Proceeds. Borrower will not, and will not permit any of
its Subsidiaries to, use the proceeds of any Loan made hereunder for any purpose
other than (a) on the Closing Date, (i) to repay all outstanding loans under the
Prepetition Revolving Credit Agreement, together with all accrued and unpaid
interest on such loans and the accrued and unpaid unused line fee thereunder,
and (ii) to pay the fees, costs, and expenses incurred in connection with this
Agreement, the other Loan Documents, and the transactions contemplated hereby
and thereby, and (b) thereafter, for working capital and general corporate
purposes, in each case (x) for their lawful and permitted purposes (including
that no part of the proceeds of the loans made to Borrower will be used to
purchase or carry any such Margin Stock or to extend credit to others for the
purpose of purchasing or carrying any such Margin Stock or for any purpose that
violates the provisions of Regulation T, U or X of the Board of Governors) and
(y) consistent with the Approved Budget, subject to Permitted Variances.

 

6.12            Limitation on Issuance of Equity Interests. Except for a
disposition permitted by Section ‎6.4, Borrower will not, and will not permit
any of its Subsidiaries to, issue or sell or enter into any agreement or
arrangement for the issuance or sale of any of its Equity Interests.

 

6.13            Negative Pledge. Each Loan Party will not, and each Loan Party
will not permit any of its Subsidiaries to, create or otherwise cause or suffer
to exist or become effective any agreement restricting or placing limitations on
its ability to grant a security interest to the Agent in their respective right,
title and interest in, to and under Zohydro Assets.

 

6.14            Borrower and IP Subsidiaries. Borrower will not incur any
liabilities (other than liabilities arising under the Loan Documents and
liabilities existing as of the Petition Date under

 

38

Permitted Indebtedness of the Borrower outstanding as of the Petition Date) or
engage itself in any operations or business, except in connection with its
ownership of its Subsidiaries and its rights and obligations under the Loan
Documents and except for agreements entered into in the Ordinary Course of
Business pursuant to which Borrower is party rather than the relevant operating
Subsidiary, including, (A) licenses and co-promotion agreements for products
distributed by any Subsidiary of Borrower, (B)  marketing of products
distributed by any Subsidiary of Borrower, (C) agreements with pharmacy benefit
managers and managed care organizations related to rebates on products
distributed by any Subsidiary of Borrower, (D) agreements with distributors that
provide for the payment of fees and/or rebates in respect of products
distributed by any Subsidiary of Borrower, (E) similar commercial agreements and
transactions in the Ordinary Course of Business. Borrower will not permit any IP
Subsidiary to incur any liabilities (other than (x) liabilities arising under
the Loan Documents, (y) liabilities existing as of the Petition Date under
Permitted Indebtedness of such IP Subsidiary outstanding as of the Petition Date
and (z) Permitted Intercompany Advances), own or acquire any assets (other than
Intellectual Property rights owned as of the Petition Date or acquired in
another transaction not prohibited under this Agreement) or engage itself in any
operations or business, except in connection with the license of its
Intellectual Property rights to any Loan Party and, in each case, other than in
connection with agreements in the Ordinary Course of Business pursuant to which
such IP Subsidiary is party rather than the relevant operating Subsidiary,
including, (A) licenses, sub-licenses and co-promotion agreements for products
distributed by any Subsidiary of Borrower, (B)  marketing of products
distributed by any Subsidiary of Borrower, (C) agreements with pharmacy benefit
managers and managed care organizations related to rebates on products
distributed by any Subsidiary of Borrower, (D) agreements with distributors that
provide for the payment of fees and/or rebates in respect of products
distributed by any Subsidiary of Borrower, (E) agreements with manufacturers to
acquire products and (F) similar commercial agreements and transactions in the
Ordinary Course of Business.

 

6.15            Burdensome Agreements. Except as provided in the following
sentence, each Loan Party will not, and each Loan Party will not permit any of
its Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind in any case on
the ability of any Subsidiary of any Loan Party to: (A) pay or make Restricted
Payments to any Loan Party; (B) pay any Indebtedness owed to any Loan Party; (C)
make loans or advances to any Loan Party; or (D) transfer any of its property or
assets to any Loan Party. Notwithstanding the immediately prior sentence, each
Loan Party and each of the Loan Parties’ Subsidiaries may create, cause or
suffer to exist or become effective any such consensual encumbrance or
restriction provided by (a) the Loan Documents, (b) any instrument governing
Indebtedness or Equity Interests of a Person (other than a Loan Party) acquired
by any Loan Party or any of the Loan Parties’ Subsidiaries as in effect at the
time of (and not in anticipation of) such acquisition, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person and/or any of its Subsidiaries, or the property or
assets of the Person and/or any of its Subsidiaries, so acquired, (c)(x)
customary non-assignment and similar provisions in contracts, leases and
licenses entered into in the Ordinary Course of Business, (y) net worth
provisions in leases and other agreements and (z) provisions restricting cash or
other deposits in agreements entered into by each Loan Party or any Subsidiary
of such Loan Party in the Ordinary Course of Business, (d) mortgage financings,
purchase money obligations and Capital Lease Obligations that impose
restrictions on the property owned or leased, (e) any agreement for the sale or
other disposition permitted by this Agreement of the Equity Interests or all or
substantially all of the property and assets of a Subsidiary of any Loan Party
that restricts distributions by that Subsidiary pending its sale or other
disposition, (f) Permitted Liens, (g) restrictions on cash or other deposits or
net worth imposed by customers or suppliers or required by insurance, surety or
bonding companies, in each case, under contracts entered into in the Ordinary
Course of Business, (h) customary encumbrances or restrictions contained in
agreements in connection with Hedge Agreements or Bank Products permitted under
this Agreement, (i) customary provisions contained in leases or licenses of
Intellectual Property and other agreements, in each case, entered into in the
Ordinary Course of Business, or (j) any consensual

 

39

encumbrance or restriction of any kind existing under any agreement that
extends, renews, refinances, replaces, amends, modifies, restates or supplements
the agreements containing the encumbrances or restrictions in the foregoing
clauses (a) through (i), or in this clause (j) (provided that the terms and
conditions of any such consensual encumbrance or restriction of any kind that
limit the actions described in (A) – (D) above are no more restrictive than
those under or pursuant to the agreement so extended, renewed, refinanced,
replaced, amended, modified, restated or supplemented).

 

6.16            Agent’s Exercise of Rights and Remedies. Seek to enjoin, hinder,
delay or object to the Agent’s exercise of rights and, following an Event of
Default, remedies hereunder in any jurisdiction, and, at any proceeding with
respect to the Agent’s exercise of rights and remedies, raise any substantive
objections, other than to challenge the occurrence of the relevant Event of
Default.

 

6.17            Additional Bankruptcy Matters. Without the Agent’s prior written
consent, do any of the following:

 

(a)                assert or prosecute any claim or cause of action against any
of the Secured Parties (in their capacities as such);

 

(b)                subject to the terms of the Interim DIP Order and the Final
DIP Order and subject to Section 9.1, object to, contest, delay, prevent or
interfere with in any material manner the exercise of rights and remedies by the
Agent or the Lenders with respect to the Collateral following the occurrence of
an Event of Default (provided that any Loan Party may contest or dispute whether
an Event of Default has occurred); or

 

(c)                except as expressly provided or permitted hereunder
(including, without limitation, pursuant to any “first day” or “second day”
orders complying with the terms of this Agreement) or, with the prior consent of
the Agent (at the direction of the Required Lenders), as provided pursuant to
any other order by the Bankruptcy Court, make any payment or distribution to any
non-debtor Affiliate or insider of any of the Debtors outside of the ordinary
course of business.

 

7.                   PRODUCT-RELATED CONTRACTS.

 

(a)       If an Event of Default shall have occurred and be continuing, the
Agent may exercise any Debtor’s rights pursuant to section 365(f) of the
Bankruptcy Code with respect to any contract or group of contracts and, subject
to the Bankruptcy Court’s approval after notice and hearing, assign any contract
or agreement related to any of the Core Assets or Zohydro Assets to which any
Loan Party or any of its Subsidiaries is a party (collectively, the "Specified
Contracts"), in any such case, such Specified Contract in accordance with
section 365 of the Bankruptcy Code notwithstanding any language to the contrary
in any of the applicable lease documents or executory contracts.

 

(b)       If an Event of Default shall have occurred and be continuing, the
Agent shall have the right to direct any Debtor that is a party to a Specified
Contract to assign such Specified Contract to the Agent, on behalf of the
Secured Parties, as collateral for the Secured Obligations and to direct such
Debtor to assume such Specified Contract to the extent assumption is required
under the Bankruptcy Code as a prerequisite to such assignment. Upon receipt of
notice that the Administrative Agent elects to exercise its rights under this
Article 7, the Debtors shall (i) promptly file a motion seeking expedited relief
and a hearing on the earliest court date available for purposes of, if
necessary, assuming such Specified Contract and assigning it to the Agent and
(ii) cure any defaults that have occurred and are continuing under such
Specified Contract.

 

(c)       If any Debtor is required to cure any monetary default under any
Specified Contract under this Article 7, or otherwise in connection with any
assumption of such Specified Contract

 

40

pursuant to section 365 of the Bankruptcy Code, and such monetary default is not
cured within five Business Days of the receipt by the Borrower of notice from
the Agent under this Article 7 or any other notice from the Agent requesting the
cure of such monetary default, then the Agent may cure any such monetary default
on behalf of such Debtor and any such payments shall, at the election of the
Agent in its sole discretion and subject to satisfaction of the conditions in
Article 3, be deemed a Loan hereunder.

 

8.                   EVENTS OF DEFAULT.

 

Any one or more of the following events (other than, in the case of Section 8.6,
those defaults directly arising as a result of the commencement of the Cases)
shall constitute an event of default (each, an “Event of Default”) under this
Agreement:

 

8.1               Payments. If Borrower fails to pay when due and payable, or
when declared due and payable, (a) all or any portion of the Obligations
consisting of interest, fees, or charges due the Lender Group, reimbursement of
Lender Group Expenses, or other amounts (other than any portion thereof
constituting principal) constituting Obligations (including any portion thereof
that accrues after the commencement of an Insolvency Proceeding, regardless of
whether allowed or allowable in whole or in part as a claim in any such
Insolvency Proceeding), and such failure continues for a period of three (3)
Business Days or (b) all or any portion of the principal of the Loans;

 

8.2               Covenants. If any Loan Party or any of its Subsidiaries:

 

(a)                fails to perform or observe any covenant or other agreement
contained in any of (i) Sections 3.7, 5.1, ‎5.3 (solely with respect to
Borrower’s existence), ‎5.6, ‎5.7 (solely if Borrower refuses to allow Agent or
its representatives or agents to visit properties of the Borrower or any of its
Subsidiaries, inspect their assets or books or records, examine and make copies
of their books and records, or discuss Borrower’s or any Subsidiary’s affairs,
finances, and accounts with officers and employees of Borrower or relevant
Subsidiary), ‎5.11, ‎5.13, 5.17, 5.18, 5.20 or 5.22 of this Agreement, (ii)
Section ‎6 of this Agreement, (iii) [reserved], or (iv) Section 8 of the
Guaranty and Security Agreement;

 

(b)                fails to perform or observe any covenant or other agreement
contained in any of Sections ‎5.3 (other than with respect to Borrower’s
existence), ‎5.4, ‎5.5, ‎5.8, and ‎5.12 of this Agreement and such failure
continues for a period of 10 days after the earlier of (i) the date on which
such failure shall first become known to any officer of Borrower or (ii) the
date on which written notice thereof is given to Borrower by Agent; or

 

(c)                fails to perform or observe any covenant or other agreement
contained in this Agreement, or in any of the other Loan Documents, in each
case, other than any such covenant or agreement that is the subject of another
provision of this Section 8 (in which event such other provision of this Section
8 shall govern), and such failure continues for a period of 30 days after the
earlier of (i) the date on which such failure shall first become known to any
officer of Borrower or (ii) the date on which written notice thereof is given to
Borrower by Agent;

 

8.3               Judgments. If one or more final postpetition judgments for the
payment of money involving an aggregate amount of $1,000,000 or more (except to
the extent fully covered (other than to the extent of customary deductibles) by
insurance pursuant to which the insurer has not denied coverage) is entered or
filed against a Loan Party or any of its Subsidiaries, or with respect to any of
their respective assets, and either (a) there is a period of 30 consecutive days
at any time after the entry of any such judgment during which (1) the same is
not discharged, satisfied, vacated, or bonded pending appeal, or (2) a stay of
enforcement thereof is not in effect, or (b) enforcement proceedings are
commenced upon such judgment;

 

41

8.4               Voluntary Bankruptcy, etc. If an Insolvency Proceeding is
commenced by any Subsidiary of the Borrower that is not a Debtor or any
Subsidiary of the Borrower that is not a Debtor shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts as they
become due;

 

8.5               Involuntary Bankruptcy, etc. If an Insolvency Proceeding is
commenced against any Subsidiary of the Borrower that is not a Debtor and any of
the following events occur: (a) such Subsidiary consents to the institution of
such Insolvency Proceeding against it, (b) the petition commencing the
Insolvency Proceeding is not timely controverted, (c) such Insolvency Proceeding
remains undismissed and unstayed for a period of 30 consecutive calendar days,
(d) an interim trustee is appointed to take possession of all or any substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, such Subsidiary, or (e) an order for relief shall
have been issued or entered therein;

 

8.6               Default Under Other Agreements. If there is (a) a default in
one or more agreements to which a Loan Party or any of its Subsidiaries is a
party with one or more third Persons relative to a Loan Party’s or any of its
Subsidiaries’ Indebtedness involving an aggregate amount of $500,000 or more,
and such default (i) occurs at the final maturity of the obligations thereunder,
or (ii) results in a right by such third Person, irrespective of whether
exercised, to accelerate the maturity of such Loan Party’s or its Subsidiary’s
obligations thereunder (after giving effect to any notice or lapse of time if
required thereunder); provided that this clause (a) shall not include any
default under any such Indebtedness outstanding as of the Petition Date to the
extent the exercise of any rights or remedies with respect thereto is subject to
the automatic stay provisions of section 362 of the Bankruptcy Code, or (b) an
involuntary early termination of one or more Hedge Agreements to which a Loan
Party or any of its Subsidiaries is a party involving an aggregate amount of
$500,000 or more, provided that no such failure or early termination date (or
such other similar term), as applicable, described in this Section 8.6 shall
constitute an Event of Default if such failure or early termination date is a
result of or arises solely from the commencement of a proceeding under chapter
11 of the Bankruptcy Code by the Debtors and/or customary events leading up to
the commencement of the Cases (including, without limitation, pursuant to
cross-default or cross-acceleration provisions or as a result of any failure to
deliver notices or take other actions under the applicable credit agreement,
indenture, or any related documents with respect to such matters and events and
including any cross default arising with respect to any of the foregoing), to
the extent the exercise of remedies in respect thereof is subject to the
automatic stay;

 

8.7               Representations, etc. If any warranty, representation,
certificate, statement, or Record made herein or in any other Loan Document or
delivered in writing to Agent or any Lender in connection with this Agreement or
any other Loan Document proves to be untrue in any material respect (except 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) as of the date of issuance or making or deemed making thereof;

 

8.8               Guaranty. If the obligation of any Guarantor under the
applicable guaranty agreement is limited or terminated by operation of law or by
such Guarantor (other than in accordance with the terms of this Agreement);

 

8.9               Security Documents. If the Guaranty and Security Agreement or
any other Loan Document that purports to create a Lien, shall, for any reason,
fail or cease to create a valid and perfected and, except to the extent of
Permitted Collateral Liens, first priority Lien on the Collateral covered
thereby, except (a) as a result of a disposition of the applicable Collateral in
a transaction permitted under this Agreement or (b) as the result of the failure
of Agent to maintain possession of any Collateral actually delivered to it;

 

42

8.10            Loan Documents. The validity or enforceability of any Loan
Document shall at any time for any reason (other than solely as the result of an
action or failure to act on the part of Agent) be declared to be null and void,
or a proceeding shall be commenced by a Loan Party or its Subsidiaries, or by
any Governmental Authority having jurisdiction over a Loan Party or its
Subsidiaries, seeking to establish the invalidity or unenforceability thereof,
or a Loan Party or its Subsidiaries shall deny that such Loan Party or its
Subsidiaries has any liability or obligation purported to be created under any
Loan Document, or any Loan Party or any of its Subsidiaries shall challenge the
enforceability of any material provision of any Loan Document in writing or
shall assert in writing that any material provision of any such Loan Document
has ceased to be or otherwise is not valid, binding and enforceable in
accordance with its or their terms (other than by reason of the payment in full
of the Obligations or any other termination of any Loan Document in accordance
with the terms thereof); or the Liens on any material portion of the Collateral
purported to be created under any of the Loan Documents shall cease to be, or
shall be asserted in writing by any Loan Party or any of its Subsidiaries not to
be, a valid and perfected Lien in such material portion of the Collateral, with
the priority required pursuant to this Agreement;

 

8.11            Change in Control. A Change in Control shall occur;

 

8.12            Section 364 Financing. Without the consent of the Agent and the
Required Lenders, the entry of any order by the Bankruptcy Court granting, or
the filing by Borrower or any of its Subsidiaries of any motion or other request
with the Bankruptcy Court (in each case, other than the DIP Orders and motions
seeking entry thereof or permitted amendments or modifications thereto) seeking,
authority to use any cash proceeds of any of the Collateral without the Agent’s
consent or to obtain any financing under section 364 of the Bankruptcy Code
other than the facility hereunder unless such motion or order contemplates
payment in full in cash of the Obligations immediately upon consummation of the
transactions contemplated thereby;

 

8.13            Other Superpriority Claims and Liens. If an order of the
Bankruptcy Court shall be entered granting (i) any Superpriority Claim (other
than the Carve Out) in any of the Cases that is pari passu with or senior to the
claims of the Agent and the Lenders against Borrower or any Loan Party under the
Loan Documents, (ii) any Lien or security interest on any of the Collateral that
is pari passu with or senior to the Liens and security interests granted by any
Loan Party securing the Obligations, (iii) any Superpriority Claim (other than
the Carve Out and, if applicable, the DIP Superpriority Claims) in any of the
Cases that is pari passu with or senior to the claims of the Prepetition Term
Secured Parties against Pernix Ireland Pain under the Prepetition Term Financing
Documents or otherwise pursuant to the DIP Orders or (iv) any Lien or security
interest on any of the Prepetition Term Collateral that is pari passu with or
senior to the Liens and security interests granted by Pernix Ireland Pain
securing the Prepetition Term Obligations;

 

8.14            Dismissal or Conversion of Cases. If any of the Cases shall be
dismissed or converted to a case under Chapter 7 of the Bankruptcy Code or any
Loan Party or Subsidiary thereof shall file a motion or other pleading seeking
the dismissal of any of the Cases under Section 1112 of the Bankruptcy Code or
otherwise; a trustee under Chapter 7 or Chapter 11 of the Bankruptcy Code,
receiver or an examiner with expanded powers beyond those set forth in Section
1106(a)(3) and (4) of the Bankruptcy Code shall be appointed in any of the
Cases;

 

8.15            Automatic Stay. If the Bankruptcy Court shall enter an order or
orders granting relief from the automatic stay applicable under Section 362 of
the Bankruptcy Code to the holder or holders of any security interest to permit
foreclosure (or the granting of a deed in lieu of foreclosure or the like) on
any assets of Borrower or any of its Subsidiaries that either constitute
Collateral or have a value in excess of $500,000 in the aggregate or permit
other actions that would, in the aggregate, constitute a Material Adverse Effect
on any Loan Party or Pernix Ireland Pain (or the estate of any Loan Party or
Pernix

 

43

Ireland Pain);

 

8.16            Modification to DIP Orders, Etc. If (i) an order of the
Bankruptcy Court shall be entered reversing, staying, vacating or (without the
consent of the Agent and the Required Lenders in their sole discretion)
otherwise amending, supplementing or modifying the Interim DIP Order, the Final
DIP Order or any other order relating to the use of cash collateral (in each
case without the written consent of the Agent and the Required Lenders in their
sole discretion) or (ii) if the Bankruptcy Court shall enter any order
terminating the right of any Debtor to use cash collateral;

 

8.17            Prepetition Payments. Except as permitted by the Interim DIP
Order or Final DIP Order, or as otherwise permitted by this Agreement (including
in connection with adequate protection payments), or as otherwise agreed to by
the Agent, if Borrower or any of its Subsidiaries shall make any Prepetition
Payment other than Prepetition Payments authorized by the Bankruptcy Court (and
made in accordance with the Approved Budget, subject to Permitted Variances)
that are: (1) in accordance with “first day” or “second day” orders complying
with the terms of this Agreement and entered with the consent of (or
non-objection by) the Agent (at the direction of the Required Lenders) on or
prior to the earlier of the date referred to in clause (c) of Schedule 5.22 and
the entry of the Final DIP Order, or other orders of the Bankruptcy Court
entered with the consent of (or non-objection by) the Agent (at the direction of
the Required Lenders), (2) in connection with the assumption of executory
contracts and unexpired leases with the consent of (or non-objection by) the
Agent (at the direction of the Required Lenders), (3) in respect of accrued
payroll and related expenses and employee benefits as of the Petition Date and
(4) in respect of other Prepetition Payments authorized by order of the
Bankruptcy Court entered with the consent of (or non-objection by) the Agent (at
the direction of the Required Lenders) in an aggregate amount not to exceed
$500,000;

 

8.18            Compliance with Orders. If any Loan Party or Subsidiary thereof
shall fail to comply with the Approved Budget, subject to Permitted Variances,
or otherwise fail to perform in all material respects any of its material
obligations under any terms of (a) the Interim DIP Order or Final DIP Order, (b)
after entry thereof, the Sale Procedures Order or the Sale Order; or (c) any
other order of the Bankruptcy Court (x) authorizing the use of cash collateral,
(y) approving debtor-in-possession financing, or (z) granting adequate
protection;

 

8.19            Sale of Assets; Etc. If (a) any Loan Party or Subsidiary shall
file any motion seeking authority to consummate a sale of assets (other than the
Treximet Assets) of such Loan Party’s or Subsidiary’s outside the ordinary
course of business, or any sale of any part of the Collateral pursuant to
Section 363 of the Bankruptcy Code, in each case without the consent of the
Required Lenders, or (b) any Loan Party or Subsidiary shall file (or support or
fail to oppose) a motion seeking, or the Bankruptcy Court shall enter, an order,
authorizing the sale of all or substantially all of such Loan Party’s or
Subsidiary’s assets (other than the Treximet Assets) (unless such order
contemplates payment in full in cash of the Obligations upon consummation of
such sale, whether pursuant to a plan of reorganization or otherwise);

 

8.20            Reorganization Plan. If a Reorganization Plan that is not an
Acceptable Reorganization Plan shall be confirmed in the Case, or Borrower shall
propose or support or fail to oppose any such plan or any motion or other
pleading that seeks to extend the Maturity Date

 

8.21            Dissolution of Borrower or any Subsidiary. If any order,
judgment or decree shall be entered against Borrower or any Subsidiary decreeing
the dissolution or split up of Borrower or any Subsidiary and such order shall
remain undischarged or unstayed for a period in excess of thirty (30) days;

 

8.22            Case Administration Procedures. If an order shall be entered
establishing procedures

 

44

for the administration of any of the Cases and/or approval of significant
transactions, including, without limitation, asset sale procedures, that is not
reasonably satisfactory in form and substance to the Agent, or Borrower or any
of its affiliates shall seek or support the filing or entry of such an order;

 

8.23            Actions Contrary to the Agreement. If any Loan Party or
Subsidiary thereof shall file a motion or other pleading seeking relief that if
granted could reasonably be expected to result in the occurrence of an Event of
Default (unless such relief, if granted (or the relevant transaction) would
result in payment in full in cash of the Obligations immediately upon
consummation of the matter addressed by such motion or pleading, whether
pursuant to a plan of reorganization or otherwise);

 

8.24            Challenges. Any Loan Party or Subsidiary thereof shall
challenge, support or encourage a challenge of any payments made to the Agent or
any Lender with respect to the Obligations, other than to challenge the
occurrence of a Default or Event of Default;

 

8.25            Grant of Adequate Protection. If an order of the Bankruptcy
Court shall be entered granting adequate protection not consented to by the
Agent in its sole discretion or any Debtor shall propose or support or fail to
oppose the entry of any such order;

 

8.26            Adequate Protection. Without the consent of the Agent, the
filing of any motion by any Debtor seeking approval of (or the entry of an order
by the Bankruptcy Court approving) adequate protection to any prepetition agent,
trustee or lender that is inconsistent with the Interim DIP Order or the Final
DIP Order; or

 

8.27            Change of Venue. If, unless otherwise approved by the Agent and
the Required Lenders, an order of the Bankruptcy Court shall be entered
providing for a change in venue with respect to any of the Cases and such order
shall not be reversed or vacated within 10 days.

 

8.28            Sale Agreement. (i) The Stalking Horse Sale Agreement shall be
terminated, rescinded or revoked (in whole or in part) by any party thereto and
is not replaced by (x) a Replacement Sale Agreement, which Replacement Sale
Agreement shall have been entered into within five Business Days thereof or (y)
an Overbid Sale Agreement entered into substantially concurrently with the
termination of the Stalking Horse Sale Agreement (which Replacement Sale
Agreement or Overbid Sale Agreement, as applicable, shall be approved by the
Bankruptcy Court no later than the date specified in clause (e) of Schedule
5.22); or (ii) any party to any Sale Agreement shall (x) admit in writing or
state publicly its intent not to pursue the transactions contemplated by the
Sale Agreement, or (y) act or fail to act in a manner that impairs such party's
ability to perform its obligations under, or otherwise constitutes an
anticipatory repudiation of, or a breach or default under (to the extent not
cured within the applicable grace period), any Sale Agreement unless a
Replacement Sale Agreement shall have been entered into within the period
referred to in clause (i) above; or (iii) the denial (in whole or in part) by
the Bankruptcy Court of any of the relief sought in the sale motion referred to
in Schedule 5.22 or in any motion seeking approval of a Replacement Sale
Agreement unless the initial relief requested shall be approved by the
Bankruptcy Court pursuant to a Sale Order no later than the date specified in
clause (e) of Schedule 5.22.

 

9.                   RIGHTS AND REMEDIES.

 

9.1               Rights and Remedies. Upon the occurrence and during the
continuation of an Event of Default, subject to paragraph 29 of the Interim DIP
Order (or, after entry thereof, the corresponding paragraph of the Final DIP
Order), Agent may, with the consent of the Required Lenders and, at the
instruction of the Required Lenders, shall (in each case under clauses (a) or
(b) by written notice to Borrower), in addition to any other rights or remedies
provided for hereunder or under any other Loan Document or by applicable law, do
any one or more of the following, in each case without further order of or
application to the Bankruptcy Court (provided that any party shall be entitled
to seek an emergency

 

45

hearing with the Bankruptcy Court to determine whether an Event of Default has
occurred and is continuing):

 

(a)                declare the principal of, and any and all accrued and unpaid
interest and fees in respect of, the Loans and all other Obligations, whether
evidenced by this Agreement or by any of the other Loan Documents to be
immediately due and payable, whereupon the same shall become and be immediately
due and payable and Borrower shall be obligated to repay all of such Obligations
in full, without presentment, demand, protest, or further notice or other
requirements of any kind, all of which are hereby expressly waived by Borrower;

 

(b)                declare the Commitments terminated, whereupon the Commitments
shall immediately be terminated together with any obligation of any Lender to
make Loans; and

 

(c)                exercise all other rights and remedies available to Agent or
the Lenders under the Loan Documents, under applicable law, or in equity.

 

The foregoing to the contrary notwithstanding, upon the occurrence of any Event
of Default described in Section ‎8.4 or Section ‎8.5, in addition to the
remedies set forth above, without any notice to Borrower or any other Person or
any act by the Lender Group, the Commitments shall automatically terminate and
the Obligations, inclusive of the principal of, and any and all accrued and
unpaid interest and fees in respect of, the Loans and all other Obligations,
whether evidenced by this Agreement or by any of the other Loan Documents, shall
automatically become and be immediately due and payable and Borrower shall
automatically be obligated to repay all of such Obligations in full, without
presentment, demand, protest, or notice or other requirements of any kind, all
of which are expressly waived by Borrower.

 

9.2               Remedies Cumulative. The rights and remedies of the Lender
Group under this Agreement, the other Loan Documents, and all other agreements
shall be cumulative. The Lender Group shall have all other rights and remedies
not inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.

 

10.               WAIVERS; INDEMNIFICATION.

 

10.1            Demand; Protest; etc. Borrower, on behalf of itself and its
Subsidiaries, waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of documents, instruments, chattel
paper, and guarantees at any time held by the Lender Group on which Borrower or
any of its Subsidiaries may in any way be liable.

 

10.2            The Lender Group’s Liability for Collateral. Borrower, on behalf
of itself and its Subsidiaries, hereby agrees that: (a) so long as Agent
complies with its obligations, if any, under the Code, the Lender Group shall
not in any way or manner be liable or responsible for: (i) the safekeeping of
the Collateral, (ii) any loss or damage thereto occurring or arising in any
manner or fashion from any cause, (iii) any diminution in the value thereof, or
(iv) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person, and (b) all risk of loss, damage, or destruction of the
Collateral shall be borne by Borrower, except to the extent such loss, damage or
destruction is determined by a final non-appealable judgment of a court of
competent jurisdiction to have directly resulted from the Agent’s and Lender’s
gross negligence or willful misconduct.

 

10.3            Indemnification. Borrower shall pay, indemnify, defend, and hold
the Agent-Related

 

46

Persons, the Lender-Related Persons, and each Participant (each, an “Indemnified
Person”) harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings,
liabilities, fines, costs, penalties, and damages, and all reasonable fees and
disbursements of attorneys, experts, or consultants and all other costs and
expenses actually incurred in connection therewith or in connection with the
enforcement of this indemnification (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them (a) in connection with or as a result of or
related to the execution and delivery (provided that Borrower shall not be
liable for costs and expenses (including attorneys’ fees) of any Lender (other
than Agent in its capacity as such) incurred in advising, structuring, drafting,
reviewing or administering the Loan Documents), enforcement, performance, or
administration (including any restructuring or workout with respect hereto) of
this Agreement, any of the other Loan Documents, or the transactions
contemplated hereby or thereby or the monitoring of Borrower’s and its
Subsidiaries’ compliance with the terms of the Loan Documents (provided, that
the indemnification in this clause (a) shall not extend to (i) disputes solely
between or among the Lenders that do not involve any acts or omissions of any
Loan Party, or (ii) disputes solely between or among the Lenders and their
respective Affiliates that do not involve any acts or omissions of any Loan
Party; it being understood and agreed that the indemnification in this clause
(a) shall extend to Agent (but not the Lenders) relative to disputes between or
among Agent on the one hand, and one or more Lenders, or one or more of their
Affiliates, on the other hand, or (iii) any Taxes or any costs attributable to
Taxes, which shall be governed by Section ‎16), (b) with respect to any actual
or prospective investigation, litigation, or proceeding related to this
Agreement, any other Loan Document or the making of any Loans hereunder, or the
use of the proceeds of the Loans provided hereunder (irrespective of whether any
Indemnified Person is a party thereto), or any act, omission, event, or
circumstance in any manner related thereto, and (c) in connection with or
arising out of any presence or release of Hazardous Materials at, on, under, to
or from any assets or properties owned, leased or operated by Borrower or any of
its Subsidiaries or any Environmental Actions, Environmental Liabilities or
Remedial Actions related in any way to any such assets or properties of Borrower
or any of its Subsidiaries (each and all of the foregoing, the “Indemnified
Liabilities”). The foregoing to the contrary notwithstanding, Borrower shall not
have any obligation to any Indemnified Person under this Section ‎10.3 with
respect to any Indemnified Liability that a court of competent jurisdiction
finally determines to have resulted from (i) the gross negligence or willful
misconduct of such Indemnified Person or its officers, directors, employees,
attorneys, or agents or (ii) a willful and material breach by an Indemnified
party of its obligations under this Agreement. This provision shall survive the
termination of this Agreement and the repayment in full of the Obligations. If
any Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrower was required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrower
with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO
EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE
OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

 

11.               NOTICES.

 

Unless otherwise provided in this Agreement, all notices or demands relating to
this Agreement or any other Loan Document shall be in writing and (except for
financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
registered or certified mail (postage prepaid, return receipt requested),
overnight courier, electronic mail (at such email addresses as a party may
designate in accordance herewith), or telefacsimile. In the case of notices or
demands to Borrower or Agent, as the case may be, they shall be sent to the
respective address set forth below:

 

47

If to Borrower: Pernix Therapeutics Holdings, Inc.  

10 North Park Place, Suite 201

Morristown, NJ 07960

 

Attn: General Counsel

 

  Fax No.: (862) 260-8752     with copies to: Davis Polk & Wardwell, LLP   450
Lexington Avenue   New York, New York 10017   Attn: Jinsoo Kim   Fax Number:
(212) 450-5800    

If to Agent:

 

Bobbie Young (Agency)

900 West Trade Street, Suite 725

Charlotte, NC 28202

Email: BankLoansAgency@cantor.com

Fax Number: 646-390-1764

 

Cantor Fitzgerald Securities

Attn: Nils Horning (Legal)

1801 N. Military Trail, Suite 202

Boca Raton, FL 33431

Email: NHorning@cantor.com

Telephone Number: 212-829-4889

Fax Number: 646-219-1180

 

Attn: Jon Stapleton (Credit)

110 E. 59th St.

New York, NY 10022

Email: JStapleton@cantor.com

   

with copies to:

Skadden, Arps, Slate, Meagher & Flom LLP

  Four Times Square   New York, New York 10036   Attn: Sarah M. Ward   Fax
Number: (917) 777-2126

 

Any party hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other
party. All notices or demands sent in accordance with this Section ‎11, shall be
deemed received on the earlier of the date of actual receipt or three (3)
Business Days after the deposit thereof in the mail; provided, that (a) notices
sent by overnight courier service shall be deemed to have been given when
received, (b) notices by facsimile shall be deemed to have been given when sent
(except that, if not given during normal business hours for the recipient, shall
be deemed to have been given at the opening of business on the next Business Day
for the recipient) and (c) notices by electronic mail shall be deemed received
upon the sender’s receipt of an acknowledgment from the intended recipient (such
as by the “return receipt requested” function, as available, return email or
other written acknowledgment).

 

12.               CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; JUDICIAL REFERENCE

 

48

PROVISION.

 

(a)                THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO
ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO, AND
ANY CLAIMS, CONTROVERSIES OR DISPUTES ARISING HEREUNDER OR THEREUNDER OR RELATED
HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND, TO THE EXTENT APPLICABLE,
THE BANKRUPTCY CODE.

 

(b)                THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE BANKRUPTCY COURT (OR, IF THE BANKRUPTCY COURT DOES NOT
HAVE (OR ABSTAINS FROM) JURISDICTION, THE STATE AND, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW
YORK); PROVIDED, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR
OTHER PROPERTY MAY BE FOUND. BORROWER AND EACH MEMBER OF THE LENDER GROUP WAIVE,
TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION ‎12(b).

 

(c)                TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, BORROWER
AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS, IF
ANY, TO A JURY TRIAL OF ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION
DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR
ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS
(EACH A “CLAIM”). BORROWER AND EACH MEMBER OF THE LENDER GROUP REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.

 

(d)                BORROWER AND EACH MEMBER OF THE LENDER GROUP HEREBY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE
BANKRUPTCY COURT (OR, IF THE BANKRUPTCY COURT DOES NOT HAVE (OR ABSTAINS FROM)
JURISDICTION, THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL
COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK), IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS, OR FOR RECOGNITION
OR ENFORCEMENT OF ANY JUDGMENT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER

 

49

PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL
AFFECT ANY RIGHT THAT AGENT MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR
ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(e)                NO CLAIM MAY BE MADE BY ANY LOAN PARTY AGAINST THE AGENT, ANY
OTHER LENDER, OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, COUNSEL,
REPRESENTATIVE, AGENT, OR ATTORNEY-IN-FACT OF ANY OF THEM FOR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES OR LOSSES IN RESPECT OF
ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF
OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION THEREWITH, AND
EACH LOAN PARTY HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE UPON ANY CLAIM
FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED
TO EXIST IN ITS FAVOR.

 

(f)                 CONSENT TO SERVICE OF PROCESS.  EACH FOREIGN LOAN PARTY
HEREBY IRREVOCABLY DESIGNATES, APPOINTS, AUTHORIZES AND EMPOWERS BORROWER AS ITS
AGENT FOR SERVICE OF PROCESS AT ITS OFFICES LOCATED AT 10 NORTH PARK PLACE,
SUITE 201 MORRISTOWN, NJ 07960 (OR SUCH OTHER OFFICE OF BORROWER LOCATED IN THE
UNITED STATES AND NOTIFIED TO AGENT AND THE LENDERS IN WRITING FROM TIME TO TIME
FOR PURPOSES OF THIS SECTION 12(F) AT LEAST TEN (10) BUSINESS DAYS PRIOR TO THE
EFFECTIVENESS OF SUCH CHANGE IN OFFICES FOR PURPOSES OF THIS SECTION 12(F)) TO
ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS,
NOTICES OR OTHER DOCUMENTS THAT MAY BE SERVED IN ANY SUIT, ACTION OR PROCEEDING
RELATING HERETO IN THE BANKRUPTCY COURT OR ANY NEW YORK COURT.

 

13.            ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.

 

13.1            Assignments and Participations.

 

(a)                (i) Subject to the conditions set forth in clause (a)(ii)
below, any Lender may assign and delegate all or any portion of its rights and
duties under the Loan Documents (including the Obligations owed to it and its
Commitments) to one or more assignees (each, an “Assignee”), with the prior
written consent (such consent not be unreasonably withheld or delayed) of:

 

(A)       the Borrower in its sole discretion so long as the Stalking Horse Sale
Agreement is in full force and effect; provided that no such consent of the
Borrower shall be required in connection with an assignment or delegation by any
Lender to any other Lender, an Affiliate of any Lender, or a Related Fund of
such Lender; and

 

(B)       Agent.

 

(ii)               Assignments shall be subject to the following additional
conditions:

 

A.                 no assignment may be made to a natural person,

 

B.                 no assignment may be made to a Loan Party or an Affiliate of
a Loan Party,

 

50

C.                 the amount of the Commitments and the other rights and
obligations of the assigning Lender hereunder and under the other Loan Documents
subject to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to Agent) shall be in a
minimum amount (unless waived by Agent) of $1,000,000 (except such minimum
amount shall not apply to (I) an assignment or delegation by any Lender to any
other Lender, an Affiliate of any Lender, or a Related Fund of such Lender or
(II) a group of new Lenders, each of which is an Affiliate of each other or a
Related Fund of such new Lender to the extent that the aggregate amount to be
assigned to all such new Lenders is at least $1,000,000),

 

D.                 each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Agreement,

 

E.                  the parties to each assignment shall execute and deliver to
Agent an Assignment and Acceptance; provided, that Borrower and Agent may
continue to deal solely and directly with the assigning Lender in connection
with the interest so assigned to an Assignee until written notice of such
assignment, together with payment instructions, addresses, and related
information with respect to the Assignee, have been given to Borrower and Agent
by such Lender and the Assignee,

 

F.                  unless waived by Agent, the assigning Lender or Assignee has
paid to Agent, for Agent’s separate account, a processing fee in the amount of
$3,500, and

 

G.                 the assignee, if it is not a Lender, shall deliver to Agent
an Administrative Questionnaire in a form approved by Agent (the “Administrative
Questionnaire”).

 

(b)                From and after the date that Agent receives the executed
Assignment and Acceptance and, if applicable, payment of the required processing
fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall be a “Lender” and shall have the rights and
obligations of a Lender under the Loan Documents (and for the avoidance of
doubt, shall have no greater rights under Section ‎16 than the assigning
Lender), and (ii) the assigning Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (except
with respect to Section ‎10.3) and be released from any future obligations under
this Agreement (and in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender’s rights and obligations under this
Agreement and the other Loan Documents, such Lender shall cease to be a party
hereto and thereto); provided, that nothing contained herein shall release any
assigning Lender from obligations that survive the termination of this
Agreement, including such assigning Lender’s obligations under Section ‎15,
Section ‎16 and Section ‎17.9(a).

 

(c)                [Reserved].

 

(d)                Immediately upon Agent’s receipt of the required processing
fee, if applicable, and delivery of notice to the assigning Lender pursuant to
Section ‎13.1(b), this Agreement shall be deemed to be amended to the extent,
but only to the extent, necessary to reflect the addition of the

 

51

Assignee and the resulting adjustment of the Commitments arising therefrom. The
Commitment allocated to each Assignee shall reduce such Commitments of the
assigning Lender pro tanto.

 

(e)                Any Lender may at any time sell to one or more commercial
banks, financial institutions, or other Persons (a “Participant”) participating
interests in all or any portion of its Obligations, its Commitment, and the
other rights and interests of that Lender (the “Originating Lender”) hereunder
and under the other Loan Documents; provided, that (i) the Originating Lender
shall remain a “Lender” for all purposes of this Agreement and the other Loan
Documents and the Participant receiving the participating interest in the
Obligations, the Commitments, and the other rights and interests of the
Originating Lender hereunder shall not constitute a “Lender” hereunder or under
the other Loan Documents and the Originating Lender’s obligations under this
Agreement shall remain unchanged, (ii) the Originating Lender shall remain
solely responsible for the performance of such obligations, (iii) Borrower,
Agent, and the Lenders shall continue to deal solely and directly with the
Originating Lender in connection with the Originating Lender’s rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the right to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment to, or consent or waiver with respect to this Agreement or of any
other Loan Document would (A) extend the final maturity date of the Obligations
hereunder in which such Participant is participating, (B) reduce the interest
rate applicable to the Obligations hereunder in which such Participant is
participating, (C) release all or substantially all of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating, (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through such Lender (other than a
waiver of default interest), or (E) decreases the amount or postpones the due
dates of scheduled principal repayments or prepayments or premiums payable to
such Participant through such Lender, (v) no participation shall be sold to a
natural person, (vi) no participation shall be sold to a Loan Party or an
Affiliate of a Loan Party, and (vii) all amounts payable by Borrower hereunder
shall be determined as if such Lender had not sold such participation, except
that, if amounts outstanding under this Agreement are due and unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall be deemed to have the right of set
off in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest were
owing directly to it as a Lender under this Agreement. The rights of any
Participant only shall be derivative through the Originating Lender with whom
such Participant participates and no Participant shall have any rights under
this Agreement or the other Loan Documents or any direct rights as to the other
Lenders, Agent, Borrower, the Collateral, or otherwise in respect of the
Obligations. No Participant shall have the right to participate directly in the
making of decisions by the Lenders among themselves. Each Lender that sells a
participation shall, acting solely for this purpose as a non-fiduciary agent of
the Borrower, maintain a register on which it enters the name and address of
each Participant and the principal amounts (and stated interest) of each
Participant’s interest in the Loans or other obligations under the Loan
Documents (the “Participant Register”); provided that no Lender shall have any
obligation to disclose all or any portion of the Participant Register (including
the identity of any Participant or any information relating to a Participant’s
interest in any commitments, loans, letters of credit or its other obligations
under any Loan Document) to any Person except to the extent that such disclosure
is necessary to establish that such commitment, loan, letter of credit or other
obligation is in registered form under Section 5f.103-1(c) of the United States
Treasury Regulations. The entries in the Participant Register shall be
conclusive absent manifest error, and such Lender shall treat each Person whose
name is recorded in the Participant Register as the owner of such participation
for all purposes of this Agreement notwithstanding any notice to the contrary.
For the avoidance of doubt, the Agent (in its capacity as administrative agent)
shall have no responsibility for maintaining a Participant Register.

 

52

(f)                 In connection with any such assignment or participation or
proposed assignment or participation or any grant of a security interest in, or
pledge of, its rights under and interest in this Agreement, a Lender may,
subject to the provisions of Section ‎17.9, disclose all documents and
information which it now or hereafter may have relating to Borrower and its
Subsidiaries and their respective businesses.

 

(g)                Any other provision in this Agreement notwithstanding, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank
or U.S. Treasury Regulation 31 CFR §203.24, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.

 

13.2            Successors. This Agreement shall bind and inure to the benefit
of the respective successors and assigns of each of the parties; provided, that
Borrower may not assign this Agreement or any rights or duties hereunder without
the Lenders’ prior written consent and any prohibited assignment shall be
absolutely void ab initio. No consent to assignment by the Lenders shall release
Borrower from its Obligations. A Lender may assign this Agreement and the other
Loan Documents and its rights and duties hereunder and thereunder pursuant to
Section 13.1 and, except as expressly required pursuant to Section ‎13.1, no
consent or approval by Borrower is required in connection with any such
assignment.

 

14.            AMENDMENTS; WAIVERS.

 

14.1            Amendments and Waivers.

 

(a)                No amendment, waiver or other modification of any provision
of this Agreement or any other Loan Document, and no consent with respect to any
departure by Borrower or any of its Subsidiaries therefrom, shall be effective
unless the same shall be in writing and signed by the Required Lenders (or by
Agent at the written request of the Required Lenders) and the Loan Parties that
are party thereto and then any such waiver or consent shall be effective, but
only in the specific instance and for the specific purpose for which given;
provided, that no such waiver, amendment, or consent shall, unless in writing
and signed by all of the Lenders directly affected thereby and all of the Loan
Parties that are party thereto, do any of the following:

 

(i)                 increase the amount of or extend the expiration date of any
Commitment of any Lender or amend, modify, or eliminate Section ‎2.4(c)(i),

 

(ii)               postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees, or other
amounts due hereunder or under any other Loan Document,

 

(iii)             reduce the principal of, or the rate of interest on, any loan
or other extension of credit hereunder, or reduce any fees or other amounts
payable hereunder or under any other Loan Document (except in connection with
the waiver of applicability of Section ‎2.6(c) (which waiver shall be effective
with the written consent of the Required Lenders)),

 

(iv)              amend, modify, or eliminate this Section or any provision of
this Agreement providing for consent or other action by all Lenders,

 

(v)                amend, modify or eliminate Section 3.5,

 

(vi)              amend any provisions in Section 15.11 that relate to release
of Agent’s Liens,

 

53

(vii)            other than as permitted by Section ‎15.11, release Agent’s Lien
in and to any of the Collateral,

 

(viii)          amend, modify, or eliminate the definitions of “Required
Lenders” or “Pro Rata Share”,

 

(ix)              contractually subordinate any of Agent’s Liens (unless
otherwise expressly permitted under this Agreement),

 

(x)                other than in connection with a merger, liquidation,
dissolution or sale of such Person expressly permitted by the terms hereof or
the other Loan Documents, release Borrower or any Guarantor from any obligation
for the payment of money or consent to the assignment or transfer by Borrower or
any Guarantor of any of its rights or duties under this Agreement or the other
Loan Documents, or

 

(xi)              amend, modify, or eliminate any of the provisions of Section
‎2.4(b)(i), ‎(ii) or ‎(iii), and

 

(b)                No amendment, waiver, modification, or consent shall amend,
modify, waive, or eliminate, any provision of Section ‎15 pertaining to Agent,
or any other rights or duties of Agent under this Agreement or the other Loan
Documents, without the written consent of Agent, Borrower, and the Required
Lenders.

 

Anything in this Section ‎14.1 to the contrary notwithstanding, any amendment,
waiver, modification, elimination, or consent of or with respect to any
provision of this Agreement or any other Loan Document may be entered into
without the consent of, or over the objection of, any Defaulting Lender other
than any of the matters governed by Section ‎14.1(a)(i) through ‎(iii) that
affect such Lender.

 

14.2            Replacement of Certain Lenders.

 

(a)                If (i) any action to be taken by the Lender Group or Agent
hereunder requires the consent, authorization, or agreement of all Lenders or
all Lenders affected thereby and if such action has received the consent,
authorization, or agreement of the Required Lenders but not of all Lenders or
all Lenders affected thereby, or (ii) any Lender makes a claim for compensation
under Section ‎16, then Borrower or Agent, upon at least five (5) Business Days
prior irrevocable notice, may permanently replace any Lender that failed to give
its consent, authorization, or agreement (a “Non-Consenting Lender”) or any
Lender that made a claim for compensation (a “Tax Lender”) with one or more
Replacement Lenders, and the Non-Consenting Lender or Tax Lender, as applicable,
shall have no right to refuse to be replaced hereunder. Such notice to replace
the Non-Consenting Lender or Tax Lender, as applicable, shall specify an
effective date for such replacement, which date shall not be later than fifteen
(15) Business Days after the date such notice is given.

 

(b)                Prior to the effective date of such replacement, the
Non-Consenting Lender or Tax Lender, as applicable, and each Replacement Lender
shall execute and deliver an Assignment and Acceptance, subject only to the
Non-Consenting Lender or Tax Lender, as applicable, being repaid in full its
share of the outstanding Obligations (without any premium or penalty of any kind
whatsoever, but including all interest, fees and other amounts that may be due
and payable in respect thereof. If the Non-Consenting Lender or Tax Lender, as
applicable, shall refuse or fail to execute and deliver any such Assignment and
Acceptance prior to the effective date of such replacement, Agent may, but shall
not be required to, execute and deliver such Assignment and Acceptance in the
name or and on behalf of the Non-Consenting Lender or Tax Lender, as applicable,
and irrespective of whether Agent executes and delivers such Assignment and
Acceptance, the Non-Consenting Lender or Tax Lender, as

 

54

applicable, shall be deemed to have executed and delivered such Assignment and
Acceptance. The replacement of any Non-Consenting Lender or Tax Lender, as
applicable, shall be made in accordance with the terms of Section ‎13.1. Until
such time as one or more Replacement Lenders shall have acquired all of the
Obligations, the Commitments, and the other rights and obligations of the
Non-Consenting Lender or Tax Lender, as applicable, hereunder and under the
other Loan Documents, the Non-Consenting Lender or Tax Lender, as applicable,
shall remain obligated to make the Non-Consenting Lender’s or Tax Lender’s, as
applicable, Pro Rata Share of Loans.

 

14.3            No Waivers; Cumulative Remedies. No failure by Agent or any
Lender to exercise any right, remedy, or option under this Agreement or any
other Loan Document, or delay by Agent or any Lender in exercising the same,
will operate as a waiver thereof. No waiver by Agent or any Lender will be
effective unless it is in writing, and then only to the extent specifically
stated. No waiver by Agent or any Lender on any occasion shall affect or
diminish Agent’s and each Lender’s rights thereafter to require strict
performance by Borrower or any of its Subsidiaries, as applicable, of any
provision of this Agreement or any other Loan Document. Agent’s and each
Lender’s rights under this Agreement and the other Loan Documents will be
cumulative and not exclusive of any other right or remedy that Agent or any
Lender may have.

 

15.           AGENT; THE LENDER GROUP.

 

15.1            Appointment and Authorization of Agent. Each Lender hereby
designates and appoints Cantor Fitzgerald Securities as its agent under this
Agreement and the other Loan Documents and each Lender hereby irrevocably
authorizes Agent to execute and deliver each of the other Loan Documents on its
behalf and to take such other action on its behalf under the provisions of this
Agreement and each other Loan Document and to exercise such powers and perform
such duties as are expressly delegated to Agent by the terms of this Agreement
or any other Loan Document, together with such powers as are reasonably
incidental thereto. Agent agrees to act as agent for and on behalf of the
Lenders on the conditions contained in this Section 15. Any provision to the
contrary contained elsewhere in this Agreement or in any other Loan Document
notwithstanding, Agent shall not have any duties or responsibilities, except
those expressly set forth herein or in the other Loan Documents which shall be
ministerial and administrative in nature. Without limiting the generality of the
foregoing, the Agent (a) shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default or an Event of Default has occurred and
is continuing; (b) shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby or by the other Loan Documents that the Agent is
required to exercise as directed in writing by the Required Lenders (or such
other number or percentage of the Lenders as shall be expressly provided for
herein or in the other Loan Documents); provided that, the Agent shall not be
required to take any action that, in its opinion or the opinion of its counsel,
may expose the Agent to liability with respect to which it is not indemnified or
that is contrary to any Loan Document or applicable law, including, for the
avoidance of doubt, any debtor relief law applicable to any Defaulting Lender;
and (c) shall not, except as expressly set forth herein and in the other Loan
Documents, have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Loan Parties or any of its Affiliates
that is communicated to or obtained by the Person serving as the Agent or any of
its Affiliates in any capacity. Without limiting the generality of the
foregoing, the use of the term “agent” in this Agreement or the other Loan
Documents with reference to Agent is not intended to connote any fiduciary or
other implied (or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of market custom,
and is intended to create or reflect only a representative relationship between
independent contracting parties. Each Lender hereby further authorizes Agent to
act as the secured party under each of the Loan Documents that create a Lien on
any item of Collateral. Except as expressly otherwise provided in this
Agreement, Agent shall have and may use its sole discretion with respect to
exercising or refraining from exercising any discretionary rights or taking or
refraining from

 

55

taking any actions that Agent expressly is entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall have the
right, but not the duty (to the extent exercise of the following would
constitute the taking of a discretionary action or the exercise any
discretionary powers), to exercise the following powers as long as this
Agreement remains in effect: (a) maintain, in accordance with its customary
business practices, ledgers and records reflecting the status of the
Obligations, the Collateral, payments and proceeds of Collateral, and related
matters, (b) execute or file any and all financing or similar statements or
notices, amendments, renewals, supplements, documents, instruments, proofs of
claim, notices and other written agreements with respect to the Loan Documents,
(c) make Loans, for itself or on behalf of Lenders, as provided in the Loan
Documents, (d) exclusively receive, apply, and distribute payments and proceeds
of the Collateral as provided in the Loan Documents, (e) open and maintain such
bank accounts and cash management arrangements as Agent deems necessary and
appropriate in accordance with the Loan Documents for the foregoing purposes,
(f) perform, exercise, and enforce any and all other rights and remedies of the
Lender Group with respect to Borrower or its Subsidiaries, the Obligations, the
Collateral, or otherwise related to any of same as provided in the Loan
Documents, and (g) incur and pay such Lender Group Expenses as Agent may deem
necessary or appropriate for the performance and fulfillment of its functions
and powers pursuant to the Loan Documents.

 

15.2            Delegation of Duties. Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys in fact (each, a “Sub-Agent”) and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. Agent and any such
Sub-Agent may perform any and all of its duties and exercise its rights and
powers by or through their respective Related Parties. The exculpatory
provisions of this Article 15 shall apply to any such Sub-Agent and to the
Related Parties of the Agent and any such Sub-Agent, and shall apply to their
respective activities in connection with the syndication of the credit
facilities under this Agreement as well as activities as such Agent. Agent shall
not be responsible for the negligence or conduct of any Sub-Agent that it
selects as long as such selection was made without gross negligence or willful
misconduct.

 

15.3            Liability of Agent. None of the Agent-Related Persons shall (a)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct
as determined by a final and non-appealable judgment of a court of competent
jurisdiction), or (b) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by Borrower or any of its
Subsidiaries or Affiliates, or any officer or director thereof, contained in
this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of Borrower or its
Subsidiaries or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Lenders to ascertain or to inquire as to (i) the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the books and records or
properties of Borrower or its Subsidiaries, (ii) any statement, warranty or
representation made by any other Person in or in connection with this Agreement
or any other Loan Document, (iii) the contents of any certificate, report or
other document delivered hereunder or thereunder or in connection herewith or
therewith, (iv) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or therein or the
occurrence of any Default or Event of Default, (v) the validity, enforceability,
effectiveness or genuineness of this Agreement, any other Loan Document or any
other agreement, instrument or document or the creation, perfection or priority
of any Lien purported to be created by the Guaranty and Security Agreement or
any other Loan Document, (v) the value or the sufficiency of any Collateral, or

 

56

(vi) the satisfaction of any condition set forth in Article 3 or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to the Agent.

 

15.4            Reliance by Agent. Agent shall be entitled to rely, and shall be
fully protected in relying, and shall not incur any liability for relying, upon
any writing, resolution, notice, consent, certificate, affidavit, letter,
telegram, telefacsimile or other electronic method of transmission, telex or
telephone message, statement or other document or conversation believed by it to
be genuine and correct and to have been signed, sent, or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to Borrower or counsel to any Lender), independent accountants and other
experts selected by Agent. The Agent also may rely upon any statement made to it
orally or by telephone and believed by it to have been made by the proper
Person, and shall not incur any liability for relying thereon. Agent shall be
fully justified in failing or refusing to take any action under this Agreement
or any other Loan Document unless Agent shall first receive such advice or
concurrence of the Lenders as it deems appropriate and until such instructions
are received, Agent shall act, or refrain from acting, as it deems advisable. If
Agent so requests, it shall first be indemnified to its reasonable satisfaction
by the Lenders against any and all liability and expense that may be incurred by
it by reason of taking or continuing to take any such action. Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Required Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.

 

15.5            Notice of Default or Event of Default. Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
unless and until notice describing such Default or Event of Default is given to
the Agent in writing by the Loan Parties or a Lender. Agent promptly will notify
the Lenders of its receipt of any such notice or of any Event of Default of
which Agent has actual knowledge. If any Lender obtains actual knowledge of any
Event of Default, such Lender promptly shall notify the other Lenders and Agent
of such Event of Default. Each Lender shall be solely responsible for giving any
notices to its Participants, if any. Subject to Section 15.4, Agent shall take
such action with respect to such Default or Event of Default as may be requested
by the Required Lenders in accordance with Section 9; provided, that unless and
until Agent has received any such request, Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable. In no event shall the
Agent be required to comply with any such directions to the extent that the
Agent believes that its compliance with such directions would be unlawful.

 

15.6            Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of Borrower
and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such due diligence, documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of Borrower or any other Person party to a
Loan Document, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to Borrower. Each Lender also represents that it
will, independently and without reliance upon any Agent-Related Person and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower or any other Person party to a Loan Document.
Except for notices, reports, and other documents expressly herein required to be
furnished to

 

57

the Lenders by Agent, Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of Borrower or any other Person party to a Loan Document that
may come into the possession of any of the Agent-Related Persons. Each Lender
acknowledges that Agent does not have any duty or responsibility, either
initially or on a continuing basis (except to the extent, if any, that is
expressly specified herein) to provide such Lender with any credit or other
information with respect to Borrower, its Affiliates or any of their respective
business, legal, financial or other affairs, and irrespective of whether such
information came into Agent’s or its Affiliates’ or representatives’ possession
before or after the date on which such Lender became a party to this Agreement.

 

15.7            Costs and Expenses; Indemnification. Agent may incur and pay
Lender Group Expenses to the extent Agent reasonably deems necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including court costs, attorneys’
fees and expenses (limited, in the case of legal fees and expenses, to
reasonable and documented fees and expenses of one counsel to the Agent, any
Sub-Agent and the Lenders (taken as a whole) in each material or relevant
jurisdiction (unless (x) a conflict or potential conflict exists as determined
in the reasonable judgment of any such party in which case(s) the fees, charges
and disbursements of reasonably necessary additional counsel for all such
affected parties shall be covered, (y) special regulatory counsel is necessary
as determined in the reasonable judgment of the Agent or the Required Lenders,
in which case the fees and expenses of such regulatory counsel shall be covered
or (z) an Event of Default exists)), fees and expenses of financial accountants,
advisors, consultants, and appraisers, costs of collection by outside collection
agencies, auctioneer fees and expenses, and costs of security guards or
insurance premiums paid to maintain the Collateral, whether or not Borrower is
obligated to reimburse Agent or Lenders for such expenses pursuant to this
Agreement or otherwise. Agent is authorized and directed to deduct and retain
sufficient amounts from payments or proceeds of the Collateral received by Agent
to reimburse Agent for such out-of-pocket costs and expenses prior to the
distribution of any amounts to Lenders. In the event Agent is not reimbursed for
such costs and expenses by Borrower or its Subsidiaries, each Lender hereby
agrees that it is and shall be obligated to pay to Agent such Lender’s ratable
thereof. Whether or not the transactions contemplated hereby are consummated,
each of the Lenders, on a ratable basis, shall indemnify and defend the
Agent-Related Persons (to the extent not reimbursed by or on behalf of Borrower
or any other Loan Party and without limiting the obligation of Borrower or any
other Loan Party to do so) from and against any and all Indemnified Liabilities;
provided, that no Lender shall be liable for the payment to any Agent-Related
Person of any portion of such Indemnified Liabilities resulting solely from such
Agent-Related Person’s gross negligence or willful misconduct nor shall any
Lender be liable for the obligations of any Defaulting Lender in failing to make
a Loan or other extension of credit hereunder. Without limitation of the
foregoing, each Lender shall reimburse Agent upon demand for such Lender’s
ratable share of any costs or out of pocket expenses (including attorneys,
accountants, advisors, and consultants fees and expenses) incurred by Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment, or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement or any other Loan Document to the extent
that Agent is not reimbursed for such expenses by or on behalf of Borrower or
any other Loan Party. The undertaking in this Section shall survive the payment
of all Obligations hereunder and the resignation or replacement of Agent.

 

15.8            Agent in Individual Capacity. Cantor Fitzgerald Securities and
its Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, provide bank products to, acquire Equity Interests in, and
generally engage in any kind of banking, trust, financial advisory,
underwriting, or other business with Borrower and its Subsidiaries and
Affiliates and any other Person party to any Loan Document as though Cantor
Fitzgerald Securities were not Agent hereunder, and, in each case, without
notice to or consent of the other members of the Lender Group. The other members
of the Lender

 

58

Group acknowledge that, pursuant to such activities, Cantor Fitzgerald
Securities or its Affiliates may receive information regarding Borrower or its
Affiliates or any other Person party to any Loan Documents that is subject to
confidentiality obligations in favor of Borrower or such other Person and that
prohibit the disclosure of such information to the Lenders, and the Lenders
acknowledge that, in such circumstances (and in the absence of a waiver of such
confidentiality obligations, which waiver Agent will use its reasonable best
efforts to obtain), Agent shall not be under any obligation to provide such
information to them. The terms “Lender” and “Lenders” include Cantor Fitzgerald
Securities in its individual capacity, to the extent Cantor Fitzgerald
Securities is party hereto as a Lender at the relevant time of determination.

 

15.9            Successor Agent. Agent may resign as Agent upon 30 days prior
written notice to the Lenders (unless such notice is waived by the Required
Lenders) and Borrower (unless such notice is waived by Borrower). If Agent
resigns under this Agreement, the Required Lenders shall be entitled, with (so
long as no Event of Default has occurred and is continuing) the consent of
Borrower (such consent not to be unreasonably withheld, delayed, or
conditioned), appoint a successor Agent for the Lenders. If no successor Agent
is appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders and Borrower, a successor Agent. If
Agent has materially breached or failed to perform any material provision of
this Agreement or of applicable law, the Required Lenders may agree in writing
to remove and replace Agent with a successor Agent from among the Lenders with
(so long as no Event of Default has occurred and is continuing) the consent of
Borrower (such consent not to be unreasonably withheld, delayed, or
conditioned). In any such event, upon the acceptance of its appointment as
successor Agent hereunder, such successor Agent shall succeed to all the rights,
powers, and duties of the retiring Agent and the term “Agent” shall mean such
successor Agent and the retiring Agent’s appointment, powers, and duties as
Agent shall be terminated. After any retiring Agent’s resignation hereunder as
Agent, the provisions of this Section ‎15 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor Agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent’s notice of resignation, the
retiring Agent’s resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of Agent hereunder until such time,
if any, as the Lenders appoint a successor Agent as provided for above.

 

15.10        Lender in Individual Capacity. Any Lender and its respective
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, provide bank products to, acquire Equity Interests in and
generally engage in any kind of banking, trust, financial advisory,
underwriting, or other business with Borrower and its Subsidiaries and
Affiliates and any other Person party to any Loan Documents as though such
Lender were not a Lender hereunder without notice to or consent of the other
members of the Lender Group. The other members of the Lender Group acknowledge
that, pursuant to such activities, such Lender and its respective Affiliates may
receive information regarding Borrower or its Affiliates or any other Person
party to any Loan Documents that is subject to confidentiality obligations in
favor of Borrower or such other Person and that prohibit the disclosure of such
information to the Lenders, and the Lenders acknowledge that, in such
circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain), such Lender shall not be under any obligation to provide such
information to them.

 

15.11        Collateral Matters.

 

(a)                The Lenders hereby irrevocably authorize Agent to release any
Lien on any Collateral (other than the Zohydro Assets and any material
Intellectual Property that constitutes Collateral, except in the case of clause
(i) or if all of the Lenders have expressly consented thereto in writing) (i)
upon the termination of the Commitments and payment and satisfaction in full by
Borrower of all of the Obligations, (ii) constituting property being sold or
disposed of if a release is required or

 

59

desirable in connection therewith and if Borrower certifies to Agent that (x)
the sale or disposition is permitted under Section ‎6.4 and (y) following such
sale or disposition, such property no longer constitutes Collateral and is not
required to be pledged as Collateral pursuant to this Agreement or any of the
Loan Documents (and Agent may rely conclusively on any such certificate, without
further inquiry), (iii) constituting property in which Borrower or its
Subsidiaries owned no interest at the time Agent’s Lien was granted nor at any
time thereafter, (iv) constituting property leased or licensed to Borrower or
its Subsidiaries under a lease or license that has expired or is terminated in a
transaction permitted under this Agreement and such property no longer
constitutes Collateral and is not required to be pledged as Collateral pursuant
to this Agreement or the other Loan Documents, or (v) in connection with a
credit bid or purchase authorized under this Section ‎15.11. The Loan Parties
and the Lenders hereby irrevocably authorize Agent, based upon the instruction
of the Required Lenders, to (a) consent to the sale of, credit bid, or purchase
(either directly or indirectly through one or more entities) all or any portion
of the Collateral at any sale thereof conducted under the provisions of the
Bankruptcy Code, including Section 363 of the Bankruptcy Code, (b) credit bid or
purchase (either directly or indirectly through one or more entities) all or any
portion of the Collateral at any sale or other disposition thereof conducted
under the provisions of the Code, including pursuant to Sections 9-610 or 9-620
of the Code, or (c) credit bid or purchase (either directly or indirectly
through one or more entities) all or any portion of the Collateral at any other
sale or foreclosure conducted or consented to by Agent in accordance with
applicable law in any judicial action or proceeding or by the exercise of any
legal or equitable remedy. In connection with any such credit bid or purchase,
(i) the Obligations owed to the Lenders shall be entitled to be, and shall be,
credit bid on a ratable basis (with Obligations with respect to contingent or
unliquidated claims being estimated for such purpose if the fixing or
liquidation thereof would not impair or unduly delay the ability of Agent to
credit bid or purchase at such sale or other disposition of the Collateral and,
if such contingent or unliquidated claims cannot be estimated without impairing
or unduly delaying the ability of Agent to credit bid at such sale or other
disposition, then such claims shall be disregarded, not credit bid, and not
entitled to any interest in the Collateral that is the subject of such credit
bid or purchase) and the Lenders whose Obligations are credit bid shall be
entitled to receive interests (ratably based upon the proportion of their
Obligations credit bid in relation to the aggregate amount of Obligations so
credit bid) in the Collateral that is the subject of such credit bid or purchase
(or in the Equity Interests of the any entities that are used to consummate such
credit bid or purchase), and (ii) Agent, based upon the instruction of the
Required Lenders, may accept non-cash consideration, including debt and equity
securities issued by any entities used to consummate such credit bid or purchase
and in connection therewith Agent may reduce the Obligations owed to the Lenders
(ratably based upon the proportion of their Obligations credit bid in relation
to the aggregate amount of Obligations so credit bid) based upon the value of
such non-cash consideration. Except as provided above, Agent will not execute
and deliver a release of any Lien on any Collateral without the prior written
authorization of (y) if the release is of all or substantially all of the
Collateral, all of the Lenders, or (z) otherwise, the Required Lenders. Upon
request by Agent or Borrower at any time, the Lenders will confirm in writing
Agent’s authority to release any such Liens on particular types or items of
Collateral expressly permitted to be released pursuant to this Section ‎15.11;
provided, that (1) anything to the contrary contained in any of the Loan
Documents notwithstanding, Agent shall not be required to execute any document
or take any action necessary to evidence such release on terms that, in Agent’s
opinion, could expose Agent to liability or create any obligation or entail any
consequence other than the release of such Lien without recourse,
representation, or warranty, and (2) such release shall not in any manner
discharge, affect, or impair the Obligations or any Liens (other than those
expressly released) upon (or obligations of Borrower or any of its Subsidiaries
in respect of) any and all interests retained by Borrower or any of its
Subsidiaries, including, the proceeds of any sale, all of which shall continue
to constitute part of the Collateral. Each Lender further hereby irrevocably
authorizes Agent, at its option and in its sole discretion, to subordinate any
Lien granted to or held by Agent under any Loan Document to the holder of any
Permitted Collateral Lien on such property if such Permitted Collateral Lien
secures Permitted Purchase Money Indebtedness.

 

60

(b)                Agent shall have no obligation whatsoever to any of the
Lenders (i) to verify or assure that the Collateral exists or is owned by
Borrower or its Subsidiaries or is cared for, protected, or insured or has been
encumbered, (ii) to verify or assure that Agent’s Liens have been properly or
sufficiently or lawfully created, perfected, protected, or enforced or are
entitled to any particular priority, (iii) to verify or assure that any
particular items of Collateral meet the eligibility criteria applicable in
respect thereof, (iv) to impose, maintain, increase, reduce, implement, or
eliminate any particular reserve hereunder or to determine whether the amount of
any reserve is appropriate or not, or (v) to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to any of the Loan Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission, or event
related thereto, subject to the terms and conditions contained herein, Agent may
act in any manner it may deem appropriate, in its sole discretion given Agent’s
own interest in the Collateral in its capacity as one of the Lenders and that
Agent shall have no other duty or liability whatsoever to any Lender as to any
of the foregoing, except as otherwise expressly provided herein.

 

15.12        Restrictions on Actions by Lenders; Sharing of Payments.

 

(a)                Each of the Lenders agrees that it shall not, without the
express written consent of Agent, and that it shall, to the extent it is
lawfully entitled to do so, upon the written request of Agent, set off against
the Obligations, any amounts owing by such Lender to Borrower or its
Subsidiaries or any deposit accounts of Borrower or its Subsidiaries now or
hereafter maintained with such Lender. Each of the Lenders further agrees that
it shall not, unless specifically requested to do so in writing by Agent, take
or cause to be taken any action, including, the commencement of any legal or
equitable proceedings to enforce any Loan Document against Borrower or any
Guarantor or to foreclose any Lien on, or otherwise enforce any security
interest in, any of the Collateral.

 

(b)                If, at any time or times any Lender shall receive (i) by
payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations, except for any such proceeds or
payments received by such Lender from Agent pursuant to the terms of this
Agreement, or (ii) payments from Agent in excess of such Lender’s Pro Rata Share
of all such distributions by Agent, such Lender promptly shall (A) turn the same
over to Agent, in kind, and with such endorsements as may be required to
negotiate the same to Agent, or in immediately available funds, as applicable,
for the account of all of the Lenders and for application to the Obligations in
accordance with the applicable provisions of this Agreement, or (B) purchase,
without recourse or warranty, an undivided interest and participation in the
Obligations owed to the other Lenders so that such excess payment received shall
be applied ratably as among the Lenders in accordance with their Pro Rata
Shares; provided, that to the extent that such excess payment received by the
purchasing party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as applicable, and the
applicable portion of the purchase price paid therefor shall be returned to such
purchasing party, but without interest except to the extent that such purchasing
party is required to pay interest in connection with the recovery of the excess
payment.

 

15.13        Agency for Perfection. Agent hereby appoints each other Lender as
its agent (and each Lender hereby accepts such appointment) for the purpose of
perfecting 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. Should any Lender obtain possession or control of any such Collateral,
such Lender shall notify Agent thereof, and, promptly upon Agent’s request
therefor shall deliver possession or control of such Collateral to Agent or in
accordance with Agent’s instructions.

 

15.14        Payments by Agent to the Lenders. All payments to be made by Agent
to the Lenders shall be made by bank wire transfer of immediately available
funds pursuant to such wire transfer

 

61

instructions as each party may designate for itself by written notice to Agent.
Concurrently with each such payment, Agent shall identify whether such payment
(or any portion thereof) represents principal, premium, fees, or interest of the
Obligations.

 

15.15        Concerning the Collateral and Related Loan Documents. Each member
of the Lender Group authorizes and directs Agent to enter into this Agreement
and the other Loan Documents. Each member of the Lender Group agrees that any
action taken by Agent in accordance with the terms of this Agreement or the
other Loan Documents relating to the Collateral and the exercise by Agent of its
powers set forth therein or herein, together with such other powers that are
reasonably incidental thereto, shall be binding upon all of the Lenders.

 

15.16        Confidentiality; Disclaimers by Lenders; Other Reports and
Information. By becoming a party to this Agreement, each Lender agrees to keep
all material, non-public information regarding Borrower and its Subsidiaries and
their operations, assets, and existing and contemplated business plans in a
confidential manner in accordance with Section ‎17.9. In addition to the
foregoing, (x) any Lender may from time to time request of Agent in writing that
Agent provide to such Lender a copy of any report or document provided by
Borrower or its Subsidiaries to Agent that has not been contemporaneously
provided by Borrower or such Subsidiary to such Lender, and, upon receipt of
such request, Agent promptly shall provide a copy of same to such Lender, (y) to
the extent that Agent is entitled, under any provision of the Loan Documents, to
request additional reports or information from Borrower or its Subsidiaries, any
Lender may, from time to time, reasonably request Agent to exercise such right
as specified in such Lender’s notice to Agent, whereupon Agent promptly shall
request of Borrower the additional reports or information reasonably specified
by such Lender, and, upon receipt thereof from Borrower or such Subsidiary,
Agent promptly shall provide a copy of same to such Lender, and (z) any time
that Agent renders to Borrower a statement regarding the Loan Account, Agent
shall send a copy of such statement to each Lender.

 

15.17        Several Obligations; No Liability. Notwithstanding that certain of
the Loan Documents now or hereafter may have been or will be executed only by or
in favor of Agent in its capacity as such, and not by or in favor of the
Lenders, any and all obligations on the part of Agent (if any) to make any
credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender. Each Lender shall
be solely responsible for notifying its Participants of any matters relating to
the Loan Documents to the extent any such notice may be required, and no Lender
shall have any obligation, duty, or liability to any Participant of any other
Lender. Except as provided in Section ‎15.7, no member of the Lender Group shall
have any liability for the acts of any other member of the Lender Group. No
Lender shall be responsible to Borrower or any other Person for any failure by
any other Lender to fulfill its obligations to make credit available hereunder,
nor to advance for such Lender or on its behalf, nor to take any other action on
behalf of such Lender hereunder or in connection with the financing contemplated
herein.

 

16.               WITHHOLDING TAXES.

 

16.1            Payments. All payments made by Borrower hereunder or under any
note or other Loan Document will be made without setoff, counterclaim, or other
defense. In addition, all such payments will be made free and clear of, and
without deduction or withholding for, any present or future Indemnified Taxes,
and in the event any deduction or withholding of Indemnified Taxes is required,
Borrower shall comply with the next sentence of this Section ‎16.1. If any
Indemnified Taxes are so

 

62

levied or imposed, Borrower agrees to pay the full amount of such Indemnified
Taxes and such additional amounts as may be necessary so that every payment of
all amounts due under this Agreement, any note, or Loan Document, including any
amount paid pursuant to this Section ‎16.1 after withholding or deduction for or
on account of any Indemnified Taxes, will not be less than the amount provided
for herein. Borrower will furnish to Agent as promptly as possible after the
date the payment of any Indemnified Tax is due pursuant to applicable law,
certified copies of tax receipts evidencing such payment by Borrower. Without
any duplication of any other obligation under this Section ‎16.1, Borrower
agrees to pay any present or future stamp, value added or documentary taxes or
any other excise or property taxes, charges, or similar levies that arise from
any payment made hereunder or from the execution, delivery, performance,
recordation, or filing of, or otherwise with respect to this Agreement or any
other Loan Document, except any such Taxes that are Other Connection Taxes
imposed with respect to an assignment (other than an assignment made pursuant to
Section 14.2).

 

16.2            Exemptions.

 

(a)       If a Lender or Participant is entitled to claim an exemption from
applicable withholding tax in any jurisdiction, such Lender or such Participant
agrees with and in favor of Agent, to deliver to Agent (or, in the case of a
Participant, to the Lender granting the participation only) any such form or
forms, as may be required under the laws of such jurisdiction as a condition to
exemption from, or reduction of, foreign withholding or backup withholding tax
before receiving its first payment under this Agreement, but only if such Lender
or such Participant is legally able to deliver such forms, provided, that
nothing in this Section ‎16.2(a) shall require a Lender or Participant to
disclose any information that it deems to be confidential (including, its tax
returns). Each Lender and each Participant shall provide new forms (or successor
forms) upon the expiration or obsolescence of any previously delivered forms and
shall promptly notify Agent (or, in the case of a Participant, notify the Lender
granting the participation only) of any change in circumstances which would
modify or render invalid any claimed exemption or reduction.

 

(b)       If a Lender or Participant claims exemption from, or reduction of,
withholding tax and such Lender or Participant sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
Borrower to such Lender or Participant, such Lender or Participant agrees to
notify Agent (or, in the case of a sale of a participation interest, to notify
the Lender granting the participation only) of the percentage amount in which it
is no longer the beneficial owner of Obligations of Borrower to such Lender or
Participant. To the extent of such percentage amount, Agent will treat such
Lender’s or such Participant’s documentation provided pursuant to Section
‎16.2(a) as no longer valid. With respect to such percentage amount, such
Participant or Assignee will provide new documentation, pursuant to Section
‎16.2(a), if applicable. Borrower agrees that each Participant shall be entitled
to the benefits of this Section ‎16 with respect to its participation in any
portion of the Commitments and the Obligations so long as such Participant
complies with the obligations set forth in this Section ‎16 with respect
thereto.

 

16.3            Reductions.

 

(a)                If a Lender or a Participant is subject to an applicable
withholding tax, Agent (or, in the case of a Participant, the Lender granting
the participation) may withhold from any payment to such Lender or such
Participant an amount equivalent to the applicable withholding tax (subject to
the third sentence of Section 16.1). If the forms or other documentation
required by Section ‎16.2(a) are not delivered to Agent (or, in the case of a
Participant, to the Lender granting the participation), then Agent (or, in the
case of a Participant, to the Lender granting the participation) may withhold
from any payment to such Lender or such Participant not providing such forms or
other documentation an amount equivalent to the applicable withholding tax.

 

(b)                If the IRS or any other Governmental Authority of the United
States or other

 

63

jurisdiction asserts a claim that Agent (or, in the case of a Participant, the
Lender granting the participation) did not properly withhold tax from amounts
paid to or for the account of any Lender or any Participant due to a failure on
the part of the Lender or any Participant (because the appropriate form was not
delivered, was not properly executed, or because such Lender failed to notify
Agent (or such Participant failed to notify the Lender granting the
participation) of a change in circumstances which rendered the exemption from,
or reduction of, withholding tax ineffective, or for any other reason) such
Lender shall indemnify and hold Agent harmless (or, in the case of a
Participant, such Participant shall indemnify and hold the Lender granting the
participation harmless) for all amounts paid, directly or indirectly, by Agent
(or, in the case of a Participant, to the Lender granting the participation), as
tax or otherwise, including penalties and interest, and including any taxes
imposed by any jurisdiction on the amounts payable to Agent (or, in the case of
a Participant, to the Lender granting the participation only) under this Section
‎16, together with all costs and expenses (including attorneys’ fees and
expenses). The obligation of the Lenders and the Participants under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of Agent.

 

16.4            Refunds. If Agent or a Lender determines, in its sole
discretion, that it has received a refund of any Indemnified Taxes to which
Borrower has paid additional amounts pursuant to this Section ‎16, it shall pay
over such refund to Borrower (but only to the extent of payments made, or
additional amounts paid, by Borrower under this Section ‎16 with respect to
Indemnified Taxes giving rise to such a refund), net of all out-of-pocket
expenses of Agent or such Lender and without interest (other than any interest
paid by the applicable Governmental Authority with respect to such a refund);
provided, that Borrower, upon the request of Agent or such Lender, agrees to
repay the amount paid over to Borrower (plus any penalties, interest or other
charges, imposed by the applicable Governmental Authority, other than such
penalties, interest or other charges imposed as a result of the willful
misconduct or gross negligence of Agent hereunder) to Agent or such Lender in
the event Agent or such Lender is required to repay such refund to such
Governmental Authority. Notwithstanding anything in this Agreement to the
contrary, this Section ‎16.4 shall not be construed to require Agent or any
Lender to make available its tax returns (or any other information which it
deems confidential) to Borrower or any other Person.

 

Subject to Section ‎16.2(b), nothing in this Section ‎16 shall be construed as
creating any obligations of Borrower to any Participant or any rights in favor
of any Participant against Borrower.

 

17.               GENERAL PROVISIONS.

 

17.1            Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower, Agent, and each Lender whose signature is
provided for on the signature pages hereof.

 

17.2            Section Headings. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each Section applies equally to this entire Agreement.

 

17.3            Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed against the Lender Group or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.

 

17.4            Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.

 

17.5            [Reserved]. 

 

64

17.6            Debtor-Creditor Relationship. The relationship between the
Lenders and Agent, on the one hand, and the Loan Parties, on the other hand, is
solely that of creditor and debtor. No member of the Lender Group has (or shall
be deemed to have) any fiduciary relationship or duty to any Loan Party arising
out of or in connection with the Loan Documents or the transactions contemplated
thereby, and there is no agency or joint venture relationship between the
members of the Lender Group, on the one hand, and the Loan Parties, on the other
hand, by virtue of any Loan Document or any transaction contemplated therein.

 

17.7            Counterparts; Electronic Execution. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile or other electronic method of transmission shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile or
other electronic method of transmission also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.

 

17.8            Revival and Reinstatement of Obligations; Certain Waivers.
If any member of the Lender Group repays, refunds, restores, or returns in whole
or in part, any payment or property (including any proceeds of Collateral)
previously paid or transferred to such member of the Lender Group in full or
partial satisfaction of any Obligation or on account of any other obligation
of any Loan Party under any Loan Document, because the payment, transfer, or the
incurrence of the obligation so satisfied is asserted or declared to be void,
voidable, or otherwise recoverable under any law relating to creditors’ rights,
including provisions of the Bankruptcy Code relating to fraudulent transfers,
preferences, or other voidable or recoverable obligations or transfers (each, a
“Voidable Transfer”), or because such member of the Lender Group elects to do so
on the reasonable advice of its counsel in connection with a claim that the
payment, transfer, or incurrence is or may be a Voidable Transfer, then, as to
any such Voidable Transfer, or the amount thereof that such member of the Lender
Group elects to repay, restore, or return (including pursuant to a settlement of
any claim in respect thereof), and as to all reasonable costs, expenses, and
attorneys’ fees of such member of the Lender Group related thereto, (i) the
liability of the Loan Parties with respect to the amount or property paid,
refunded, restored, or returned will automatically and immediately be revived,
reinstated, and restored and will exist and (ii) Agent’s Liens securing such
liability shall be effective, revived, and remain in full force and effect, in
each case, as fully as if such Voidable Transfer had never been made.  If, prior
to any of the foregoing, (A) Agent’s Liens shall have been released or
terminated or (B) any provision of this Agreement shall have been terminated
or cancelled, Agent’s Liens, or such provision of this Agreement, shall be
reinstated in full force and effect and such prior release, termination,
cancellation or surrender shall not diminish, release, discharge, impair or
otherwise affect the obligation of any Loan Party in respect of such liability
or any Collateral securing such liability. 

 

17.9            Confidentiality.

 

(a)                Agent and Lenders each individually (and not jointly or
jointly and severally) agree that material, non-public information regarding
Borrower and its Subsidiaries, their operations, assets, and existing and
contemplated business plans (“Confidential Information”) shall be treated by
Agent and the Lenders in a confidential manner, and shall not be disclosed by
Agent and the Lenders to Persons who are not parties to this Agreement, except:
(i) to attorneys for and other advisors, accountants, auditors, and consultants
to any member of the Lender Group and to employees, directors and officers of
any member of the Lender Group (the Persons in this clause (i), “Lender Group

 

65

Representatives”) on a “need to know” basis in connection with this Agreement
and the transactions contemplated hereby and on a confidential basis, (ii) to
Subsidiaries and Affiliates of any member of the Lender Group, provided that any
such Subsidiary or Affiliate shall have agreed to receive such information
hereunder subject to the terms of this Section ‎17.9, (iii) as may be required
by regulatory authorities so long as such authorities are informed of the
confidential nature of such information, (iv) as may be required by statute,
decision, or judicial or administrative order, rule, or regulation; provided
that (x) prior to any disclosure under this clause (iv), the disclosing party
agrees to provide Borrower with prior notice thereof, to the extent that it is
practicable to do so and to the extent that the disclosing party is permitted to
provide such prior notice to Borrower pursuant to the terms of the applicable
statute, decision, or judicial or administrative order, rule, or regulation and
(y) any disclosure under this clause (iv) shall be limited to the portion of the
Confidential Information as may be required by such statute, decision, or
judicial or administrative order, rule, or regulation, (v) as may be agreed to
in advance in writing by Borrower, (vi) as requested or required by any
Governmental Authority pursuant to any subpoena or other legal process,
provided, that, (x) prior to any disclosure under this clause (vi) the
disclosing party agrees to provide Borrower with prior written notice thereof,
to the extent that it is practicable to do so and to the extent that the
disclosing party is permitted to provide such prior written notice to Borrower
pursuant to the terms of the subpoena or other legal process and (y) any
disclosure under this clause (vi) shall be limited to the portion of the
Confidential Information as may be required by such Governmental Authority
pursuant to such subpoena or other legal process, (vii) as to any such
information that is or becomes generally available to the public (other than as
a result of prohibited disclosure by Agent or the Lenders or the Lender Group
Representatives), (viii) in connection with any assignment, participation or
pledge of any Lender’s interest under this Agreement, provided that prior to
receipt of Confidential Information any such assignee, participant, or pledgee
shall have agreed in writing to receive such Confidential Information either
subject to the terms of this Section ‎17.9 or pursuant to confidentiality
requirements substantially similar to those contained in this Section ‎17.9 (and
such Person may disclose such Confidential Information to Persons employed or
engaged by them as described in clause (i) above), (ix) in connection with any
litigation or other adversary proceeding involving parties hereto which such
litigation or adversary proceeding involves claims related to the rights or
duties of such parties under this Agreement or the other Loan Documents;
provided, that, prior to any disclosure to any Person (other than any Loan
Party, Agent, any Lender, any of their respective Affiliates, or their
respective counsel) under this clause (ix) with respect to litigation involving
any Person (other than Borrower, Agent, any Lender, any of their respective
Affiliates, or their respective counsel), the disclosing party agrees to provide
Borrower with prior written notice thereof, and (x) in connection with, and to
the extent reasonably necessary for, the exercise of any secured creditor remedy
under this Agreement or under any other Loan Document.

 

(b)                Anything in this Agreement to the contrary notwithstanding,
Agent may disclose information concerning the terms and conditions of this
Agreement and the other Loan Documents to loan syndication and pricing reporting
services or in its marketing or promotional materials, with such information to
consist of deal terms and other information customarily found in such
publications or marketing or promotional materials and may otherwise use the
name, logos, and other insignia of Borrower or the other Loan Parties and the
Commitments provided hereunder in any “tombstone” or other advertisements, on
its website or in other marketing materials of the Agent.

 

(c)                The Loan Parties hereby acknowledge that Agent or its
Affiliates may make available to the Lenders materials or information provided
by or on behalf of Borrower or any other Loan Party hereunder or under any other
Loan Document (collectively, “Borrower Materials”) by posting the Borrower
Materials on IntraLinks, SyndTrak or another similar electronic system (the
“Platform”) and certain of the Lenders may be “public-side” Lenders (i.e.,
Lenders that do not wish to receive material non-public information with respect
to the Loan Parties or their securities) (each, a “Public Lender”). The Loan
Parties shall be deemed to have authorized Agent and its Affiliates and the

 

66

Lenders to treat any Borrower Materials marked “PUBLIC” or otherwise at any time
filed with the SEC as not containing any material non-public information with
respect to the Loan Parties or their securities for purposes of United States
federal and state securities laws. All Borrower Materials marked “PUBLIC” are
permitted to be made available through a portion of the Platform designated as
“Public Investor” (or another similar term). Agent and its Affiliates and the
Lenders shall be entitled to treat any Borrower Materials that are not marked
“PUBLIC” or that are not at any time filed with the SEC as being suitable only
for posting on a portion of the Platform not marked as “Public Investor” (or
such other similar term).

 

(d)                During the course of any visits, inspections, examinations
and discussions, representatives of the Agent and the Lenders may encounter
individually identifiable healthcare information as defined under HIPAA, or
other confidential information relating to healthcare patients (collectively,
the “Confidential Healthcare Information”). The Loan Party or relevant
Subsidiary thereof maintaining such Confidential Healthcare Information shall,
consistent with HIPAA’s “minimum necessary” provisions, permit such disclosure
for their “healthcare operations” purposes.

 

17.10        Survival. All representations and warranties made by the Loan
Parties in the Loan Documents and in the certificates or other instruments
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be considered to have been relied upon by the other parties
hereto and shall survive the execution and delivery of the Loan Documents and
the making of any Loans, regardless of any investigation made by any such other
party or on its behalf and notwithstanding that Agent or any Lender may have had
notice or knowledge of any Default or Event of Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of, or any
accrued interest on, any Loan or any fee or any other amount payable under this
Agreement is outstanding or unpaid and so long as the Commitments have not
expired or been terminated.

 

17.11        Patriot Act. Each Lender that is subject to the requirements of the
Patriot Act hereby notifies Borrower and the other Loan Parties that pursuant to
the requirements of the Act, it is required to obtain, verify and record
information that identifies each Loan Party, which information includes the name
and address of such Loan Party and other information that will allow such Lender
to identify such Loan Party in accordance with the Patriot Act. In addition, if
Agent is required by law or regulation or internal policies to do so, it shall
have the right to periodically conduct (a) Patriot Act searches, OFAC/PEP
searches, and customary individual background checks for the Loan Parties and
(b) OFAC/PEP searches and customary individual background checks for the Loan
Parties’ senior management and key principals, and Borrower agrees to cooperate
in respect of the conduct of such searches and further agrees that the
reasonable costs and charges for such searches shall constitute Lender Group
Expenses hereunder and be for the account of Borrower.

 

17.12        Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.

 

[Signature pages to follow.]

 

67

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered as of the date first above written.

 

 

 

Borrower: PERNIX THERAPEUTICS HOLDINGS, INC.             By:   /s/ John Sedor  
Name:  John Sedor   Title: Chief Executive Officer

 

 

[Signature Page to Senior Secured Superpriority Debtor-In-Possession Credit
Agreement]

 

 

 

Cantor Fitzgerald Securities, as Agent 

            By:   /s/ James Buccola   Name:  James Buccola   Title: Head of
Fixed Income

 

 

 

[Signature Page to Senior Secured Superpriority Debtor-In-Possession Credit
Agreement]

LENDERS:   1992 MSF INTERNATIONAL LTD.                   BY: HIGHBRIDGE CAPITAL
MANAGEMENT, LLC,
as Trading Manager               By: /s/ Jason Hempel         Name: Jason Hempel
        Title: Managing Director                 By: /s/ Jonathan Segal        
Name: Jonathan Segal         Title: Managing Director

 

    1992 TACTICAL CREDIT MASTER FUND, L.P.             BY: HIGHBRIDGE CAPITAL
MANAGEMENT, LLC,
as Trading Manager               By: /s/ Jason Hempel         Name: Jason Hempel
        Title: Managing Director                 By: /s/ Jonathan Segal         
Name: Jonathan Segal         Title: Managing Director

 

 

 

 

[Signature Page to Senior Secured Superpriority Debtor-In-Possession Credit
Agreement]

Schedule A-1

 

Agent’s Account

 

Bank: The Bank of New York Mellon ABA Number: 021-000-018 Account Number:
8900730501 Account Name: Cantor Fitzgerald Securities – Bank Loan Agency
Currency: USD Legal Entity: Cantor Fitzgerald Securities ATTN: Louis Pagnotta
Reference: Agency – Pernix DIP

 

 

 

 

 

 

Schedule A-1

Schedule A-2

 

Approved Budget

 

[See attached]

 

 

Schedule A-2 

 

 

Pernix Therapeutics
Cash Flow Forecast (USD)

 

$ in 000s                                           Week Ended  Post
Forecast 2/22/2019  Post
Forecast 3/1/2019  Post
Forecast 3/8/2019  Post
Forecast 3/15/2019  Post
Forecast 3/22/2019  Post
Forecast 3/29/2019  Post
Forecast 4/5/2019  Post
Forecast 4/12/2019  Post
Forecast 4/19/2019  Post
Forecast 4/26/2019  Post
Forecast 5/3/2019  Post
Forecast 5/10/2019  Post
Forecast 5/17/2019  2/22 - 5/17
Total Operating Cash Flow                                                   
                   Receipts                                                   
                   Operating Receipts  $3,276   $2,115   $3,548   $3,360  
$4,065   $5,712   $4,216   $3,648   $3,352   $2,265   $2,231   $2,352   $1,962  
$42,101  Miscellaneous Receipts   —      —      —      —      —      —    
 —      —      —      —      —      —      —      —    Total Receipts  $3,276  
$2,115   $3,548   $3,360   $4,065   $5,712   $4,216   $3,648   $3,352   $2,265  
$2,231   $2,352   $1,962   $42,101  Disbursements                               
                                       Payroll & Benefits  $(297)  $(283) 
$(30)  $(271)  $(270)  $(652)  $(30)  $(271)  $(100)  $—     $(283)  $(30) 
$(271)  $(2,790) Gross to Net Disbursements   (1,482)   (2,408)   (1,020) 
 (2,429)   (473)   (4,689)   (857)   (132)   (2,004)   (127)   (1,328)   (835) 
 (1,821)   (19,604) Inventory   (1,368)   (1,007)   (70)   (270)   (70)   (70) 
 (354)   (354)   (554)   (354)   (354)   (177)   (377)   (5,382) Royalties 
 —      —      —      —      —      —      —      —      —      —      —    
 —      (416)   (416) Insurance   —      (155)   —      —      —      —    
 (77)   —      —      —      (77)   —      —      (309) Nalpropion   —    
 —      (1,459)   (1,643)   (768)   (328)   (2,210)   (370)   (532)   (479) 
 —      316    —      (7,474) Other G&A   (402)   (375)   (338)   (338)   (338) 
 (338)   (319)   (258)   (258)   (258)   (319)   (233)   (233)   (4,007)
Operating Disbursements  $(3,548)  $(4,228)  $(2,918)  $(4,952)  $(1,921) 
$(6,078)  $(3,847)  $(1,385)  $(3,447)  $(1,218)  $(2,362)  $(960)  $(3,118) 
$(39,982) Operating Cash Flow  $(272)  $(2,112)  $630   $(1,592)  $2,144  
$(366)  $369   $2,262   $(95)  $1,047   $(131)  $1,392   $(1,156)  $2,119  Debt
Service                                                                      
ABL   (328)   —      —      —      —      —      —      —      —      —    
 —      —      —      (328) Total Debt Service  $(328)  $—     $—     $—    
$—     $—     $—     $—     $—     $—     $—     $—     $—     $(328)
Restructuring Costs                                                             
         DIP Loan Interest and Fees   —      (19)   —      —      —      —    
 (161)   —      —      —      (132)   —      —      (312) Professional Fees 
 (1,200)   —      (100)   —      —      —      (974)   —      —      (500) 
 (2,150)   —      —      (4,924) Total Restructuring Costs  $(1,200)  $(19) 
$(100)  $—     $—     $—     $(1,135)  $—     $—     $(500)  $(2,282)  $—    
$—     $(5,236) Total Disbursements  $(5,076)  $(4,247)  $(3,018)  $(4,952) 
$(1,921)  $(6,078)  $(4,982)  $(1,385)  $(3,447)  $(1,718)  $(4,643)  $(960) 
$(3,118)  $(45,546) Net Cash Flow  $(1,800)  $(2,131)  $530   $(1,592)  $2,144  
$(366)  $(767)  $2,262   $(95)  $547   $(2,413)  $1,392   $(1,156)  $(3,445)
Beginning Cash Balance  $6,235   $6,200   $6,200   $8,730   $6,200   $8,344  
$7,978   $7,211   $9,474   $9,378   $9,925   $7,513   $8,905   $6,235  Net Cash
Flow   (1,800)   (2,131)   530    (1,592)   2,144    (366)   (767)   2,262  
 (95)   547    (2,413)   1,392    (1,156)   (3,445) DIP Draw   1,765    2,131  
 —      1,062    —      —      —      —      —      —      —      —      —    
 4,958  Ending Cash Balance (maintain $6.2m min)  $6,200   $6,200   $6,730  
$6,200   $8,344   $7,978   $7,211   $9,474   $9,378   $9,925   $7,513   $8,905  
$7,748   $7,748  ABL Availability  $—     $—     $—     $—     $—     $—    
$—     $—     $—     $—     $—     $—     $—     $—    Total Liquidity Before
DIP Loan  $6,200   $6,200   $6,730   $6,200   $8,344   $7,978   $7,211  
$9,474   $9,378   $9,925   $7,513   $8,905   $7,748   $7,748  DIP Loan Balance 
                                                                     Opening DIP
Balance  $14,189   $15,954   $18,085   $18,085   $19,147   $19,147   $19,147  
$19,147   $19,147   $19,147   $19,147   $19,147   $19,147   $14,189  DIP Draw 
 1,765    2,131    —      1,062    —      —      —      —      —      —    
 —      —      —      4,958  Ending DIP Loan Balance  $15,954   $18,085  
$18,085   $19,147   $19,147   $19,147   $19,147   $19,147   $19,147   $19,147  
$19,147   $19,147   $19,147   $19,147  Accrued but unpaid Professional Fees 
$(515)  $(1,074)  $(1,779)  $(2,378)  $(2,978)  $(3,577)  $(3,632)  $(4,207) 
$(4,781)  $(5,356)  $(3,985)  $(4,560)  $(5,134)  $(5,134) DIP Loan
Availability  $12,720   $10,030   $9,325   $7,664   $7,065   $6,465   $6,410  
$5,836   $5,261   $4,687   $6,057   $5,483   $4,908   $4,908  Total Liquidity 
$18,920   $16,230   $16,055   $13,864   $15,409   $14,443   $13,621   $15,309  
$14,639   $14,612   $13,570   $14,388   $12,657   $12,657 

 

Schedule A-2 

 

Schedule A-3

 

Authorized Persons

 

Pernix Therapeutics Holdings, Inc.

 

1.John Sedor (Chief Executive Officer).

 

2.Kenneth Piña (Senior Vice President, Chief Legal & Compliance Officer and
Corporate Secretary) (Authorized Signatory).

 

3.Glenn Whaley, Vice President of Finance and Principal Financial and Accounting
Officer (Authorized Signatory).

 

U.S. Subsidiaries

 

1.John Sedor (Chief Executive Officer).

 

2.Glenn Whaley (Vice President of Finance, Principal Financial and Accounting
Officer & Treasurer (Authorized Signatory).

 

3.Kenneth Piña (Senior Vice President, Chief Legal and Compliance Officer and
Corporate Secretary) (Authorized Signatory).

 

Schedule A-3

Schedule C-1

 

Commitments

 

(A) Closing Date ABL Refinancing Commitment Lender Commitment
Amount Applicable
Percentage 1992 MSF International Ltd. $11,220,468.02 77.24853% 1992 Tactical
Credit Master Fund, L.P. $3,304,685.77 22.75147% Total: $14,525,153.79 100%    
  (B) Closing Date General Purpose Commitment Lender Commitment Amount
Applicable Percentage 1992 MSF International Ltd. $1,000,000 25% 1992 Tactical
Credit Master Fund, L.P. $3,000,000 75% Total: $4,000,000 100%       (C) Delayed
Draw Commitment Lender Commitment Amount Applicable Percentage 1992 MSF
International Ltd. $5,900,000 53.63636% 1992 Tactical Credit Master Fund, L.P.
$5,100,000 46.36364% Total: $11,000,000 100%

Schedule C-1

Schedule D-1

 

Designated Accounts

 

Account Name Financial Institution(s) where Accounts Maintained Account Numbers
Routing Number Descriptions of Accounts
/ Currency Pernix Therapeutics,
LLC Wells Fargo, N.A.
PO Box 63020
San Francisco, CA 94163 4540802824 121000248 Operating Account

Schedule D-1

Schedule G-1

 

Generics Assets

 

A. Pernix Products

 

[image_010.jpg]

 

B. Cypress Pharmaceutical, Inc. Products

 

[image_011.jpg]

 

Schedule G-1

Schedule P-1

 

Permitted Investments

 

Pernix Therapeutics Holdings, Inc. – 10% interest in Nalpropion Pharmaceuticals,
Inc.

 

Schedule P-1

Schedule P-2

 

Permitted Liens

 

1.Standard copier leases.

 

2.Lease for 110 Dell tablets and styluses.

 

3.Lien in favor of Nalpropion Pharmaceuticals, Inc. on all Pernix Therapeutics,
LLC accounts arising from (i) the sale or distribution of the products, any of
the services performed under the Transitional Distribution Services Agreement,
dated as of January 6, 2019, between Pernix Therapeutics, LLC and Nalpropion
Pharmaceuticals, Inc.; (ii) all cash and cash equivalents arising from the sale
or distribution of Pernix Therapeutics, LLC’s products, (iii) specific deposit
accounts and all other deposit accounts into which any cash or cash equivalent
referred to in clause (ii) is deposited; (iv) all inventory of the product; (v)
all required permits; and (vi) all accessions and all proceeds of any and all of
the foregoing in favor of Nalpropion Pharmaceuticals, Inc.

 

4.The following liens in favor of Cantor Fitzgerald Securities, as the
Prepetition Revolving Agent (as defined in the Credit Agreement), securing the
Prepetition Revolving Obligations (as defined in the Credit Agreement):

 

a.Lien on all assets of GAINE, INC. by Cantor Fitzgerald Securities, as the
Prepetition Revolving Agent.

 

b.Lien on all assets of Cypress Pharmaceuticals, Inc. by Cantor Fitzgerald
Securities, as the Prepetition Revolving Agent.

 

c.Lien on all assets of Hawthorn Pharmaceuticals, Inc. by Cantor Fitzgerald
Securities, as the Prepetition Revolving Agent.

 

d.Lien on all assets of Macoven Pharmaceuticals, L.L.C. by Cantor Fitzgerald
Securities, as the Prepetition Revolving Agent.

 

e.Lien on all assets of PERNIX SLEEP, INC. by Cantor Fitzgerald Securities, as
the Prepetition Revolving Agent.

 

f.Lien on all assets of Pernix Therapeutics Holdings, Inc. by Cantor Fitzgerald
Securities, as the Prepetition Revolving Agent.

 

g.Lien on all assets of Pernix Therapeutics, LLC by Cantor Fitzgerald
Securities, as the Prepetition Revolving Agent.

 

h.Lien on all assets of Respicopea Inc. by Cantor Fitzgerald Securities, as the
Prepetition Revolving Agent.

 

5.The following lien in favor of Cantor Fitzgerald Securities, as the
Prepetition Term Agent (as defined in the Credit Agreement), securing the
Prepetition Term Obligations (as defined in the Credit Agreement):

 

a.Lien on all assets of Pernix Ireland Pain Designated Activity Company by
Cantor Fitzgerald Securities, as the Prepetition Term Agent.

 

6.Lien on Pernix Therapeutics Holdings, Inc.’s right, title and interest to (i)
Promissory Note, dated as of August 19, 2014, by and between Pernix Therapeutics
Holdings, Inc. and Pernix Ireland Limited and (ii) 100 ordinary shares of €1.00
and all other shares in the capital of Pernix Ireland Limited in favor of U.S.
Bank National Association.

 

7.Lien on all assets of Pernix Ireland Limited in favor of U.S. Bank National
Association.

 

Schedule P-2

Schedule 1.1

 

Definitions

 

As used in the Agreement, the following terms shall have the following
definitions:

 

“363 Assets” means, collectively, the Zohydro Assets, the Silenor Assets, the
Generics Assets, the Treximet Assets, the Nalpropion Assets, the Borrower Cash
Assets and the Services Agreement.

 

"Acceptable Alternative Sale Agreement" means an Overbid Sale Agreement or
Replacement Sale Agreement, as the case may be, that satisfies each of the
requirements listed below and shall otherwise, in form and substance, be
acceptable to Lenders in their reasonable discretion:

 

(a)       The agreement shall be on terms that are not more conditional and that
are no less favorable to the Debtors than the terms of the Stalking Horse Sale
Agreement.

 

(b)       Without limiting the generality of clause (a) above, the agreement
shall not be subject to any diligence or financing conditions and the proposed
purchaser(s) shall have obtained all requisite corporate/organizational
approvals, and has obtained, or is reasonably likely to obtain all necessary
governmental and third-party consents, within a time frame such that the
contemplated sale is capable of being consummated in accordance with the
Milestones prior to the Maturity Date.

 

(c)       The proposed purchaser(s) is/are capable of consummating the sale in
accordance with the Milestones prior to the Maturity Date, after taking into
account all relevant legal, regulatory, and business considerations.

 

(d)       The proposed purchaser(s) shall have provided such financial and other
information demonstrating the proposed purchaser's or purchasers' financial
wherewithal and business capabilities to fulfill all obligations in connection
with the transactions contemplated by the agreement, including, without
limitation, any equity or debt financing commitment letters.

 

(e)       The agreement, and in the event there is more than one Replacement
Sale Agreement and/or Overbid Sale Agreement, such Replacement and/or Overbid
Sale Agreements, collectively, shall provide for (i) Net Cash Proceeds in an
aggregate amount sufficient for the payment in full in cash of the Obligations
after giving effect to the closing(s) of the sale(s) contemplated thereby in
accordance with the terms of such agreement(s) and (ii) except as expressly
permitted by the Agreement, payment in full in cash of the Obligations and
termination of the Commitments on the closing date of the sale(s).

 

“Acceptable Entity” means any Person that is (a) a corporation or limited
liability company organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia, or (b) a corporation or
an entity treated as a corporation for U.S. federal income tax purposes
organized and existing under the laws of Bermuda, the Netherlands, Belgium,
Switzerland, Luxembourg, the Republic of Ireland, Canada, the United Kingdom,
Sweden, Denmark or any other jurisdiction acceptable to the Required lenders.

 

“Acceptable Reorganization Plan” means a Reorganization Plan in the Cases that
(a) provides for the payment in full in cash of the Obligations under the Loan
Documents (other than contingent indemnification obligations not yet due and
payable) on the effective date of such Reorganization Plan or such other
treatment of the Obligations as the holders of such Obligations shall consent to
under the terms of such Reorganization Plan (which may be the credit bidding
pursuant to the

 

Schedule 1.1

Page - 1- 

Stalking Horse Sale Agreement), (b) contains release and indemnification
provisions relating to the Agent and the Lenders that are reasonably acceptable
to the Agent and (c) does not contain any provisions that are materially
inconsistent with the payment, release and indemnification provisions described
in the foregoing clauses (a) and (b).

 

“Account” means an account (as that term is defined in the Code), including all
health-care insurance receivables (as that term is defined in the Code).

 

“Account Debtor” means “account debtor”, as defined in Article 9 of the Code and
any other Person who is obligated on an Account, chattel paper, or a general
intangible.

 

“Accounting Changes” means changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions).

 

“Additional Documents” has the meaning specified therefor in Section ‎5.12 of
the Agreement.

 

“Administrative Questionnaire” has the meaning specified therefor in Section
‎13.1(a) of the Agreement.

 

“Affected Lender” has the meaning specified therefor in Section ‎2.13(b) of the
Agreement.

 

“Affiliate” means, as applied to any Person, any other Person who directly or
indirectly controls, is controlled by, or is under direct or indirect common
control with, such Person. For purposes of this definition, “control” means the
possession, directly or indirectly through one or more intermediaries, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of Equity Interests, by contract, or
otherwise, and the terms “controlling” and “controlled” have meanings
correlative to the foregoing; provided, that, for purposes of Section ‎6.10 of
the Agreement: (a) any Person which owns directly or indirectly 10% or more of
the Equity Interests having ordinary voting power for the election of directors
or other members of the governing body of a Person or 10% or more of the
partnership or other ownership interests of a Person (other than as a limited
partner of such Person) shall be deemed an Affiliate of such Person, (b) each
director (or comparable manager) of a Person shall be deemed to be an Affiliate
of such Person, and (c) each partnership in which a Person is a general partner
shall be deemed an Affiliate of such Person.

 

“Agent” has the meaning specified therefor in the preamble to the Agreement.

 

“Agent-Related Persons” means Agent, together with its Affiliates and the
officers, directors, employees, attorneys, partners, trustees, administers,
managers, advisors, representative, Sub-Agents and agents of Agent, its
Affiliates and any Sub-Agent.

 

“Agent’s Account” means the Deposit Account of Agent identified on Schedule A-1
to the Agreement (or such other Deposit Account of Agent that has been
designated as such, in writing, by Agent to Borrower and the Lenders).

 

“Agent’s Liens” means the Liens granted by Borrower or its Subsidiaries to Agent
under the Loan Documents and securing the Obligations.

 

“Agreement” means the Senior Secured Superpriority Debtor-In-Possession Credit

 

Schedule 1.1

Page - 2- 

Agreement to which this Schedule 1.1 is attached.

 

“Anti-Terrorism Laws” means any laws of the United States relating to terrorism
or money laundering, including Executive Order No. 13224 (effective September
24, 2001), the PATRIOT Act, the laws comprising or implementing the Bank Secrecy
Act, and the laws administered by OFAC.

 

“Application Event” means the occurrence of (a) a failure by Borrower to repay
all of the Obligations in full on the Maturity Date, or (b) an Event of Default
and the election by Agent or the Required Lenders to accelerate all or any part
of the Obligations pursuant to Section ‎9.1 of the Agreement, or to require that
payments and proceeds of Collateral be applied pursuant to Section 2.4(b)(iii)
of the Agreement.

 

“Approved Budget” has the meaning specified therefor in the applicable DIP
Order; provided that the form thereof shall be reasonably satisfactory to the
Agent and Required Lenders and any modifications to the Approved Budget shall be
subject to the consent of the Required Lenders in their sole discretion.

 

“Asset Sale” means any sale, lease, conveyance, license, abandonment, transfer,
assignment or other disposition of any property or assets (whether in one
transaction or a series of related transactions) by Borrower or any of its
Subsidiaries.

 

“Assignee” has the meaning specified therefor in Section ‎13.1(a) of the
Agreement.

 

“Assignment and Acceptance” means an Assignment and Acceptance Agreement
substantially in the form of Exhibit A-1 to the Agreement.

 

“Auction” shall have the meaning set forth in the Sale Procedures.

 

“Authorized Person” means any one of the individuals identified on Schedule A-3
to the Agreement, as such schedule is updated from time to time by written
notice from Borrower to Agent.

 

“Availability Period” means the period from but excluding the Closing Date to
but excluding the Maturity Date.

 

“Bank Product” means any one or more of the following financial products or
accommodations extended to Borrower or its Subsidiaries: (a) credit cards
(including commercial cards (including so-called “purchase cards”, “procurement
cards” or “p-cards”)), (b) credit card processing services, (c) debit cards, (d)
stored value cards, (e) Cash Management Services, or (f) transactions under
Hedge Agreements.

 

“Bank Product Agreements” means those agreements entered into from time to time
by Borrower or its Subsidiaries in connection with the obtaining of any of the
Bank Products.

 

“Bankruptcy Code” means Title 11 of the United States Code, Sections 101 et
seq., as in effect or as may be amended from time to time.

 

“Bankruptcy Court” means the United States Bankruptcy Court for the District of
Delaware or any other court having jurisdiction over any of the Cases from time
to time.

 

“Base Rate” means, on any day, an annual rate of interest equal to the greatest
of (a) the Federal Funds Rate plus ½%, (b) the LIBOR Rate (which rate shall be
calculated based upon an Interest Period of 1 month and shall be determined on a
daily basis), plus 1 percentage point, and (c) the rate last

 

Schedule 1.1

Page - 3- 

quoted by The Wall Street Journal as the “Prime Rate” in the United States or,
if The Wall Street Journal ceases to quote such rate, the highest per annum
interest rate published by the Federal Reserve Board in Federal Reserve
Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime
loan” rate or, if such rate is no longer quoted therein, any similar rate quoted
therein (as determined by the Agent) or any similar release by the Federal
Reserve Board (as determined by the Agent).

 

“Base Rate Loan” means each portion of the Loans that bears interest at a rate
determined by reference to the Base Rate.

 

“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of
ERISA) subject to Title IV of ERISA for which any Loan Party, any of their
respective Subsidiaries or any of their respective ERISA Affiliates has been an
“employer” (as defined in Section 3(5) of ERISA) within the past six years.

 

“Board of Directors” means, as to any Person, the board of directors (or
comparable managers) of such Person, or any committee thereof duly authorized to
act on behalf of the board of directors (or comparable managers).

 

“Board of Governors” means the Board of Governors of the Federal Reserve System
of the United States (or any successor).

 

“Borrower” has the meaning specified therefor in the preamble to the Agreement.

 

“Borrower Cash Assets” means all cash and Cash Equivalents owned by Borrower.

 

“Borrower Materials” has the meaning specified therefor in Section ‎17.9(c) of
the Agreement.

 

“Borrowing” means a borrowing consisting of Loans made on the same day by the
Lenders (or Agent on behalf thereof).

 

“Business Day” means any day that is not a Saturday, Sunday, or other day on
which banks are authorized or required to close in the state of New York.

 

“Capitalized Lease Obligation” means that portion of the obligations under a
Capital Lease that is required to be capitalized in accordance with GAAP.

 

“Capital Lease” means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.

 

“Carve Out” has the meaning specified therefor in the applicable DIP Order.

 

“Cases” means the bankruptcy cases commenced by the Borrower and its
Subsidiaries under chapter 11 of the Bankruptcy Code in the Bankruptcy Court.

 

“Cash Equivalents” means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one (1) year from the date of acquisition thereof, (b)
marketable direct obligations issued or fully guaranteed by any state of the
United States or any political subdivision of any such state or any public
instrumentality thereof maturing within one (1) year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor’s Rating Group (“S&P”) or
Moody’s Investors Service, Inc. (“Moody’s”),

 

Schedule 1.1

Page - 4- 

(c) commercial paper maturing no more than 270 days from the date of creation
thereof and, at the time of acquisition, having a rating of at least A-1 from
S&P or at least P-1 from Moody’s, (d) certificates of deposit, time deposits,
overnight bank deposits or bankers’ acceptances maturing within one (1) year
from the date of acquisition thereof issued by any bank organized under the laws
of the United States or any state thereof or the District of Columbia or any
United States branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $1,000,000,000, (e) Deposit
Accounts maintained with (i) any bank that satisfies the criteria described in
clause (d) above, or (ii) any other bank organized under the laws of the United
States or any state thereof so long as the full amount maintained with any such
other bank is insured by the Federal Deposit Insurance Corporation, (f)
repurchase obligations of any commercial bank satisfying the requirements of
clause (d) of this definition or recognized securities dealer having combined
capital and surplus of not less than $1,000,000,000, having a term of not more
than seven days, with respect to securities satisfying the criteria in clauses
(a) or (d) above, (g) debt securities with maturities of six months or less from
the date of acquisition backed by standby letters of credit issued by any
commercial bank satisfying the criteria described in clause (d) above, and (h)
Investments in money market funds substantially all of whose assets are invested
in the types of assets described in clauses (a) through (g) above.

 

“Cash Management Services” means any cash management or related services
including treasury, depository, return items, overdraft, controlled
disbursement, merchant store value cards, e-payables services, electronic funds
transfer, interstate depository network, automatic clearing house transfer
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve Fedline system) and other cash management
arrangements.

 

“Change in Control” means that:

 

(a) any Person or two or more Persons, in each case, other than the Permitted
Holders, acting in concert, shall have acquired beneficial ownership, directly
or indirectly, of Equity Interests of Borrower (or other securities convertible
into such Equity Interests) representing 49% or more of the combined voting
power of all Equity Interests of Borrower entitled (without regard to the
occurrence of any contingency) to vote for the election of members of the Board
of Directors of Borrower;

 

(b) any Person or two or more Persons, in each case, other than the Permitted
Holders, acting in concert, shall have acquired by contract or otherwise, or
shall have entered into a contract or arrangement that, upon consummation
thereof, will result in its or their acquisition of the power to exercise,
directly or indirectly, a controlling influence over the management or policies
of Borrower or control over the Equity Interests of such Person entitled to vote
for members of the Board of Directors of Borrower on a fully-diluted basis (and
taking into account all such Equity Interests that such Person or group has the
right to acquire pursuant to any option right) representing 49% or more of the
combined voting power of such Equity Interests;

 

(c) during any period of 24 consecutive months commencing on or after the
Closing Date, the occurrence of a change in the composition of the Board of
Directors of Borrower such that a majority of the members of such Board of
Directors are not Continuing Directors; or

 

(d) Borrower fails to own and control, directly or indirectly, 100% of the
Equity Interests of each other Loan Party or Pernix Ireland Pain.

 

“Change in Law” means the occurrence after the date of the Agreement of: (a) the
adoption or effectiveness of any law, rule, regulation, judicial ruling,
judgment, directive or treaty, (b) any change in any law, rule, regulation,
judicial ruling, judgment, directive or treaty or in the administration,
interpretation, implementation or application by any Governmental Authority of
any law, rule, regulation,

 

Schedule 1.1

Page - 5- 

guideline, directive or treaty, or (c) the making or issuance by any
Governmental Authority of any request, rule, guideline or directive, whether or
not having the force of law; provided that notwithstanding anything in the
Agreement to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer
Protection Act and all requests, rules, guidelines, requirements or directives
thereunder or issued in connection therewith or in implementation thereof and
(ii) all requests, rules, guidelines, requirements or directives concerning
capital adequacy promulgated by the Bank for International Settlements, the
Basel Committee on Banking Supervision (or any successor or similar authority)
or the United States or foreign regulatory authorities shall, in each case, be
deemed to be a “Change in Law,” regardless of the date enacted, adopted,
implemented or issued.

 

“Claim” has the meaning specified therefor in Section ‎11 of the Agreement.

 

“Closing Date” means the first Business Day on which the conditions referred to
in Section 3.1 of the Agreement shall have been satisfied or waived and the
Closing Date Loans shall have been made to the Borrower.

 

“Closing Date ABL Refinancing Commitment” means, with respect to each Lender,
the commitment of such Lender to make Closing Date ABL Refinancing Loans
hereunder on the Closing Date, in each case as such Dollar amounts are set forth
beside such Lender’s name under the applicable heading on Part A of Schedule C-1
to the Agreement or in the Assignment and Acceptance pursuant to which such
Lender became a Lender under the Agreement, as such amounts may be reduced or
increased from time to time pursuant to assignments made in accordance with the
provisions of Section ‎13.1 of the Agreement. As of the Closing Date,
immediately prior to the funding of any Loans, the aggregate principal amount of
the Closing Date ABL Refinancing Commitments is $14,525,153.79.

 

“Closing Date ABL Refinancing Loan” has the meaning specified therefor in
Section 2.1(a) of this Agreement.

 

“Closing Date Commitments” shall mean the Closing Date General Purpose
Commitments and the Closing Date ABL Refinancing Commitments.

 

“Closing Date General Purpose Commitment” means, with respect to each Lender,
the commitment of such Lender to make Closing Date General Purpose Loans
hereunder on the Closing Date, in each case as such Dollar amounts are set forth
beside such Lender’s name under the applicable heading on Part B of Schedule C-1
to the Agreement or in the Assignment and Acceptance pursuant to which such
Lender became a Lender under the Agreement, as such amounts may be reduced or
increased from time to time pursuant to assignments made in accordance with the
provisions of Section ‎13.1 of the Agreement. As of the Closing Date,
immediately prior to the funding of any Loans, the aggregate principal amount of
the Closing Date General Purpose Commitments is $4,000,000.

 

“Closing Date General Purpose Loan” has the meaning specified therefor in
Section 2.1(a) of this Agreement.

 

“Closing Date Loans” has the meaning specified therefor in Section 2.1(a) of the
Agreement.

 

“CMS” means The Centers for Medicare and Medicaid Services of the United States
Department of Health and Human Services, and any Governmental Authority
successor thereto.

 

“Code” means the New York Uniform Commercial Code, as in effect from time to
time; provided, however, that in the event that, by reason of mandatory
provisions of law, any or all of the perfection or priority of, or remedies with
respect to, any Liens on any Collateral is governed by the

 

Schedule 1.1

Page - 6- 

Uniform Commercial Code (or similar code or statute) as enacted and in effect in
a jurisdiction other than the State of New York, the term “Code” shall mean the
Uniform Commercial Code (or similar code or statute) as enacted and in effect in
such other jurisdiction solely for purposes of the provisions hereof relating to
such perfection, priority or remedies.

 

“Collateral” means all “DIP Collateral” (as defined in the Interim DIP Order or,
after entry thereof, the Final DIP Order) and all other assets and interests in
assets and proceeds thereof now owned or hereafter acquired by Borrower or its
Subsidiaries in or upon which a Lien is granted by such Person in favor of Agent
or the Lenders under any of the Loan Documents and the DIP Orders; provided that
the Collateral shall not include the Prepetition Treximet Notes Collateral (as
defined in the applicable DIP Order) or any other Excluded Property.

 

“Commitment” means, with respect to each Lender, the Closing Date Commitments
and the Delayed Draw Commitment of such Lender.

 

“Confidential Information” has the meaning specified therefor in Section
‎17.9(a) of the Agreement.

 

“Contingent Obligation” means, with respect to any Person, any direct or
indirect liability of such Person: (a) with respect to any Indebtedness of
another Person (a “Third Party Obligation”) if the purpose or intent of such
Person incurring such liability, or the effect thereof, is to provide assurance
to the obligee of such Third Party Obligation that such Third Party Obligation
will be paid or discharged, or that any agreement relating thereto will be
complied with, or that any holder of such Third Party Obligation will be
protected, in whole or in part, against loss with respect thereto; (b) with
respect to any undrawn portion of any letter of credit issued for the account of
such Person or as to which such Person is otherwise liable for the reimbursement
of any drawing; (c) to make take-or-pay or similar payments if required
regardless of nonperformance by any other party or parties to an agreement; or
(d) for any obligations of another Person pursuant to any guarantee or pursuant
to any agreement to purchase, repurchase or otherwise acquire any obligation or
any property constituting security therefor, to provide funds for the payment or
discharge of such obligation or to preserve the solvency, financial condition or
level of income of another Person. The amount of any Contingent Obligation shall
be equal to the amount of the obligation so guaranteed or otherwise supported
or, if not a fixed and determinable amount, the maximum amount so guaranteed or
otherwise supported.

 

“Continuing Directors” means (a) any member of the Board of Directors who was a
director (or comparable manager) of Borrower on the Closing Date, and (b) any
individual who becomes a member of the Board of Directors of Borrower after the
Closing Date if such individual was approved, appointed or nominated for
election to the Board of Directors of Borrower by a majority of the Continuing
Directors.

 

“Copyrights” means any and all rights in any works of authorship, including (a)
copyrights and moral rights, (b) copyright registrations and recordings thereof
and all applications in connection therewith including those listed on Schedule
4.5 to the Agreement, (c) income, license fees, royalties, damages, and payments
now and hereafter due or payable under and with respect thereto, including
payments under all licenses entered into in connection therewith and damages and
payments for past, present, or future infringements thereof, (e) the right to
sue for past, present, and future infringements thereof, and (d) all rights
corresponding thereto throughout the world.

 

“Core Assets” means the Silenor Assets and the Generics Assets.

 

“Committee” has the meaning specified therefor in the applicable DIP Order.

 

Schedule 1.1

Page - 7- 

“Debtors” means, collectively, the Borrower and each of its Subsidiaries.

 

“Default” means an event, condition, or default that, with the giving of notice,
the passage of time, or both, would be an Event of Default.

 

“Defaulting Lender” means any Lender that (a) has failed to fund any amounts
required to be funded by it under the Agreement on the date that it is required
to do so under the Agreement, (b) notified Borrower, Agent, or any Lender in
writing that it does not intend to comply with all or any portion of its funding
obligations under the Agreement, (c) has made a public statement to the effect
that it does not intend to comply with its funding obligations under the
Agreement or under other agreements generally (as reasonably determined by
Agent) under which it has committed to extend credit, (d) failed, within one (1)
Business Day after written request by Agent, to confirm that it will comply with
the terms of the Agreement relating to its obligations to fund any amounts
required to be funded by it under the Agreement, (e) otherwise failed to pay
over to Agent or any other Lender any other amount required to be paid by it
under the Agreement on the date that it is required to do so under the
Agreement, unless the subject of a good faith dispute, or (f) (i) becomes or is
insolvent or has a parent company that has become or is insolvent or (ii)
becomes the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee, or custodian or appointed for it, or has taken
any action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment or has a parent company that
has become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee, or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment.

 

“Defaulting Lender Rate” means the interest rate applicable to the Loan on which
such interest accrues plus (ii) 2.00% per annum.

 

“Delayed Draw Commitment” means, with respect to each Lender, the commitment of
such Lender to make Loans hereunder after the Closing Date during the
Availability Period, in each case as such Dollar amounts are set forth beside
such Lender’s name under the applicable heading on Part C of Schedule C-1 to the
Agreement or in the Assignment and Acceptance pursuant to which such Lender
became a Lender under the Agreement, as such amounts may be reduced or increased
from time to time pursuant to assignments made in accordance with the provisions
of Section 13.1 of the Agreement. As of the Closing Date, immediately prior to
the funding of any Loans, the aggregate principal amount of the Delayed Draw
Commitments is $11,000,000.

 

“Delayed Draw Loan” has the meaning specified therefore in Section ‎2.1(b) of
the Agreement.

 

“Deposit Account” means any deposit account (as that term is defined in the
Code).

 

“Designated Account” means the Deposit Account of Borrower identified on
Schedule D-1 to the Agreement (or such other Deposit Account of Borrower located
at Designated Account Bank that has been designated as such, in writing, by
Borrower to Agent).

 

“DESI Program Products” means Products subject to regulation under the FDA’s
Drug Efficacy Study Implementation program.

 

“Designated Account Bank” has the meaning specified therefor in Schedule D-1 to
the Agreement (or such other bank that is located within the United States that
has been designated as such, in writing, by Borrower to Agent).

 

“DIP Orders” means, collectively, the Interim DIP Order and the Final DIP Order,
as the

 

Schedule 1.1

Page - 8- 

same may be amended, supplemented or modified from time to time on or after
entry thereof in accordance with the terms hereof.

 

“Disqualified Equity Interests” means any Equity Interest that, by its terms (or
by the terms of any security or other Equity Interests into which it is
convertible or for which it is exchangeable), or upon the happening of any event
or condition (a) matures or is mandatorily redeemable (other than solely for
Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise
(except as a result of a change of control or asset sale so long as any rights
of the holders thereof upon the occurrence of a change of control or asset sale
event shall be subject to the prior repayment in full of the Loans and all other
Obligations that are accrued and payable and the termination of the
Commitments), (b) is redeemable at the option of the holder thereof (other than
solely for Qualified Equity Interests), in whole or in part, (c) provides for
the scheduled payments of dividends in cash, or (d) is or becomes convertible
into or exchangeable for Indebtedness or any other Equity Interests that would
constitute Disqualified Equity Interests, in each case, prior to the date that
is 180 days after the Maturity Date.

 

“Dollars” or “$” means United States dollars.

 

“Environmental Action” means any written complaint, summons, citation, notice,
directive, order, claim, investigation, judgment, letter, or other written
communication, or any litigation or judicial or administrative proceeding, from
or involving any Governmental Authority or any third party, involving violations
of Environmental Laws by Borrower or any Subsidiary of Borrower, or releases of
Hazardous Materials (a) from or to any assets or properties, or businesses of
Borrower, any Subsidiary of Borrower, or any of their predecessors in interest,
(b) from adjoining properties or businesses to any properties of Borrower or any
Subsidiary of Borrower or (c) from or onto any facilities which received
Hazardous Materials generated by Borrower, any Subsidiary of Borrower, or any of
their predecessors in interest.

 

“Environmental Law” means any applicable federal, state, provincial, foreign or
local statute, law, rule, regulation, ordinance, code, binding and enforceable
guideline, binding and enforceable written policy, or rule of common law now or
hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, in each case, to the extent binding on
Borrower or its Subsidiaries, relating to the environment, the effect of the
environment on employee health, or Hazardous Materials, in each case as amended
from time to time.

 

“Environmental Liabilities” means all liabilities, monetary obligations, losses,
damages, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts, or consultants, and costs of investigation and
feasibility studies), fines, penalties, sanctions, and interest incurred as a
result of any claim or demand, or Remedial Action required, by any Governmental
Authority or any third party, and which relate to any Environmental Action.

 

“Environmental Lien” means any Lien in favor of any Governmental Authority for
Environmental Liabilities.

 

“Equipment” means equipment (as that term is defined in the Code).

 

“Equity Interest” means, with respect to a Person, all of the shares, options,
warrants, interests, participations, rights to purchase, or other equivalents
(regardless of how designated) of or in such Person, whether voting or
nonvoting, including capital stock (or other ownership or profit interests or
units), preferred stock, or any other “equity security” (as such term is defined
in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under
the Exchange Act); provided that “Equity

 

Schedule 1.1

Page - 9- 

Interests” shall not include any debt securities convertible into or
exchangeable for any securities otherwise constituting Equity Interests pursuant
to this definition.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any and all rules or regulations promulgated from time to time thereunder,
and any successor statute thereto.

 

“ERISA Affiliate” means (a) any Person subject to ERISA whose employees are
treated as employed by the same employer as the employees of any Loan Party or
any of their respective Subsidiaries under IRC Section 414(b), (b) any trade or
business subject to ERISA whose employees are treated as employed by the same
employer as the employees of any Loan Party or their respective Subsidiaries
under IRC Section 414(c), (c) solely for purposes of Section 302 of ERISA and
Section 412 of the IRC, any organization subject to ERISA that is a member of an
affiliated service group of which any Loan Party or any of their respective
Subsidiaries is a member under IRC Section 414(m), or (d) solely for purposes of
Section 302 of ERISA and Section 412 of the IRC, any Person subject to ERISA
that is a party to an arrangement with any Loan Party or any of their respective
Subsidiaries and whose employees are aggregated with the employees of any Loan
Party or any of their respective Subsidiaries under IRC Section 414(o).

 

“Event of Default” has the meaning specified therefor in Section ‎8 of the
Agreement.

 

“Excess Proceeds” means the aggregate Net Cash Proceeds received by Borrower or
any of its Subsidiaries from one or more Non-Exclusive Licenses in excess of
$25,000.

 

“Exchange Act” means the Securities Exchange Act of 1934, as in effect from time
to time, and the rules and regulations promulgated thereunder.

 

“Excluded Property” has the meaning specified therefor in the Guaranty and
Security Agreement.

 

“Excluded Taxes” means (i) any tax imposed on the net income (however
denominated) or net profits of any Lender or any Participant (including any
branch profits or franchise taxes), in each case imposed by the jurisdiction (or
by any political subdivision or taxing authority thereof) in which such Lender
or such Participant is organized or the jurisdiction (or by any political
subdivision or taxing authority thereof) in which such Lender’s or such
Participant’s principal office is located in each case as a result of a present
or former connection between such Lender or such Participant and the
jurisdiction or taxing authority imposing the tax (other than any such
connection arising solely from such Lender or such Participant having executed,
delivered or performed its obligations or received payment under, or enforced
its rights or remedies under the Agreement or any other Loan Document) and (ii)
taxes resulting from a Lender’s or a Participant’s failure to comply with the
requirements of Section ‎16.2 of the Agreement, (iii) any United States federal
withholding taxes that would be imposed on amounts payable to a Non-U.S. Lender
based upon the law (and the applicable withholding rate) in effect at the time
such Non-U.S. Lender becomes a party to the Agreement (or designates a new
lending office), excluding any amount that such Non-U.S. Lender (or its
assignor, if any) was previously entitled to receive pursuant to Section ‎16.1
of the Agreement with respect to such withholding tax at the time such Non-U.S.
Lender becomes a party to the Agreement (or designates a new lending office) and
(iv) any United States federal withholding taxes imposed under FATCA.

 

“fair market value” means, at the time of any given transaction, with respect to
any asset or property, the price (after taking into account any liabilities
related to such asset or property) that could be negotiated in an arm’s length
transaction, for cash, between a willing seller and a willing and able

 

Schedule 1.1

Page - 10- 

buyer, neither of whom is under undue pressure or compulsion to complete the
transaction

 

“FATCA” means Sections 1471 through 1474 of the IRC, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with) and any current or future
regulations or official interpretations thereof, including any applicable
intergovernmental agreement with respect thereto.

 

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

 

“Federal Funds Rate” means, for any period, a fluctuating interest rate per
annum equal to, for each day during such period, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by Agent from three
Federal funds brokers of recognized standing selected by it.

 

“Final DIP Order” means an order entered by the Bankruptcy Court substantially
in the form of the Interim DIP Order, with only such material modifications as
are satisfactory in form and substance to the Agent and the Required Lenders in
its or their sole discretion, as applicable, which order shall (x) have been
entered and on such prior notice to such parties as may be satisfactory to the
Agent and the Required Lenders in its or their sole discretion, as applicable,
and (y) not have been, after entry, (A) vacated, reversed, or stayed, or (B)
amended or modified except as otherwise agreed to in writing by the Agent and
the Required Lenders in its or their sole discretion, as applicable.

 

“Foreign Loan Party” means any Loan Party organized or incorporated under the
laws of a jurisdiction outside of the United States.

 

“Funding Date” means the date on which a Borrowing occurs.

 

“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States, consistently applied.

 

“Generics Assets” means the products listed on Schedule G-1 to the Agreement.

 

“Governing Documents” means, with respect to any Person, the certificate or
articles of incorporation, constitution, by-laws, or other organizational
documents of such Person.

 

“Government Drug Rebate Program” means, collectively, the Medicaid Drug Rebate
Program with CMS and any individual state drug rebate program administered by
any State.

 

“Governmental Authority” means the government of any nation or any political
subdivision thereof, whether at the national, state, territorial, provincial,
municipal or any other level, and any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions
of, or pertaining to, government (including any supra-national bodies such as
the European Union or the European Central Bank). The term “Governmental
Authority” shall further include any institutional review board, ethics
committee, data monitoring committee, or other committee or entity with defined
authority to oversee Regulatory Matters or any agency, branch or other
governmental body charged with the responsibility and/or vested with the
authority to administer and/or enforce any Health Care Laws.

 

Schedule 1.1

Page - 11- 

“Guarantee” means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof, in
whole or in part; provided, that the term “Guarantee” does not include
endorsements for collection or deposit in the Ordinary Course of Business. The
term “Guarantee” used as a verb has a corresponding meaning.

 

“Guarantor” means each Person that is party to the Guaranty and Security
Agreement as of the date hereof, and each other Person that becomes a guarantor
after the Closing Date pursuant to Section 5.11 of the Agreement; provided,
that, notwithstanding anything herein to the contrary, (i) for so long as Pernix
Manufacturing, LLC complies with the covenants applicable to it in the Agreement
and the representations and warranties in the Agreement with respect to it are
true and accurate in all material respects, Pernix Manufacturing, LLC shall not
be required to be a Guarantor, (ii) Pernix Ireland shall not be required to be a
Guarantor and (iii) the Debtors shall only be required to use commercially
reasonable efforts to obtain a guarantee of the Obligations from Pernix Ireland
Pain, provided, further that in no event shall Pernix Ireland Pain be required
to be a Guarantor if doing so would result in personal liability for the
directors of Pernix Ireland Pain under Irish law as advised by Irish counsel to
the Debtors in writing.

 

“Guaranty and Security Agreement” means a guaranty and security agreement, dated
as of the Closing Date, in form and substance reasonably satisfactory to Agent,
executed and delivered by Borrower and each of the Guarantors to Agent.

 

“Hazardous Materials” means (a) substances that are defined or listed in, or
otherwise classified pursuant to, any applicable laws or regulations as
“hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic
substances,” or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP
toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.

 

“Health Care Laws” means all Requirements of Law relating to (a) fraud and abuse
(including the following statutes, as amended, modified or supplemented from
time to time and any successor statutes thereto and regulations promulgated from
time to time thereunder: the federal Anti-Kickback Statute (42 U.S.C. §
1320a-7b(b)); the civil False Claims Act (31 U.S.C. § 3729 et seq.); and
Sections 1320a-7 and 1320a-7a and 1320a-7b of Title 42 of the United States
Code); (b) the Medicare Prescription Drug, Improvement, and Modernization Act of
2003 (Pub. L. No. 108-173)); (c) any Government Drug Rebate Program, (d) all
statutes and regulations administered by the FDA or any comparable Governmental
Authority, including but not limited to the Food, Drug, and Cosmetic Act (21
U.S.C. § 301 et seq.); (e) the Physician Payments Sunshine Act; (f) the
licensure or regulation of healthcare providers, suppliers, professionals,
facilities or payors; (g) patient health care; (h) quality, safety certification
and accreditation standards and requirements; (i) HIPAA; (j) certificates of
operations and authority; (k) laws regulating the provision of free or
discounted care or services; and (l) any and all

 

Schedule 1.1

Page - 12- 

other applicable federal, state or local health care laws, rules, codes,
statutes, regulations, manuals, orders, ordinances, statutes, policies,
professional or ethical rules, administrative guidance and requirements, as the
same may be amended, modified or supplemented from time to time, and any
successor statute thereto.

 

“Health Care Permits” means any and all permits, licenses, authorizations,
certificates, certificates of need, as well as accreditations and plans of
third-party accreditation agencies (such as the Joint Commission for
Accreditation of Healthcare Organizations) that are (a) necessary to enable any
Loan Party or Subsidiary thereof to continue to conduct its business as it is
conducted on the Closing Date, or (b) required under any Health Care Law or the
business affairs, practices, licensing or reimbursement entitlements of any Loan
Party or Subsidiary thereof.

 

“Health Care Proceeding” means any inquiries, investigations, probes, audits,
hearings, litigation or proceedings (in each case, whether civil, criminal,
administrative or investigative) concerning any alleged or actual non-compliance
by any Loan Party or Subsidiary thereof with any Health Care Laws or the
requirements of any Health Care Permit.

 

“Hedge Agreement” means a “swap agreement” as that term is defined in Section
101(53B)(A) of the Bankruptcy Code, that is intended to provide protection
against fluctuations in interest, commodity prices or currency exchange rates
and not for speculative purposes.

 

“HIPAA” means (a) the Health Insurance Portability and Accountability Act of
1996; (b) the Health Information Technology for Economic and Clinical Health Act
(Title XIII of the American Recovery and Reinvestment Act of 2009); and (c) any
state and local laws regulating the privacy and/or security of individually
identifiable information, in each case as the same may be amended, modified or
supplemented from time to time, any successor statutes thereto, and any and all
rules or regulations promulgated from time to time thereunder.

 

“Incremental Amendment” has the meaning specified therefor in Section 2.17 of
this Agreement.

 

“Incremental Commitment” has the meaning specified therefor in Section 2.17 of
this Agreement.

 

“Incremental Date” has the meaning specified therefor in Section 2.17 of this
Agreement.

 

“Incremental Facility” has the meaning specified therefor in Section 2.17 of
this Agreement.

 

“Incremental Loan” has the meaning specified therefor in Section 2.17 of this
Agreement.

 

“Indebtedness” as to any Person means (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, or other
financial products, (c) all obligations of such Person as a lessee under Capital
Leases, (d) all obligations or liabilities of others secured by a Lien on any
asset of such Person, irrespective of whether such obligation or liability is
assumed, (e) all obligations of such Person to pay the deferred purchase price
of assets or services due more than 180 days after such assets are acquired or
such services are contemplated (other than trade payables incurred in the
Ordinary Course of Business and repayable in accordance with customary trade
practices), (f) all monetary obligations of such Person owing under Hedge
Agreements (which amount shall be calculated based on the amount that would be
payable by such Person if the Hedge Agreement were terminated on the date of
determination), (g) any Disqualified

 

Schedule 1.1

Page - 13- 

Equity Interests of such Person, (h) [reserved], (i) any obligation of such
Person guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation
of any other Person that constitutes Indebtedness under any of clauses (a)
through (h) above and (j) off-balance sheet liabilities, liabilities under any
ERISA plan that is subject to Section 412 of the Code or Title IV of ERISA
and/or Multiemployer Plan liabilities of such Person. For purposes of this
definition, (i) the amount of any Indebtedness represented by a guaranty or
other similar instrument shall be the lesser of the principal amount of the
obligations guaranteed and still outstanding and the maximum amount for which
the guaranteeing Person may be liable pursuant to the terms of the instrument
embodying such Indebtedness, and (ii) the amount of any Indebtedness which is
limited or is non-recourse to a Person or for which recourse is limited to an
identified asset shall be valued at the lesser of (A) if applicable, the limited
amount of such obligations, and (B) if applicable, the fair market value of such
assets securing such obligation.

 

“Indemnified Liabilities” has the meaning specified therefor in Section ‎10.3 of
the Agreement.

 

“Indemnified Person” has the meaning specified therefor in Section ‎10.3 of the
Agreement.

 

“Indemnified Taxes” means any Taxes, other than Excluded Taxes, imposed on or
with respect to any payments made by or on account of any obligation of Borrower
under any Loan Document.

 

“Initial Lenders” means, collectively, at any time of determination, (a) any
Person identified as a Lender on the signature pages to the Agreement as of the
Closing Date (not including any of their respective assignees that become
Lenders from time to time after the Closing Date), other than any such Person
who is no longer party to the Agreement as a Lender at the relevant time of
determination, (b) any other Lender that, at the relevant time of determination,
is an Affiliate of any Person identified as a Lender on the signature pages to
the Agreement as of the Closing Date, (c) any other Lender that is engaged in
making, purchasing, holding or investing in bank loans and similar extensions of
credit in the ordinary course and that is administered, advised or managed by
(i) any Person referred to in clause (a) or (b) above or (ii) an entity or an
Affiliate of an entity that administers, advises or manages any Person referred
to in clause (a) or (b) above, and (d) any fund or investment vehicle that is
managed by the same entity that manages a Person identified as a Lender on the
signature pages to the Agreement as of the Closing Date. Any reference to an
Affiliate of an Initial Lender shall include the management company of such
Initial Lender.

 

“Insolvency Proceeding” means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code or under any other state or federal
or other applicable bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, examinership, arrangement, or
other similar relief, or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of such Person or any
substantial part of its properties.

 

“Intellectual Property” means any and all Patents, Copyrights, Trademarks,
rights under Patent Licenses, trade secrets, know-how, inventions (whether or
not patentable), algorithms, software programs (including source code and object
code), processes, product designs, industrial designs, blueprints, drawings,
data, customer lists, URLs and domain names, specifications, documentations,
reports, catalogs, literature, and any other forms of technology or proprietary
information of any kind, including all rights therein and all applications for
registration or registrations thereof.

 

“Intercompany Subordination Agreement” means an intercompany subordination

 

Schedule 1.1

Page - 14- 

agreement, dated as of even date with the Agreement, executed and delivered by
Borrower, each other Loan Party, and Agent, the form and substance of which is
reasonably satisfactory to the Required Lenders.

 

“Interest Payment Date” means (a) with respect to any Base Rate Loan, the first
Business Day of each full calendar month ended after the Closing Date and (b)
with respect to any LIBOR Rate Loan, the last day of the Interest Period
applicable to the Borrowing of which such LIBOR Rate Loan is a part; provided,
that, in the case of any Interest Period greater than one month in duration,
interest shall be payable at one-month intervals after the commencement of the
applicable Interest Period and on the last day of such Interest Period.

 

“Interest Period” means, with respect to each LIBOR Rate Loan, a period
commencing on the date of the making of such LIBOR Rate Loan (or the
continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan to a
LIBOR Rate Loan) and ending 1, 2, 3 or 6 months thereafter; provided, that (a)
interest shall accrue at the applicable rate based upon the LIBOR Rate from and
including the first day of each Interest Period to, but excluding, the day on
which any Interest Period expires, (b) any Interest Period that would end on a
day that is not a Business Day shall be extended to the next succeeding Business
Day unless such Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day, (c) with respect
to an Interest Period that begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period), the Interest Period shall end on the
last Business Day of the calendar month that is 1, 2, 3 or 6 months after the
date on which the Interest Period began, as applicable, and (d) Borrower may not
elect an Interest Period which will end after the Maturity Date.

 

“Interim DIP Order” has the meaning specified on Schedule 3.1.

 

“Interim DIP Order Entry Date” has the meaning specified on Schedule 3.1.

 

“Inventory” means inventory (as that term is defined in the Code).

 

“Investment” means, with respect to any Person, any investment by such Person in
any other Person (including Affiliates) in the form of loans, guarantees,
advances, capital contributions (excluding (a) commission, travel, and similar
advances to officers and employees of such Person made in the Ordinary Course of
Business, to the extent such advances would not be required to be classified as
investments on a balance sheet prepared in accordance with GAAP, and (b) bona
fide accounts receivable arising in the Ordinary Course of Business), or
acquisitions of Indebtedness, Equity Interests or all or substantially all of
the assets of such other Person (or of any division or business line of such
other Person), and any other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. The amount of
any Investment shall be the original cost of such Investment plus the cost of
all additions thereto, without any adjustment for increases or decreases in
value, or write-ups, write-downs, or write-offs with respect to such Investment.

 

“IP Subsidiaries” means Pernix Ireland and Pernix Ireland Pain.

 

“IRC” means the Internal Revenue Code of 1986, as in effect from time to time.

 

“Lender” has the meaning set forth in the preamble to the Agreement and shall
also include any other Person made a party to the Agreement pursuant to the
provisions of Section ‎13.1 of the Agreement and “Lenders” means each of the
Lenders or any one or more of them.

 

“Lender Group” means each of the Lenders and Agent, or any one or more of them.

 

Schedule 1.1

Page - 15- 

“Lender Group Expenses” means all (a) out-of-pocket costs or expenses (including
taxes and insurance premiums) required to be paid by Borrower or its
Subsidiaries under any of the Loan Documents that are paid, advanced, or
incurred by the Lender Group, (b) documented out-of-pocket fees or charges paid
or incurred by Agent in connection with the Lender Group’s transactions with
Borrower and its Subsidiaries under any of the Loan Documents, including,
photocopying, notarization, couriers and messengers, telecommunication, public
record searches, filing fees, recording fees, publication, real estate surveys
and real estate title policies and endorsements and environmental audits, (c)
Agent’s customary fees and charges imposed or incurred in connection with any
background checks or OFAC/PEP searches related to Borrower or its Subsidiaries,
(d) Agent’s customary fees and charges (as adjusted from time to time) with
respect to the disbursement of funds (or the receipt of funds) to or for the
account of Borrower (whether by wire transfer or otherwise), together with any
out-of-pocket costs and expenses incurred in connection therewith, (e) customary
charges imposed or incurred by Agent resulting from the dishonor of checks
payable by or to any Loan Party, (f) reasonable documented out-of-pocket costs
and expenses paid or incurred by the Lender Group to correct any default or
enforce any provision of the Loan Documents, or during the continuance of an
Event of Default, in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is
consummated, (g) Agent’s reasonable costs and expenses (including reasonable
documented attorneys’ fees and expenses) relative to third party claims or any
other lawsuit or adverse proceeding paid or incurred, whether in enforcing or
defending the Loan Documents or otherwise in connection with the transactions
contemplated by the Loan Documents, Agent’s Liens in and to the Collateral, or
the Lender Group’s relationship with Borrower or any of its Subsidiaries, (h)
Agent’s reasonable documented costs and expenses (including reasonable
documented attorneys’ fees and due diligence expenses) incurred in advising,
structuring, drafting, reviewing, administering (including travel, meals, and
lodging), or amending, waiving, or modifying the Loan Documents, and (i) Agent’s
and each Lender’s reasonable documented costs and expenses (including reasonable
documented attorneys, accountants, consultants, and other advisors fees and
expenses) incurred in terminating, enforcing (including attorneys, accountants,
consultants, and other advisors fees and expenses incurred in connection with a
“workout,” a “restructuring,” or an Insolvency Proceeding concerning Borrower or
any of its Subsidiaries or in exercising rights or remedies under the Loan
Documents), or defending the Loan Documents, irrespective of whether a lawsuit
or other adverse proceeding is brought, or in taking any enforcement action or
any Remedial Action with respect to the Collateral.

 

“Lender Group Representatives” has the meaning specified therefor in Section
‎17.9 of the Agreement.

 

“Lender-Related Person” means, with respect to any Lender, such Lender, together
with such Lender’s Affiliates and the officers, directors, employees, partners,
trustees, administers, managers, advisors, representative, attorneys, and agents
of such Lender, such Lender’s manager and such Lender’s Affiliates.

 

“LIBOR Deadline” has the meaning specified therefor in Section 2.12(b)(i) of the
Agreement.

 

“LIBOR Notice” means a written notice in the form of Exhibit L-1 to the
Agreement.

 

“LIBOR Option” has the meaning specified therefor in Section 2.12(a) of the
Agreement.

 

“LIBOR Rate” means the rate per annum as reported on Reuters Screen LIBOR01 page
(or any successor page) two (2) Business Days prior to the commencement of the
requested Interest Period, for a term, and in an amount, comparable to the
Interest Period and the amount of the LIBOR Rate

 

Schedule 1.1

Page - 16- 

Loan requested (whether as an initial LIBOR Rate Loan or as a continuation of a
LIBOR Rate Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by
Borrower in accordance with the Agreement (and, if any such rate is below 1.00%,
the LIBOR Rate shall be deemed to be 1.00%), which determination shall be made
by Agent and shall be conclusive in the absence of manifest error.

 

“LIBOR Rate Loan” means each portion of a Loan that bears interest at a rate
determined by reference to the LIBOR Rate.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment,
charge, deposit arrangement, encumbrance, easement, lien (statutory or other),
security interest, or other security arrangement and any other preference,
priority, or preferential arrangement of any kind or nature whatsoever,
including any conditional sale contract or other title retention agreement, the
interest of a lessor under a Capital Lease and any synthetic or other financing
lease having substantially the same economic effect as any of the foregoing.

 

“Loan” means any Closing Date Loan, any Delayed Draw Loan and any Incremental
Loan, in each case made (or to be made) hereunder.

 

“Loan Account” has the meaning specified therefor in Section ‎2.9 of the
Agreement.

 

“Loan Documents” means the Agreement, the Guaranty and Security Agreement, the
Intercompany Subordination Agreement, any Additional Document, any Incremental
Agreement, any license or sublicense agreement granted in favor of Agent, any
note or notes executed by Borrower in connection with the Agreement and payable
to any member of the Lender Group, and any other instrument or agreement entered
into, now or in the future, by Borrower or any of its Subsidiaries and any
member of the Lender Group in connection with the Agreement.

 

“Loan Party” means the Borrower or any Guarantor.

 

“Margin Stock” means “margin stock” as defined in Regulation U of the Board of
Governors as in effect from time to time.

 

“Material Adverse Effect” means any event, change, condition, occurrence or
effect that has individually or in the aggregate resulted in, or would be
reasonably likely to result in, (a) a material adverse effect on the business,
properties, liabilities, financial condition or results of operations of the
Borrower and its Subsidiaries, taken as a whole, (b) a material impairment of
Borrower’s and its Subsidiaries ability to perform their obligations under the
Loan Documents to which they are parties or a material impairment of or material
delay to the Lender Group’s ability to enforce the Obligations or realize upon
the Collateral (other than as a result of as a result of an action taken or not
taken that is solely in the control of Agent), or (c) a material impairment of
the enforceability or priority of Agent’s Liens with respect to all or a
material portion of the Collateral, other than, in the case of clause (a) above,
any event, change, condition, occurrence or effect to the extent arising out of,
attributable to or resulting from, alone or in combination, (i) general changes
or developments in the industry in which the business of the Borrower and its
Subsidiaries operates, (ii) changes in general economic, financial market or
geopolitical conditions, (iii) natural disasters or calamities, (iv) changes in
any applicable laws or GAAP, (vi) the announcement, pendency or consummation of
the transactions contemplated by the Stalking Horse Sale Agreement, (vii) the
filing of the Cases (and customary events leading up to and following such
filing) and any orders of the Bankruptcy Court complying with the terms of the
Agreement, (viii) any action taken by the Loan Parties which is required by the
Agreement, (ix) a decline in the trading price or trading volume of any
securities issued by the Borrower or any change in the ratings or ratings
outlook for the Borrower (provided that the underlying causes thereof, to the
extent not otherwise excluded by this

 

Schedule 1.1

Page - 17- 

definition, may be deemed to contribute to a Material Adverse Effect), or (x)
the failure to meet any projections, guidance, budgets, forecasts or estimates
with respect to the Borrower (provided that the underlying causes thereof, to
the extent not otherwise excluded by this definition, may be deemed to
contribute to a Material Adverse Effect); provided, however, that any event,
change, condition, occurrence or effect set forth in clauses (i), (ii), (iii) or
(iv) may be taken into account in determining whether there has been or is
Material Adverse Effect if such any event, change, condition, occurrence or
effect has a disproportionate impact on the business of the Loan Parties or the
363 Assets, taken as a whole, relative to the other participants in the
industries and markets in which such business and the 363 Assets operate.

 

“Material Contract” means (a) each contract or agreement related to Core Assets
or Zohydro Assets to which any Loan Party or any of its Subsidiaries is a party
involving aggregate consideration payable to or by such Loan Party or such
Subsidiary of $150,000 or more (other than purchase orders in the ordinary
course of the business of such Loan Party or such Subsidiary and other than
contracts that by their terms may be terminated by such Loan Party or Subsidiary
in the ordinary course of its business upon less than 60 days’ notice without
penalty or premium), (b) all Patent Licenses (other than immaterial Patent
Licenses), (c) any settlement agreement to which a Loan Party or Subsidiary is a
party involving an amount in excess of $150,000, (d) any agreement with respect
to rebates in excess of $150,000 provided for any Inventory of a Loan Party or
Subsidiary and (e) all other contracts or agreements, the loss of which could
reasonably be expected to result in a Material Adverse Effect.

 

“Maturity Date” means the earliest to occur of (a) the date that is 180 days
after the Closing Date (or, in the case of Loans made pursuant an Incremental
Agreement, the maturity date specified in such Incremental Agreement), (b) the
acceleration of the Loans and the termination of the Commitments pursuant to
Section 9.1 and (c) the substantial consummation (as defined in Section 1101(2)
of the Bankruptcy Code, which for purposes hereof shall be no later than the
effective date thereof) of a Reorganization Plan that is confirmed pursuant to
an order entered by the Bankruptcy Court.

 

“Medicaid” means, collectively, the healthcare assistance program established by
Title XIX of the Social Security Act (42 U.S.C. §§ 1396 et seq.) and any
statutes succeeding thereto, and all laws, rules, regulations, manuals, orders,
guidelines or requirements (whether or not having the force of law) pertaining
to such program, including all state statutes and plans for medical assistance
enacted in connection with such program, in each case as the same may be
amended, supplemented or otherwise modified from time to time.

 

“Medicare” means, collectively, the health insurance program for the aged and
disabled established by Title XVIII of the Social Security Act (42 U.S.C. §§
1395 et seq.) and any statutes succeeding thereto, and all laws, rules,
regulations, manuals, orders, guidelines or requirements (whether or not having
the force of law) pertaining to such program, in each case as the same may be
amended, supplemented or otherwise modified from time to time.

 

“Milestones” means any and all milestones set forth in Schedule 5.22.

 

“Moody’s” has the meaning specified therefor in the definition of Cash
Equivalents.

 

“Multiemployer Plan” means a multiemployer plan within the meaning of Section
4001(a)(3) of ERISA to which any Loan Party or any Subsidiary or any of their
respective ERISA Affiliates (or any Person who in the last five years was an
ERISA Affiliate) is making or accruing an obligation to make contributions or
has within the preceding five plan years (as determined on the applicable date
of determination) made contributions.

 

Schedule 1.1

Page - 18- 

“Nalpropion” means Nalpropion Pharmaceuticals, Inc.

 

“Nalpropion Assets” means, with respect to Borrower or any Subsidiary of
Borrower, its right, title and interest in, to and under all personal property
consisting of or relating to any equity or debt securities issued by, or
obligations of, Nalpropion Pharmaceuticals, Inc., whether now owned or existing
or hereafter acquired or arising and wherever located. For the avoidance of
doubt, Nalpropion Assets shall not include the Services Agreement and the TSA.

 

“Net Cash Proceeds” means, with respect to any Asset Sale or Non-Exclusive
License, the proceeds of such Asset Sale or Non-Exclusive License in the form of
cash (including (i) payments in respect of deferred payment obligations to the
extent corresponding to principal, but not interest, when received in the form
of cash and/or cash equivalents, and (ii) proceeds from the conversion of other
consideration received when converted to cash), net of:

 

(1)        brokerage commissions and other fees and expenses directly related to
such Asset Sale or Non-Exclusive License, as applicable, including reasonable
and customary fees and expenses of counsel, accountants and investment bankers;

 

(2)        provisions for taxes as a result of such Asset Sale or Non-Exclusive
License, as applicable, without regard to the consolidated results of operations
of Borrower and its Subsidiaries;

 

(3)        payments required to be made to holders of minority interests in
Subsidiaries as a result of such Asset Sale or Non-Exclusive License, as
applicable, or to repay Indebtedness (other than the Obligations) outstanding at
the time of such Asset Sale or Non-Exclusive License, as applicable, that is
secured by a Lien on the property or assets sold, disposed of or subject to such
Non-Exclusive License, as applicable, to the extent required to be applied prior
to the repayment of the Obligations; and

 

(4)        appropriate amounts to be provided as a reserve against liabilities
associated with such Asset Sale or Non-Exclusive License, as applicable,
including pension and other post-employment benefit liabilities, liabilities
related to environmental matters and indemnification obligations associated with
such Asset Sale or Non-Exclusive License, as applicable, with any subsequent
reduction of the reserve other than by payments made and charged against the
reserved amount to be deemed a receipt of cash.

 

“New Money General Purpose Commitments” means, collectively, the Closing Date
General Purpose Commitments and the Delayed Draw Commitments. As of the Closing
Date, immediately prior to the funding of any Loans, the aggregate principal
amount of the New Money General Purpose Commitments is $15,000,000.

 

“New Money General Purpose Loans” means the Closing Date General Purpose Loans
and the Delayed Draw Loans.

 

“Non-Consenting Lender” has the meaning specified therefor in Section ‎‎14.2(a)
of the Agreement.

 

“Non-Defaulting Lender” means each Lender other than a Defaulting Lender.

 

“Non-Exclusive License” means the licensing on a non-exclusive basis (including
co-promotion arrangements) of patents, trademarks, copyrights, and other
Intellectual Property rights in the Ordinary Course of Business that does not
materially and adversely affect the business or condition

 

Schedule 1.1

Page - 19- 

(financial or otherwise) of Borrower and any of its Subsidiaries, taken as a
whole, relating to the development, manufacture, distribution, sale or other
commercialization of Products.

 

“Non-U.S. Lender” means any Lender or Participant that is not a United States
person within the meaning of IRC section 7701(a)(30).

 

“Notice of Borrowing” has the meaning specified therefor in Section ‎2.3(a) of
the Agreement.

 

“Obligations” means all loans, debts, principal, interest (including any
interest that accrues after the commencement of an Insolvency Proceeding,
regardless of whether allowed or allowable in whole or in part as a claim in any
such Insolvency Proceeding), premiums, liabilities (including all amounts
charged to the Loan Account pursuant to the Agreement), obligations (including
indemnification obligations), fees, Lender Group Expenses (including any fees or
expenses that accrue after the commencement of an Insolvency Proceeding,
regardless of whether allowed or allowable in whole or in part as a claim in any
such Insolvency Proceeding), guaranties, and all covenants and duties of any
other kind and description owing by any Loan Party arising out of, under,
pursuant to, in connection with, or evidenced by the Agreement or any of the
other Loan Documents and irrespective of whether for the payment of money,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, and including all interest not paid when due and
all other expenses or other amounts that Borrower is required to pay or
reimburse by the Loan Documents or by law or otherwise in connection with the
Loan Documents. Without limiting the generality of the foregoing, the
Obligations of Borrower under the Loan Documents include the obligation to pay
(i) the principal of the Loans, (ii) interest accrued on the Loans, (iii) Lender
Group Expenses, (iv) fees payable under the Agreement or any of the other Loan
Documents, and (v) indemnities and other amounts payable by any Loan Party under
any Loan Document. Any reference in the Agreement or in the Loan Documents to
the Obligations shall include all or any portion thereof and any extensions,
modifications, renewals, or alterations thereof, both prior and subsequent to
any Insolvency Proceeding.

 

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

 

“Order” means any award, writ, injunction, judgment, order or decree entered,
issued, made, or rendered by any Governmental Authority.

 

“Ordinary Course of Business” means, in respect of any transaction involving any
Loan Party or any Subsidiary, the ordinary course of business of such Loan Party
or Subsidiary, as conducted by such Loan Party or Subsidiary in accordance with
past practices, as such practice is, or may have been, reasonably modified as a
result of the Cases, subject to (a) the filing of the Cases, (b) any orders of
the Bankruptcy Court complying with the terms of the Agreement, and (c) the
conduct of the Auction in accordance with the bidding procedures set forth in
the Sale Procedures Order.

 

“Originating Lender” has the meaning specified therefor in Section ‎13.1(e) of
the Agreement.

 

“Other Connection Taxes” means, with respect to any Lender or Participant, Taxes
imposed as a result of a present or former connection between such Lender or
Participant and the jurisdiction imposing such Tax (other than connections
arising from such Lender or Participant having executed, delivered, become a
party to, performed its obligations under, received payments under, received or
perfected a security interest under, engaged in any other transaction pursuant
to or enforced any Loan Document, or sold or assigned an interest in any Loan or
Loan Document).

 

Schedule 1.1

Page - 20- 

"Overbid Sale Agreement" means one or more asset purchase agreements entered
into pursuant to the bidding procedures and following the auction conducted
pursuant to the Sale Procedures Order, collectively with all schedules and
exhibits thereto and all other agreements, documents and instruments related
thereto and executed and/or delivered in connection therewith, which Overbid
Sale Agreement is an Acceptable Alternative Sale Agreement, as such Overbid Sale
Agreement may be amended, supplemented and/or modified from time to time as
permitted by the Agreement.

 

“Participant” has the meaning specified therefor in Section ‎13.1(e) of the
Agreement.

 

“Participant Register” has the meaning specified therefor in Section ‎13.1(e) of
the Agreement.

 

“Patent License” means any license or distribution agreement pursuant to which
Borrower or any of its Subsidiaries is granted rights with respect to Patents
for use in connection with the use, sale, manufacture, import, export and/or
distribution of any Products.

 

“Patents” means patents and patent applications, including (a) the patents and
patent applications listed on Schedule 4.5 to the Agreement, (b) all
continuations, divisionals, continuations-in-part, re-examinations, reissues,
and renewals thereof and improvements thereon, (c) all income, royalties,
damages and payments now and hereafter due or payable under and with respect
thereto, including payments under all licenses entered into in connection
therewith and damages and payments for past, present, or future infringements
thereof, (d) the right to sue for past, present, and future infringements
thereof, and (e) all of rights corresponding thereto throughout the world.

 

“Patriot Act” has the meaning specified therefor in Section ‎4.13 of the
Agreement.

 

“Perfection Certificate” means a certificate in the form of Exhibit P-1 to the
Agreement.

 

“Permits” means, with respect to any Person, any permit, approval, clearance,
authorization, license, registration, certificate, concession, grant, franchise,
variance or permission from, and any other contractual obligations with, any
Governmental Authority, in each case whether or not having the force of law and
applicable to or binding upon such Person or any of its property or Products or
to which such Person or any of its property or Products is subject, including
all Registrations and all Health Care Permits.

 

“Permitted Collateral Lien” means, with respect to any asset that constitutes
Collateral or is required to constitute Collateral pursuant to any Loan
Document, (a) any non-consensual Permitted Lien on such asset that is senior to
the Agent’s Lien on such asset by operation of law, and (b) other than with
respect to any material Intellectual Property or Zohydro Assets, any Permitted
Lien on such asset pursuant to clause (f) of the definition of “Permitted
Liens”, in any such case, only to the extent the existence of such Lien and/or
the priority of such Lien over the Agent’s Lien on such asset does not violate
or contravene any other provision of the Agreement.

 

“Permitted Contingent Obligations” means Contingent Obligations (a) existing as
of the Petition Date in respect of Permitted Indebtedness outstanding as of the
Petition Date; (b) resulting from endorsements for collection or deposit in the
Ordinary Course of Business; (c) pursuant to agreements outstanding on the
Closing Date that do not exceed $1,000,000 individually, or $2,500,000 in the
aggregate (and including any refinancings, extensions or amendments to the
indebtedness underlying such Contingent Obligations (to the extent expressly
permitted by the Agreement) except to the extent any such refinancing, extension
or amendment increases the amount of the Contingent Obligation relating
thereto); (d) incurred in the Ordinary Course of Business with respect to surety
and appeal bonds, performance bonds and other similar obligations not to exceed
$1,000,000 in the aggregate at any time

 

Schedule 1.1

Page - 21- 

outstanding; (e) arising with respect to customary indemnification obligations
in favor of purchasers in connection with dispositions of personal property
assets that are Permitted Dispositions; (f) existing or arising under any Hedge
Contract, so long as there exists no Event of Default both immediately before
and immediately after giving effect to any such transaction, and provided, that
such obligations are (or were) entered into by a Loan Party in the Ordinary
Course of Business for the purpose of mitigating risks associated with interest
rates, commodity prices, currency, liabilities, commitments, investments,
assets, or property held or reasonably anticipated by such Person and not for
purposes of speculation; (g) that are Permitted Investments; (h) that constitute
Permitted Indebtedness or are with respect to indebtedness that constitutes
Permitted Indebtedness; (i) pursuant to the Zogenix Purchase Agreement as in
effect on the Petition Date; and (j) not permitted by clauses (a) through (i)
above, not to exceed $1,000,000 in the aggregate at any time outstanding.

 

“Permitted Dispositions” means:

 

(a)       sales, abandonment, or other dispositions of Equipment that is
substantially worn, damaged, or obsolete or no longer used or useful in the
Ordinary Course of Business and leases or subleases of Real Property not useful
in the conduct of the business of Borrower and its Subsidiaries,

 

(b)       sales of Inventory to buyers (including without limitation, sales of
inventory to Affiliates to the extent permitted pursuant to Section ‎6.10 of the
Agreement) in the Ordinary Course of Business,

 

(c)       the disposition of Cash Equivalents in the Ordinary Course of Business
in a manner that is not prohibited by the terms of the Agreement,

 

(d)       the entry into Non-Exclusive Licenses; provided that the Borrower will
not, and will not permit its Subsidiaries to, enter into any Non-Exclusive
License unless the following conditions are met:

 

(i)        the relevant Loan Party receives consideration at the time of the
Non-Exclusive License at least equal to fair market value (determined by
Borrower, or, in the case of any Non-Exclusive License valued in excess of
$2,500,000, by the Board of Directors of Borrower) of such Non-Exclusive
License,

 

(ii)        100% of the consideration consists of cash or Cash Equivalents (it
being understood that any deferred payment, milestone payment, royalty payment
or other contingent payment in connection with any sale or licensing of
Intellectual Property, in each case, to be paid in cash or Cash Equivalents,
shall constitute cash consideration for purposes of this clause (ii)), and

 

(iii)        the Borrower shall comply with Section 2.4(d)(ii) of the Agreement
in connection with such Non-Exclusive License,

 

(e)       the granting of Permitted Liens,

 

(f)       the sale or discount, in each case without recourse, of accounts
receivable arising in the Ordinary Course of Business, but only in connection
with the compromise or collection thereof,

 

(g)       any involuntary loss, damage or destruction of property of Borrower or
any Subsidiary,

 

(h)       any involuntary condemnation, seizure or taking, by exercise of the
power of

 

Schedule 1.1

Page - 22- 

eminent domain or otherwise, or confiscation or requisition of use of property,

 

(i)       the leasing or subleasing of any real or personal property of Borrower
or its Subsidiaries in the Ordinary Course of Business,

 

(j)       [reserved],

 

(k)       the lapse or abandonment of patents, trademarks, copyrights, or other
Intellectual Property rights, in each case, that are not material and in the
Ordinary Course of Business and that is, in the reasonable judgment of the
Borrower, no longer economically practicable or commercially reasonable to
maintain or useful in any material respect in the conduct of business of
Borrower and its Subsidiaries, taken as a whole, so long as, (A) with respect to
copyrights, such copyrights are not material revenue generating copyrights and
(B) such lapse or abandonment is not materially adverse to the interests of the
Lender Group,

 

(l)       the making of Restricted Payments that are expressly permitted to be
made pursuant to the Agreement,

 

(m)       the making of Permitted Investments,

 

(n)       so long as no Event of Default has occurred and is continuing or would
immediately result therefrom, transfers of assets (i) from Borrower or any of
its Subsidiaries to a Loan Party, and (ii) from any Subsidiary of Borrower that
is not a Loan Party to any Loan Party,

 

(o)       any other disposition (other than a Non-Exclusive License) in a
transaction or series of related transactions of assets with a fair market value
of less than $100,000 and less than $150,000 for all dispositions pursuant to
this clause (o),

 

(q)       the sale transactions contemplated by any Sale Agreement; provided
that, other than with respect to the sale transactions pursuant to the Stalking
Horse Sale Agreement, (i) such sale transactions, collectively, shall provide
for Net Cash Proceeds in an aggregate amount sufficient for the payment in full
in cash of the Obligations after giving effect to the closing(s) of the sale(s)
contemplated thereby in accordance with the terms of such agreement(s), and (ii)
on the closing date of the sales contemplated by the Sale Agreement, sufficient
Net Cash Proceeds thereof are applied to repay the Obligations in full in cash
and the Commitments are terminated, and

 

(r)       any sale of any Treximet Assets pursuant to Section 363 of the
Bankruptcy Code.

 

“Permitted Holders” means (a) any Person identified as a Lender on the signature
pages to the Agreement as of the Closing Date (not including any of their
respective assignees that become Lenders from time to time after the Closing
Date), regardless of whether or not such Person continues to be party to the
Agreement as a Lender at the relevant time of determination, (b) any Affiliate
of any Person referred to in clause (a) above, (c) any other Person (other than
a natural person) that is engaged in making, purchasing, holding or investing in
bank loans and similar extensions of credit in the ordinary course and that is
administered, advised or managed by (i) any Person referred to in clause (a) or
(b) above or (ii) an entity or an Affiliate of an entity that administers,
advises or manages any Person referred to in clause (a) or (b) above, (d) any
fund or investment vehicle that is managed by the same entity that manages a
Person identified as a Lender on the signature pages to the Agreement as of the
Closing Date, and (e) any other Person with which one or more Persons referred
to in clauses (a), (b), (c) and/or (d) above forms a “group” (within the meaning
of Section 14(d) of the Exchange Act) so long as, in the case of this clause
(e), one or more Persons referred to in clauses (a), (b), (c) and/or (d) above
beneficially

 

Schedule 1.1

Page - 23- 

own, directly or indirectly, more than 50% in the aggregate of the relevant
voting stock beneficially owned by the group.

 

“Permitted Indebtedness” means:

 

(a)       Indebtedness evidenced by the Agreement or the other Loan Documents,

 

(b)       Indebtedness set forth on Schedule 4.14(a) to the Agreement,

 

(c)       Permitted Purchase Money Indebtedness incurred by a Loan Party not
constituting Indebtedness in connection with mortgage financings and capital
leases, in an aggregate amount for this clause (c) not to exceed $200,000
outstanding at any time (whether in the form of a loan or a lease) used solely
to acquire equipment or other assets used in the Ordinary Course of Business and
secured only by such equipment or other assets,

 

(d)       endorsement of instruments or other payment items for deposit in the
Ordinary Course of Business,

 

(e)       trade accounts payable arising and paid on a timely basis and in the
Ordinary Course of Business,

 

(f)       Indebtedness, if any, arising under Hedge Agreements that are incurred
for the bona fide purpose of hedging the interest rate, commodity, or foreign
currency risks associated with Borrower’s and its Subsidiaries’ operations and
not for speculative purposes,

 

(g)       [reserved],

 

(h)       Permitted Intercompany Advances;

 

(i)       unsecured Indebtedness in respect of bid, performance, appeal and
surety bonds, including guarantees or obligations of the Loan Parties with
respect to letters of credit supporting such bid, performance and surety bonds
or other forms of credit enhancement supporting performance obligations under
services contracts, workers’ compensation claims, self-insurance obligations,
unemployment insurance, health, disability and other employee benefits or
property, casualty or liability insurance, in each case incurred in the Ordinary
Course of Business,

 

(j)       unsecured Indebtedness arising from postpetition agreements to provide
for indemnification, adjustment of purchase price, or other similar obligations,
in each case, incurred in connection with Permitted Dispositions subject to the
limits set forth in the definition thereof,

 

(k)       unsecured postpetition Indebtedness arising from agreements to provide
for indemnification, adjustment of purchase price, earn-outs or other similar
obligations to which the seller may become entitled, in each case, incurred in
connection with any Investment permitted hereby, to the extent such payment is
determined by a final closing balance sheet, working capital calculation or
other similar method or such payment depends on the performance of such business
or assets after the closing; provided, that, (1) at the time of closing, the
amount of any such payment is not determinable or is of a contingent nature and,
to the extent such payment thereafter becomes fixed and finally determined, the
amount is paid within 60 days thereafter and (2) the only obligor in respect of
such Indebtedness is the relevant Subsidiary that is the acquirer or investor,
as applicable, in such permitted Investment,

 

(l)       Indebtedness composing Permitted Investments,

 

Schedule 1.1

Page - 24- 

(m)       unsecured Indebtedness incurred in respect of netting services,
overdraft protection, and other like services, in each case, incurred in the
Ordinary Course of Business,

 

(n)       reimbursement obligations in connection with any letters of credit, in
accordance with the Approved Budget, subject to Permitted Variances, but in any
event in an aggregate outstanding amount not to exceed $150,000,

 

(o)       any other unsecured Indebtedness incurred by Borrower or any of its
Subsidiaries in an aggregate outstanding amount not to exceed $100,000 at any
one time.

 

“Permitted Intercompany Advances” means loans made by (a) a Loan Party to
another Loan Party, (b) [reserved], and (c) a Subsidiary of Borrower that is not
a Loan Party to a Loan Party, so long as the parties thereto are party to an
intercompany subordination agreement substantially in the form of Exhibit I-1
hereto or such loan is subject to other subordination provisions reasonably
acceptable to the Required Lenders.

 

“Permitted Investments” means:

 

(a)        Investments in cash and Cash Equivalents;

 

(b)       Investments in negotiable instruments deposited or to be deposited for
collection in the Ordinary Course of Business,

 

(c)        advances made in connection with purchases of goods or services in
the Ordinary Course of Business,

 

(d)       Investments received in settlement of amounts due to any Loan Party or
any of its Subsidiaries effected in the Ordinary Course of Business or owing to
any Loan Party or any of its Subsidiaries as a result of Insolvency Proceedings
involving an account debtor or upon the foreclosure or enforcement of any Lien
in favor of a Loan Party or its Subsidiaries,

 

(e)        Investments owned by any Loan Party or any of its Subsidiaries on the
Closing Date and set forth on Schedule P-1 to the Agreement,

 

(f)       guarantees permitted under the definition of Permitted Indebtedness,

 

(g)        Permitted Intercompany Advances,

 

(h)        Equity Interests or other securities acquired in connection with the
satisfaction or enforcement of Indebtedness or claims due or owing to a Loan
Party or its Subsidiaries (in bankruptcy of customers or suppliers or in
settlement of delinquent obligations of, and other disputes with, customers or
suppliers arising in the Ordinary Course of Business) or as security for any
such Indebtedness or claims,

 

(i)        deposits of cash in the Ordinary Course of Business to secure
performance of operating leases,

 

(j)        loans and advances to employees and officers of Borrower or any of
its Subsidiaries in the Ordinary Course of Business for any business purpose
(other than the purchase of the Borrower’s Equity Interests), so long as the
aggregate amount of all such loans or advances outstanding at any time does not
exceed $150,000,

 

(k)        Investments resulting from entering into Bank Product Agreements,

 

Schedule 1.1

Page - 25- 

(l)        to the extent outstanding as of the Petition Date, the Investment by
Borrower in Pernix Ireland evidenced by the Treximet Intercompany Note,

 

(m)        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,

 

(n)        (i) Investments by any Loan Party in another Loan Party, (ii)
Investments by any non-Loan Party in any Loan Party, and (iii) Investments held
by any non-Loan Party as of the Closing Date, and

 

(o)        so long as no Event of Default has occurred and is continuing or
would result therefrom, any other Investments in an aggregate amount not to
exceed $150,000 (with the fair market value of such Investments being measured
at the time such Investment is made without giving effect to subsequent changes
in value) during the term of the Agreement.

 

“Permitted Liens” means:

 

(a)        Liens granted to, or for the benefit of, Agent to secure the
Obligations,

 

(b)        Liens for unpaid taxes, assessments, or other governmental charges or
levies that either (i) are not yet delinquent, or (ii) do not have priority over
Agent’s Liens and the underlying taxes, assessments, or charges or levies are
the subject of Permitted Protests,

 

(c)        judgment Liens arising solely as a result of the existence of
judgments, orders, or awards that do not constitute an Event of Default under
Section ‎8.3 of the Agreement,

 

(d)        Liens set forth on Schedule P-2 to the Agreement; provided, that to
qualify as a Permitted Lien, (i) any such Lien described on Schedule P-2 to the
Agreement shall only secure the Indebtedness that it secures on the Petition
Date and (ii) such Liens shall only encumber the assets that secured such
Indebtedness as of the Petition Date,

 

(e)        the interests of lessors under operating leases in the Ordinary
Course of Business,

 

(f)        any Lien on any equipment or other assets (other than material
Intellectual Property) securing Indebtedness permitted under clause (c) of the
definition of Permitted Indebtedness; provided that (i) such Lien attaches
concurrently with or within one hundred twenty (120) days after the acquisition
thereof and only to the asset purchased or acquired and the proceeds thereof and
(ii) such Lien only secures the Indebtedness that was incurred to acquire the
asset purchased or acquired or any Refinancing Indebtedness in respect thereof,

 

(g)        Liens arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in
the Ordinary Course of Business and not in connection with the borrowing of
money, and which Liens either (i) are for sums not yet delinquent, or (ii) are
the subject of Permitted Protests,

 

(h)        Liens on amounts deposited to secure Borrower’s and its Subsidiaries
obligations in connection with worker’s compensation or other unemployment
insurance (but excluding Liens arising under ERISA) pertaining to any Loan
Party’s or its Subsidiaries’ employees in the Ordinary Course of Business,

 

(i)        Liens on amounts deposited to secure Borrower’s and its Subsidiaries
obligations in connection with the making or entering into of bids, tenders, or
leases in the Ordinary

 

Schedule 1.1

Page - 26- 

Course of Business and not in connection with the borrowing of money or the
deferred purchase price of property or services,

 

(j)        Liens on amounts deposited to secure Borrower’s and its Subsidiaries
reimbursement obligations with respect to surety or appeal bonds obtained in the
Ordinary Course of Business,

 

(k)        with respect to any Real Property, easements, rights of way, and
zoning restrictions that do not, individually or in the aggregate, materially
affect the value or marketability of the applicable asset or impair the use or
operation thereof,

 

(l)        Liens arising under Non-Exclusive Licenses,

 

(m)        [reserved],

 

(n)        rights of setoff or bankers’ liens upon deposits of funds in favor of
banks or other depository institutions, solely to the extent incurred in
connection with the maintenance of such Deposit Accounts in the Ordinary Course
of Business,

 

(o)        Liens granted in the Ordinary Course of Business on the unearned
portion of insurance premiums securing the financing of insurance premiums to
the extent the financing is permitted under the definition of Permitted
Indebtedness,

 

(p)  Liens in favor of customs and revenue authorities arising as a matter of
law to secure payment of customs duties which are not past due in connection
with the importation of goods by the Loan Parties or their Subsidiaries in the
Ordinary Course of Business,

 

(q)        Liens solely on any cash earnest money deposits made by Borrower or
any of its Subsidiaries in connection with any letter of intent or purchase
agreement with respect to any Investment permitted hereby,

 

(r)  [reserved],

 

(s)  Liens (including any adequate protection replacement Liens granted under
the DIP Orders) as provided for in the DIP Orders; provided that such Liens are
made expressly junior to the Liens securing the Obligations,

 

(t)        a Lien on cash collateral in accordance with the Approved Budget,
subject to Permitted Variances, but in any event not to exceed $157,500 in the
aggregate, securing the reimbursement obligations of the Borrower and its
material Subsidiaries under any letter of credit permitted pursuant to clause
(n) of the definition of “Permitted Indebtedness”; provided that the amount of
cash collateral in respect of any such letter of credit shall not exceed 105% of
the face amount thereof,

 

(u)         precautionary UCC-1 financing statement filings that are filed by
lessors with respect to operating leases entered into by the Loan Parties in the
Ordinary Course of Business, and

 

(w)        other Liens which do not secure Indebtedness for borrowed money or
letters of credit and as to which the aggregate amount of the obligations
secured thereby does not exceed $150,000.

 

“Permitted Prior Lien” has the meaning specified therefor in the applicable DIP
Order.

 

“Permitted Protest” means the right of Borrower or any of its Subsidiaries to
protest any

 

Schedule 1.1

Page - 27- 

Lien (other than any Lien that secures the Obligations), taxes (other than
payroll taxes or taxes that are the subject of a United States federal tax lien
or an Irish tax lien), or rental payment, provided that (a) a reserve or other
appropriate provision with respect to such obligation is established on
Borrower’s or its Subsidiaries’ books and records in such amount as is required
under GAAP, (b) any such protest is instituted promptly and prosecuted
diligently by Borrower or its Subsidiary, as applicable, in good faith, (c)
Agent is satisfied that, while any such protest is pending, there will be no
impairment of the enforceability, validity, or priority of any of Agent’s Liens,
(d) compliance with the obligation that is the subject of such contest is
effectively stayed during such challenge; (e) the title to, and right to use,
the applicable asset by any Loan Party or the Subsidiaries of any Loan Party are
not adversely affected thereby; (f) the applicable asset or any part thereof or
any interest therein shall not be in any danger of being sold, forfeited or lost
by reason of such contest by any Loan Party or any Subsidiaries of any Loan
Party; and (g) upon a final, non-appealable determination of such protest, any
Loan Party and the Subsidiaries of any Loan Party shall promptly comply with the
requirements thereof.

 

“Permitted Purchase Money Indebtedness” means, as of any date of determination,
Indebtedness (other than the Obligations, but including Capitalized Lease
Obligations), incurred after the Closing Date and at the time of, or within 20
days after, the acquisition of any fixed assets for the purpose of financing all
or any part of the acquisition cost thereof, in an aggregate principal amount
outstanding at any one time not in excess of the amount permitted pursuant to
clause (c) of the definition of “Permitted Indebtedness”.

 

“Permitted Variances” has the meaning specified therefor in the applicable DIP
Order. Any waiver of any variances from the Approved Budget that do not
constitute Permitted Variances shall be subject to the consent of the Required
Lenders in their sole discretion

 

“Pernix Ireland” means Pernix Ireland Limited, formerly known as Worrigan
Limited, a wholly owned Subsidiary of Borrower and a private company limited by
shares incorporated under the laws of Ireland.

 

“Pernix Ireland Pain” means Pernix Ireland Pain Designated Activity Company
(f/k/a Pernix Ireland Pain Limited), a designated activity company organized
under the laws of the Republic of Ireland.

 

“Petition Date” has the meaning specified therefor in the recitals to the
Agreement.

 

“Person” means natural persons, corporations, limited liability companies,
limited partnerships, general partnerships, limited liability partnerships,
joint ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.

 

“Platform” has the meaning specified therefor in Section ‎17.9(c) of the
Agreement.

 

“Prepetition Collateral” has the meaning specified therefor in the applicable
DIP Order.

 

“Prepetition Payment” means a payment (by way of adequate protection or
otherwise) of principal or interest or otherwise on account of any prepetition
Indebtedness or trade payables (including, without limitation, in respect of
reclamation claims) or other prepetition claims against any Debtor.

 

“Prepetition Revolving Agent” has the meaning specified therefor in the
applicable DIP Order.

 

“Prepetition Revolving Financing Documents” has the meaning specified therefor
in the

 

Schedule 1.1

Page - 28- 

applicable DIP Order.

 

“Prepetition Revolving Obligations” has the meaning specified therefor in the
applicable DIP Order.

 

“Prepetition Revolving Secured Parties” has the meaning specified therefor in
the applicable DIP Order.

 

“Prepetition Secured Parties” has the meaning specified therefor in the
applicable DIP Order.

 

“Prepetition Term Agent” has the meaning specified therefor in the applicable
DIP Order.

 

“Prepetition Term Collateral” has the meaning specified therefor in the
applicable DIP Order.

 

“Prepetition Term Financing Documents” has the meaning specified therefor in the
applicable DIP Order.

 

“Prepetition Term Obligations” has the meaning specified therefor in the
applicable DIP Order.

 

“Prepetition Term Secured Parties” has the meaning specified therefor in the
applicable DIP Order.

 

“Primed Liens” has the meaning specified therefor in Section 2.14(c) of the
Agreement.

 

“Products” means any FDA-approved product that is marketed and sold in the
United States by any Loan Party or any of its Subsidiaries and shall include by
reference Registrations that are required to conduct the Borrower’s business as
currently conducted and any Subsidiary’s business as conducted from time to
time.

 

“Projections” means any forecasts, projections or other forward-looking
information furnished by or on behalf of a Loan Party or its Subsidiaries in
writing to Agent or any Lender for purposes of or in connection with this
Agreement or the other Loan Documents.

 

“Pro Rata Share” means, as of any date of determination, the percentage obtained
by dividing (i) the outstanding Loans and unused Commitments of such Lender by
(ii) the sum of the aggregate outstanding Loans and unused Commitments of all
Lenders.

 

“Public Lender” has the meaning specified therefor in Section ‎17.9(c) of the
Agreement.

 

“Qualified Equity Interest” means and refers to any Equity Interests issued by
Borrower (and not by one or more of its Subsidiaries) that is not a Disqualified
Equity Interest.

 

“Real Property” means any estates or interests in real property now owned or
hereafter acquired by Borrower or one of its Subsidiaries and the improvements
thereto.

 

“Record” means information that is inscribed on a tangible medium or that is
stored in an electronic or other medium and is retrievable in perceivable form.

 

“Refinancing Indebtedness” means refinancings, renewals, or extensions of
Indebtedness (other than prepetition Indebtedness of any Debtor) so long as:

 

Schedule 1.1

Page - 29- 

(a)        such refinancings, renewals, or extensions do not result in an
increase in the principal amount of the Indebtedness so refinanced, renewed, or
extended, other than by the amount necessary to pay any premiums paid thereon
and the fees and expenses incurred in connection therewith and by the amount of
unfunded commitments with respect thereto,

 

(b)        such refinancings, renewals, or extensions do not result in a
shortening of the average weighted maturity (measured as of the refinancing,
renewal, or extension) of the Indebtedness so refinanced, renewed, or extended,
nor are they on terms or conditions that, taken as a whole, are or could
reasonably be expected to be more restrictive to the Loan Parties or materially
adverse to the interests of the Agent or Lenders,

 

(c)        if the Indebtedness that is refinanced, renewed, or extended was
subordinated in right of payment to the Obligations, then the terms and
conditions of the refinancing, renewal, or extension must include subordination
terms and conditions that are at least as favorable to the Lender Group as those
that were applicable to the refinanced, renewed, or extended Indebtedness,

 

(d)        the Indebtedness that is refinanced, renewed, or extended (i) is not
recourse to any Person that is liable on account of the Obligations other than
those Persons which were obligated with respect to the Indebtedness that was
refinanced, renewed, or extended and (ii) will not have any guarantors that did
not guarantee the Indebtedness that was refinanced, renewed, or extended, and

 

(e)       such refinancings, renewals, or extensions do not result in
Indebtedness (i) with a stated maturity prior to the stated maturity of the
Indebtedness so refinanced, renewed, or extended or (ii) that is secured by any
collateral that did not secure the Indebtedness so refinanced, renewed, or
extended and, for the avoidance of doubt, if the Indebtedness so refinanced,
renewed, or extended is unsecured, the new Indebtedness will not be secured.

 

“Registrations” means all Permits and exemptions issued or allowed by any
Governmental Authority (including but not limited to new drug applications,
abbreviated new drug applications, biologics license applications,
investigational new drug applications, over-the-counter drug monograph, device
pre-market approval applications, device pre-market notifications,
investigational device exemptions, product recertifications, manufacturing
approvals and authorizations, CE Marks, pricing and reimbursement approvals,
labeling approvals or their foreign equivalent, controlled substance
registrations, and wholesale distributor permits) held by, or applied by
contract to, any Loan Party or any of its Subsidiaries, that are required for
the research, development, manufacture, distribution, marketing, storage,
transportation, use and sale of the Products of any Loan Party or any of its
Subsidiaries.

 

“Regulatory Action” means a governmental administrative or regulatory action,
proceeding or investigation related to the safety, efficacy, manufacture,
marketing, sale and/or reimbursement of one or more Products.

 

“Regulatory Authority” means the U.S. Food and Drug Administration or any
successor thereto or any comparable Governmental Authority that is concerned
with the safety, efficacy, reliability, manufacture, sale, advertising,
promotion, reimbursement, import, export or marketing of medical products or
drugs.

 

“Regulatory Matters” means governmental administrative or regulatory matters
related to or as a result of relevant Health Care Laws.

 

“Related Fund” means any Person (other than a natural person) that is engaged in
making, purchasing, holding or investing in bank loans and similar extensions of
credit in the ordinary course and that is administered, advised or managed by
(a) a Lender, (b) an Affiliate of a Lender or (c) an

 

Schedule 1.1

Page - 30- 

entity or an Affiliate of an entity that administers, advises or manages a
Lender.

 

“Related Parties” with respect to any Person, means such Person's Affiliates and
the directors, officers, employees, partners, agents, trustees, administrators,
managers, advisors and representatives of such Person and its Affiliates.

 

“Remedial Action” means all actions taken to (a) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate, or in any way address a release of
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) restore or reclaim natural resources or the
environment, (d) perform any pre-remedial studies, investigations, or
post-remedial operation and maintenance activities, or (e) conduct any other
actions with respect to a release of Hazardous Materials, in each case as
required by Environmental Laws.

 

“Reorganization Plan” means a chapter 11 plan or plans filed in any of the
Cases.

 

“Replacement Lender” has the meaning specified therefor in Section ‎2.13(b) of
the Agreement.

 

“Required Lenders” means, at any time, Lenders having or holding more than 50%
of the aggregate Loans and undrawn Commitments of all Lenders; provided, that
(i) the Loans and undrawn Commitments of any Defaulting Lender shall be
disregarded in the determination of the Required Lenders and (ii) at any time
there are 2 or more Lenders, “Required Lenders” must include at least 2 Lenders
(who are not Affiliates of one another).

 

"Replacement Sale Agreement" means one or more sale agreements entered into
within five days following the termination, rescission or revocation of the
Stalking Horse Sale Agreement or Overbid Sale Agreement, as the case may be,
collectively with all schedules and exhibits thereto and all other agreements,
documents and instruments related thereto and executed and/or delivered in
connection therewith, which Replacement Sale Agreement is an Acceptable
Alternative Sale Agreement, as such Replacement Sale Agreement may be amended,
supplemented and/or modified from time to time as permitted by the Agreement.

 

“Requirement of Law” means, as to any Person, any law (statutory or common),
ordinance, treaty, rule, regulation, order, policy, other legal requirement or
determination of an arbitrator or of a Governmental Authority, in each case
applicable to or binding upon such Person or any of its Property or Products or
to which such Person or any of its Property or Products is subject, including
all applicable Health Care Laws.

 

“Restricted Payment” means, as to any Person (a) any dividend or other
distribution (whether in cash, securities or other property) on any Equity
Interest in such Person (except those payable solely in its Equity Interest of
the same class), (b) any payment by such Person on account of (i) the purchase,
redemption, retirement, defeasance, surrender, cancellation, termination or
acquisition of any Equity Interest in such Person or any claim respecting the
purchase or sale of any Capital Stock in such Person, or (ii) any option,
warrant or other right to acquire any Equity Interest in such Person, (c) any
management fees, salaries or other fees or compensation to any Person holding
any Equity Interest in a Loan Party or a Subsidiary or an Affiliate of a Loan
Party or an Affiliate of any Subsidiary of a Loan Party (in each case, other
than (A) payments of salaries and customary bonuses to individuals, (B)
directors fees, (C) advances and reimbursements to employees or directors and
(D) customary indemnities to employees and directors, all in the Ordinary Course
of Business), (d) any lease or rental payments to an Affiliate or a Subsidiary
of a Loan Party, or (e) repayments of or debt service on loans or other

 

Schedule 1.1

Page - 31- 

indebtedness (other than “earnouts” and similar payment obligations) held by any
Person holding any Equity Interest in a Loan Party or a Subsidiary of a Loan
Party, an Affiliate of a Loan Party or an Affiliate of any Subsidiary of a Loan
Party (other than in respect of any Permitted Indebtedness). For purposes of
this definition, “Affiliate” of Borrower, any Loan Party or any of their
respective Subsidiaries shall not include any Permitted Holder.

 

"Sale Agreement" means the Stalking Horse Sale Agreement, an Overbid Sale
Agreement or a Replacement Sale Agreement.

 

“Sale Order” means the form of order attached as Exhibit 4 to the Stalking Horse
Sale Agreement as in effect on the date hereof, or once entered, the order of
the Bankruptcy Court, which order shall be substantially in the form attached as
Exhibit 4 to the Stalking Horse Sale Agreement as in effect on the date hereof,
with such changes as may be required by the Bankruptcy Court that are in form
and substance acceptable to the Lenders.

 

“Sale Procedures” means the bidding procedures set forth in the Sale Procedures
Order, to be entered by the Bankruptcy Court.

 

“Sale Procedures Order” means the form of order attached as Exhibit 5 to the
Stalking Horse Sale Agreement as in effect on the date hereof, or once entered,
the order of the Bankruptcy Court, which order shall be substantially in the
form attached as Exhibit 5 to the Stalking Horse Sale Agreement as in effect on
the date hereof, with such changes as may be required by the Bankruptcy Court
that are in form and substance reasonably acceptable to the Lenders.

 

“Sanctioned Entity” means (a) a country or a government of a country, (b) an
agency of the government of a country, (c) an organization directly or
indirectly controlled by a country or its government or (d) a Person resident in
or determined to be resident in a country, in each case, that is subject to a
comprehensive country sanctions program administered and enforced by OFAC
(currently, such programs target Crimea, Cuba, Iran, North Korea, Sudan and
Syria).

 

“Sanctioned Person” means a person named on the list of Specially Designated
Nationals maintained by OFAC.

 

“S&P” has the meaning specified therefor in the definition of Cash Equivalents.

 

“SEC” means the United States Securities and Exchange Commission and any
successor thereto.

 

“Secured Parties” means, collectively, the Lenders, the Agent and any other
holder of the Obligations, and “Secured Party” means any one of them.

 

“Securities Account” means a securities account (as that term is defined in the
Code).

 

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and the rules and regulations promulgated thereunder, and any successor statute.

 

“Services Agreement” means that certain Services Agreement, dated as of July 27,
2018, between Nalpropion and Pernix Therapeutics, LLC, as amended by that
certain Amendment No. 1 to Services Agreement, as further amended by that
certain Amendment No. 2 to Services Agreement, and as further amended,
supplemented or otherwise modified from time to time.

 

“Silenor” means the prescription pharmaceutical product containing doxepin and

 

Schedule 1.1

Page - 32- 

marketed under the Silenor® trademark.

 

“Silenor Assets” means with respect to Borrower or any Subsidiary of Borrower,
its right, title and interest in, to and under all personal property consisting
of, relating to, or developed or used in connection with Silenor, whether now
owned or existing or hereafter acquired or arising and wherever located,
including all proceeds, products, accessions, rents, profits of or in respect of
any of the foregoing, without limitation, the Intellectual Property rights of
Borrower or any of its Subsidiaries relating to Silenor and all rights of
Borrower or any of its Subsidiaries under and arising out of the Silenor
Contracts.

 

“Silenor Contracts” means (i) the License Agreement dated as of August 25, 2003,
between ProCom One, Inc. and Pernix Sleep, Inc. (“Pernix Sleep”) (as successor
in interest); (ii) the License Agreement dated as of June 7, 2011, between
Paladin Labs Inc. and Pernix Sleep (as successor in interest); (iii) the License
Agreement dated as of April 26, 2012, between CJ CheilJedang Corporation and
Pernix Sleep (as successor in interest); (iv) the Settlement and License
Agreement dated as of July 17, 2012, by and among ProCom One, Inc., Mylan Inc.,
Mylan Pharmaceuticals, Inc. and Pernix Sleep (as successor in interest); (v) the
Manufacturing Services Agreement dated as of February 1, 2006 between Patheon
Pharmaceuticals Inc. and Pernix Sleep (as successor in interest); (vi) the
Manufacturing Services Agreement dated as of July 17, 2012, between Mylan
Pharmaceuticals Inc. and Pernix Sleep (as successor in interest); (vii) the
Supply Agreement dated as of June 7, 2011, between Paladin Labs Inc. and Pernix
Sleep (as successor in interest); (viii) the Supply Agreement dated as of April
26, 2012, between CJ CheilJedang Corporation and Pernix Sleep (as successor in
interest); (ix) the Purchase Agreement dated as of June 7, 2011, between Paladin
Labs Inc. and Pernix Sleep (as successor in interest); (x) any other contracts
relating to the Silenor Assets as of the Closing Date; and (xi) each amendment,
modification or restatement thereof or substitute agreement for any such
agreement specified in clauses (i) through (x).

 

“Specified Contracts” has the meaning specified therefor in Article 7 of the
Agreement.

 

“Stalking Horse Sale Agreement” means that certain Asset Purchase Agreement,
dated as of February 18, 2019, amount the Loan Parties and the other Debtors, as
sellers, and Phoenix Top Holdings LLC, as the buyer, as amended, restated,
supplemented or otherwise modified from time to time on terms and conditions
reasonably acceptable to the Required Lenders.

 

“Subsidiary” means, with respect to any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Equity Interests or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers, general partners or trustees (or
other governing body) thereof is at the time owned or controlled, directly or
indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of
such Person; or (iii) one or more Subsidiaries of such Person.

 

“Superpriority Claim” has the meaning specified therefor in the applicable DIP
Order.

 

“Taxes” means any taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed or levied by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein, and all interest, penalties or similar liabilities with respect
thereto.

 

“Tax Lender” has the meaning specified therefor in Section ‎14.2(a) of the
Agreement.

 

“TCA” means the Taxes Consolidation Act 1997 of Ireland.

 

“Trademarks” means any and all trademarks, trade names, registered trademarks,
trademark applications, service marks, registered service marks and service mark
applications, including

 

Schedule 1.1

Page - 33- 

(a) the trade names, registered trademarks, trademark applications, registered
service marks and service mark applications listed on Schedule 4.5 to the
Agreement, (b) all renewals thereof, (c) all income, royalties, damages and
payments now and hereafter due or payable under and with respect thereto,
including payments under all licenses entered into in connection therewith and
damages and payments for past or future infringements or dilutions thereof, (d)
the right to sue for past, present and future infringements and dilutions
thereof, (e) the goodwill of the business symbolized by the foregoing or
connected therewith, and (f) all rights corresponding thereto throughout the
world.

 

“Transactions” means collectively, (a) the entering into of the Loan Documents
to be executed on the Closing Date and the incurrence of the Loans, (b) the
repayment of all outstanding loans under the Prepetition Revolving Credit
Agreement, together with all accrued and unpaid interest on such loans and the
accrued and unpaid unused line fee thereunder on the Closing Date and (c) the
payment of fees, costs and expenses in connection with the foregoing and with
the Cases.

 

“Treximet Assets” means the Treximet Intellectual Property, all Inventory used
or held for use in the Treximet Business and the assets identified as the
Product Working Capital Assets in the Reference Statement, to the extent related
to the Treximet Business; provided that no Shared GTN Contract shall be a
Treximet Asset. Capitalized terms used in this definition shall have the meaning
specified therefor in the Stalking Horse Sale Agreement as in effect on the
Closing Date.

 

“Treximet Intercompany Note” means that certain promissory note dated as of
August 19, 2014 in the principal outstanding amount of $225,500,000 as of the
Petition Date executed by Pernix Ireland in favor of Borrower.

 

“TSA” means that certain Transitional Distribution Services Agreement, dated
January 6, 2019, between Nalpropion and Pernix Therapeutics, LLC, as amended,
supplemented or otherwise modified from time to time.

 

“United States” or “U.S.” means the United States of America.

 

“Voidable Transfer” has the meaning specified therefor in Section ‎17.8 of the
Agreement.

 

“Zohydro” means the pharmaceutical product containing hydrocodone birtartrate
and marketed under the Zohydro® trademark.

 

“Zohydro Assets” means, with respect to Borrower or any Subsidiary of Borrower,
its right, title and interest in, to and under all personal property consisting
of, relating to, or developed or used in connection with Zohydro, whether now
owned or existing or hereafter acquired or arising and wherever located,
including, without limitation, all proceeds, products, accessions, rents,
profits of or in respect of any of the foregoing, the Intellectual Property of
Borrower or any of its Subsidiaries relating to Zohydro and all rights of
Borrower or any of its Subsidiaries under and arising out of the Zohydro
Contracts.

 

“Zohydro Contracts” means (i) the Asset Purchase Agreement dated as of March 10,
2015 by and among Pernix Ireland Pain (as successor in interest to Pernix
Ireland Limited, a private company limited by shares incorporated under the laws
of the Republic of Ireland and including any permitted assignees) and Zogenix
(as amended, restated or otherwise modified, subject to the proviso to clause
(v) of this definition, the “Zogenix Purchase Agreement”), (ii) the License
Agreement between Elan Pharma International Limited and Pernix Ireland Pain,
dated as of November 27, 2007, (iii) the Commercial Manufacturing and Supply
Agreement between Daravita Limited and Pernix Ireland Pain, dated as of March 5,
2015, (iv) each other contract relating to the Zohydro Assets existing on the
Closing

 

Schedule 1.1

Page - 34- 

Date, and (v) each amendment, modification or restatement thereof or substitute
or similar agreement for any such agreement specified in clauses (i) through
(iv) above; provided, that the terms of any such amendment, modification,
restatement or substitute agreement not made in the Ordinary Course of Business
(x) shall be no more restrictive, taken as a whole, than the existing terms of
the agreement being so amended, modified, restated or substituted, as the case
may be and (y) shall not be materially adverse to the Agent or the Lenders.

 

“Zogenix” means Zogenix, Inc., a Delaware corporation.

 

“Zogenix Purchase Agreement” has the meaning specified in the definition of
“Zohydro Contracts”.

 

Schedule 1.1

Page - 35- 

Schedule 3.1

 

Conditions Precedent to Closing Date Loan

 

The occurrence of the Closing Date and the obligation of each Lender to make the
Closing Date Loans provided for hereunder is subject to the fulfillment, to the
satisfaction of Agent and each Lender, of each of the following conditions
precedent (the making of such initial extensions of credit by a Lender being
conclusively deemed to be its satisfaction or waiver of the conditions
precedent):

 

(a)                [Reserved];

 

(b)                Agent shall have received each of the following documents, in
form and substance satisfactory to Agent, duly authorized, executed and
delivered by each of the parties thereto, and each such document shall be in
full force and effect:

 

(i)                 the Guaranty and Security Agreement,

 

(ii)               the Intercompany Subordination Agreement,

 

(iii)             a completed Perfection Certificate for each of the Loan
Parties, and

 

(iv)              Notes executed by the Borrower for the account of each Lender
which has requested a note at least three (3) Business Days prior to the Closing
Date;

 

(c)                Agent shall have received a certificate from the Secretary of
each Loan Party (i) attesting to the resolutions of its Board of Directors
authorizing its execution, delivery, and performance of the Loan Documents to
which it is a party, (ii) authorizing its Authorized Persons to execute the
same, and (iii) attesting to the incumbency and signatures of such Authorized
Persons;

 

(d)                Agent shall have received copies of each Loan Party’s
Governing Documents, as amended, modified, or supplemented to the Closing Date,
which Governing Documents shall be certified by the Secretary of such Loan Party
and with respect to Governing Documents of a Loan Party that are charter
documents, certified (if applicable in such Loan party’s jurisdiction of
formation) as of a recent date (not more than 30 days prior to the Closing Date)
by the appropriate government official;

 

(e)                To the extent available in the relevant jurisdiction, Agent
shall have received a certificate of good standing (or equivalent, to the extent
the concept is applicable) as of a recent date with respect to each Loan Party,
such certificate to be issued by the relevant authority of the jurisdiction of
organization of such Loan Party;

 

(f)                 Agent shall have received an opinion of the Loan Parties’
counsel in form and substance reasonably satisfactory to the Required Lenders;

 

(g)                Borrower shall have paid all Lender Group Expenses incurred
in connection with the transactions evidenced by the Agreement and the other
Loan Documents to the extent invoiced at least three (3) Business Days prior to
the Closing Date;

 

(h)                Agent shall have received the following, each of which shall
be original, .PDF or facsimile copies or delivered by other electronic method
(followed promptly by originals) unless otherwise specified, each properly
executed, where applicable, and each in form and substance reasonably
satisfactory to the Required Lenders:

 

(i)       a Notice of Borrowing with respect to the Closing Date Loans, executed

 

Schedule 3.1

Page - 1- 

by an Authorized Person of Borrower and in accordance with the requirements of
the Agreement;

 

(ii)       executed counterparts of the Agreement that, when taken together,
bear the signatures of an Authorized Person of Borrower, Agent and each Lender;
and

 

(iii)       executed counterparts of the Guaranty and Security Agreement duly
executed by an Authorized Person of each Loan Party party thereto;

 

(i)       Agent shall have received at least three (3) Business Days prior to
the Closing Date, all documentation and other information with respect to the
Loan Parties reasonably requested by Agent in writing at least ten (10) Business
Days prior to the Closing Date, required under applicable “know your customer”
and anti-money laundering rules and regulations, including the USA PATRIOT Act;

 

(j)       Borrower and its Subsidiaries shall have received all governmental and
third party approvals (including shareholder approvals, landlord consents and
other consents) necessary or, in the reasonable opinion of the Required Lenders,
advisable in connection with the Agreement or the transactions contemplated by
the Loan Documents, which shall all be in full force and effect, and all
applicable waiting periods shall have expired without any action being taken or
threatened by any competent authority which would restrain, prevent or otherwise
impose adverse conditions on the Agreement or the transactions contemplated by
the Loan Documents;

 

(k)       All outstanding loans under the Prepetition Revolving Credit
Agreement, together with all accrued and unpaid interest on such loans and the
accrued and unpaid unused line fee thereunder on the Closing Date, shall have
been paid to the Prepetition Revolving Secured Parties on account of such
Prepetition Revolving Obligations;

 

(l)       Agent shall have received the results of a search of the Uniform
Commercial Code filings (or equivalent filings, to the extent available in the
applicable jurisdiction) and judgment filings made with respect to the Loan
Parties in the states (or other jurisdictions) of formation of such Persons and
in which the chief executive office of each such Person is located, and in such
other jurisdictions as may be reasonably required by Agent, together with copies
of the financing statements (or similar documents, to the extent available in
the applicable jurisdiction) disclosed by such search, and accompanied by
evidence satisfactory to the Agent that the Liens indicated in any such
financing statement (or similar document) would constitute Permitted Liens or
have been or will be contemporaneously with the funding of the initial extension
of credit released or terminated;

 

(m)       Agent and Lenders shall have received the Approved Budget, which shall
be acceptable to the Lenders in their reasonable discretion and which shall be
substantially similar in form and substance to the proposed budget provided by
Borrower to the Lenders on January 4, 2019;

 

(n)       Borrower and its Subsidiaries shall have commenced the Cases with the
Bankruptcy Court and Borrower and its Subsidiaries shall each be a debtor and a
debtor-in-possession, the Cases shall not have been converted to one under
chapter 7 of the Bankruptcy Code or dismissed under section 1112 of the
Bankruptcy Code, and the Bankruptcy Court has not terminated any Debtor’s
exclusive right to file a Reorganization Plan;

 

(o)       No trustee or examiner with expanded powers pursuant to section
1106(b) of the Bankruptcy Code shall have been appointed or designated with
respect to any Debtor or its business, properties or assets;

 

Schedule 3.1

Page - 2- 

(p)       (i) All of the material “first day” orders and all related pleadings
(including a cash management order and any order establishing procedures for the
administration of any of the Cases) shall have been entered by the Bankruptcy
Court at the time of the commencement of the Cases (and if any such orders or
pleadings shall not have been entered by the Bankruptcy Court, the form of such
orders and pleadings have been submitted to the Bankruptcy Court for approval
together with all motions and documents in connection with such orders), and, in
each case, shall be in form and substance reasonably satisfactory to Agent and
shall provide the relief requested therein at the time of the commencement of
the Cases, and (ii) none of such orders shall have been amended or modified in a
material manner except as otherwise agreed to in writing by Agent in its
reasonable discretion;

 

(q)       Not later than 5 days following the Petition Date, entry of an order
of the Bankruptcy Court that is satisfactory in form and substance to the
Lenders and Agent in their or its sole discretion, as applicable (it being
understood and agreed that an order in the form set forth as Exhibit I-2 to the
Agreement shall, if entered by the Bankruptcy Court be deemed to be acceptable
to the Lenders and Agent) (the “Interim DIP Order”; and the date on which the
Interim DIP Order is entered, the “Interim DIP Order Entry Date”) on an
application or motion by the Debtors that is satisfactory in form and substance
to the Lenders and Agent in their or its sole discretion, as applicable, which
Interim DIP Order shall have been entered on such prior notice to such parties
as may be satisfactory to the Lenders and Agent in their or its sole discretion,
as applicable, which Interim DIP Order shall not have been vacated, reversed,
modified, amended or stayed in a manner materially adverse to Agent, except as
otherwise agreed to in writing by Agent in its reasonable discretion;

 

(r)       Borrower shall have retained a financial advisor acceptable to the
Lenders and Agent (provided, that the Lenders and Agent each acknowledge that
Guggenheim Securities, LLC is acceptable) and Agent and Lenders shall have been
provided reasonable access to such financial advisor; and

 

(s)       There shall be no actions, suits, or proceedings pending or, to the
knowledge of Borrower, after due inquiry, threatened in writing against a Loan
Party or any of its Subsidiaries that that challenge any Loan Document or any
transaction contemplated by this Agreement or the other Loan Documents.

 

(t)       The Loan Parties shall have entered into the Stalking Horse Sale
Agreement and delivered a true and correct copy thereof to the Agent.

 

Schedule 3.1

Page - 3- 

Schedule 3.2

 

Conditions Precedent to Each Delayed Draw Loan

 

The obligation of each Lender to make each Delayed Draw Loan and each
Incremental Loan provided for hereunder is subject to the fulfillment of each of
the following conditions precedent (the making of such extensions of credit by a
Lender being conclusively deemed to be its satisfaction or waiver of the
conditions precedent):

 

1.The proceeds of such Delayed Draw Loan or Incremental Loan shall be used in
accordance with Section 5.17 of the Agreement.

 

2.Borrower shall have paid all Lender Group Expenses incurred in connection with
such Delayed Draw Loan or Incremental Loan and the transactions related thereto
to the extent invoiced at least two (2) Business Days prior to the Funding Date.

 

3.Agent shall have received a duly executed Notice of Borrowing with respect to
such Delayed Draw Loan or Incremental Loan, executed by an Authorized Person of
Borrower and in accordance with the requirements of the Agreement and the amount
of such Delayed Draw Loan or Incremental Loan shall be consistent with the
Approved Budget then in effect, subject to Permitted Variances, for the two-week
period including the relevant Funding Date.

 

4.Agent shall have received a certificate duly signed by an Authorized Person of
Borrower confirming the satisfaction of the conditions set forth in Section 3.3
or Section 3.4, as applicable, and this Schedule 3.2.

 

5.There shall be no actions, suits, or proceedings pending or, to the knowledge
of Borrower, after due inquiry, threatened in writing against a Loan Party or
any of its Subsidiaries that that challenge (i) any Loan Document or any
transaction contemplated by this Agreement or the other Loan Documents or (ii)
to the extent in effect at such time, the Stalking Horse Sale Agreement or the
transactions contemplated thereby.

 

6.The Stalking Horse Sale Agreement shall be in full force and effect at such
time or, if the Stalking Horse Sale Agreement has been terminated, one or more
other Sale Agreements that are Acceptable Alternative Sale Agreements shall be
in full force and effect at such time. The Debtors shall be in compliance in all
material respects with the Sale Agreement(s) then in effect (except to the
extent such compliance has been waived by the buyer thereunder or as would not
give rise to any right of the buyer thereunder to terminate such Sale
Agreement).

 

7.Prior to the satisfaction of the Milestones set forth in clause (c) of
Schedule 5.22 to the Agreement, no more than $6,000,000 of Loans shall be made
(excluding Closing Date ABL Refinancing Loans), unless otherwise agreed by the
Lenders in their sole discretion.

 

Schedule 3.2

Page - 1- 

Schedule 4.1(c)

 

Capitalization of Subsidiaries

 

Subsidiary Authorized Capital Stock Percentage of Shares Owned Directly or
Indirectly by Pernix Therapeutics Holdings, Inc. Direct Parent Pernix
Manufacturing, LLC N/A 100% Pernix Holdco 3, LLC Pernix Holdco 3, LLC N/A 100%
Pernix Therapeutics Holdings, Inc. Pernix Holdco 2, LLC N/A 100% Cypress
Pharmaceuticals, Inc. Pernix Holdco 1, LLC N/A 100% Pernix Therapeutics, LLC
Pernix Ireland Limited (f/k/a Worrigan Limited) 100,000 ordinary shares
authorized, par value 1.00 euro. 100 shares outstanding owned by Pernix
Therapeutics Holdings, Inc. 100% Pernix Therapeutics Holdings, Inc. Pernix
Ireland Pain Limited (f/k/a Ferrimill Limited) 100,000 ordinary shares
authorized, par value 1.00 euro. 100 shares outstanding owned by   Pernix
Therapeutics Holdings, Inc. 100% Pernix Therapeutics Holdings, Inc. Pernix
Therapeutics, LLC N/A 100% Pernix Holdco 3, LLC PERNIX SLEEP, INC. 1,000 shares
of common stock authorized 100% Pernix Holdco 3, LLC Cypress Pharmaceuticals,
Inc. 100,000 shares of common stock authorized, 1,000 shares outstanding owned
by Pernix Holdco 3, LLC 100% Pernix Holdco 3, LLC Hawthorn Pharmaceuticals, Inc.
1,000 shares of common stock authorized, 1,000 shares owned by Pernix Holdco 2,
LLC 100% Pernix Holdco 2, LLC Macoven Pharmaceuticals, L.L.C. N/A 100% Pernix
Holdco 1, LLC GAINE, INC. 1,000,000 shares of common stock authorized 100%
Pernix Holdco 1, LLC Respicopea Inc. 10,000,000 shares of common stock
authorized 100% Pernix Holdco 1, LLC

Schedule 4.1(c)

Schedule 4.1(d)

 

Subscriptions, Options, Warrants, Calls

 

Options (for common stock of Pernix Therapeutics Holdings, Inc.):

 

Options:

 

Options Outstanding at December 31, 2017 1,042,000 Granted 556,000 Cancelled

(228,000)

Awards outstanding at September 30, 2018

1,370,000

Warrants:

 

Name of Warrant Holder Issue Date Expiration Date Underlying Shares Class of
Equity Oxford Finance LLC 8/2/2011 8/2/2021 929 Common stock of Pernix
Therapeutics Holdings, Inc. Oxford Finance LLC 8/2/2011 8/2/2021 1,393 Common
stock of Pernix Therapeutics Holdings, Inc. Silicon Valley Bank 8/2/2011
8/2/2021 1,161 Common stock of Pernix Therapeutics Holdings, Inc. Oxford Finance
LLC 12/19/2011 12/19/2021 598 Common stock of Pernix Therapeutics Holdings, Inc.
Silicon Valley Bank 12/19/2011 12/19/2021 299 Common stock of Pernix
Therapeutics Holdings, Inc. TOTALS     4,380  

 

Convertible Debt:

 

1.4.25%/5.25% Exchangeable Senior Notes due 2022 ($35,742,500 pro forma amount
outstanding, convertible into common stock of Pernix Therapeutics Holdings,
Inc.)

 

2.4.25% Convertible Senior Notes Due 2021 ($78,225,000 pro forma amount
outstanding, convertible into common stock of Pernix Therapeutics Holdings,
Inc.)

 

Schedule 4.1(d)

Schedule 4.5

 

Intellectual Property

 

Pernix Therapeutics, LLC

 

Patents Title Country Status Patent No. Appl. No Issue Date Process for
preparing tannate liquid and semi-solid dosage forms US Issued 7,094,429
10/921,438 08/22/2006 Process for preparing tannate tablet, capsule or other
solid dosage forms US Issued 7,273,623

10/269,027

 

09/25/2007 Tannate compositions, methods of making and methods of use US Issued
8,012,506 11/501,649 09/06/2011

 

Trademarks Mark Country Status Serial No. Reg. No. Reg. Date [image_011.gif] US
Registered 85251109 4076351 12/27/2011 [image_012.gif] KR Registered
40-2017-0120858 40-1419740 11/22/2018 Pernix US Registered 77779507 3897832
12/28/2010 PRESCRIPTIONS DIRECT US Registered 86757098 5024315 8/22/2016
Pediatex US Registered 75775487 2684051 04/04/2003 [image_002.jpg] US Registered
78176952 2764357 09/16/2003 Aldex US Registered 78126667 2748943 08/05/2003
Z-Cof US Registered 76258253 2738086 07/15/2003

 

Gaine, Inc (“Gaine”).

 

Patents Title Country Status Patent No. Appl. No Issue Date Antitussive
compositions US Issued/expired 6348470 09/381,841 02/19/2002

Schedule 4.5

Page - 1- 

Cypress Pharmaceuticals, Inc.

 

Patents Title Country Status Patent No. Appl. No Issue Date Hyaluronate
compositions US Issued 8,466,128 12/022,095 06/18/2013 Hyaluronate compositions
US Issued 9,107,882 13/915,818 08/18/2015 Hyaluronate compositions US Issued
9,937,134 14/803,841 4/10/2018 Hyaluronate compositions US Pending   15/948,598
  Phosphate-binding chitosan and uses thereof US Issued 7,943,597 12/099,433
05/17/2011 Phosphate-binding chitosan and uses thereof US Pending   13/544,775  
Phosphate-binding magnesium salts and uses thereof US Issued 8,247,000
12/422,012 08/21/2012 Phosphate-binding magnesium salts and uses thereof US
Issued 8,236,358 13/445,771 08/07/2012 Phosphate-binding magnesium salts and
uses thereof US Issued 9,339,481 13/856,084 5/17/2016 Phosphate-binding
magnesium salts and uses thereof US Issued 9,610,267 15/155,366 4/04/2017
Phosphate-binding magnesium salts and uses thereof US Issued 9,889,157
15/477,325   Phosphate-binding magnesium salts and uses thereof US Pending  
15/893,861   Phosphate-binding magnesium Salts and Uses Thereof AU Issued
2009344184 2009344184 8/25/2016 Phosphate-binding magnesium Salts and Uses
Thereof AU

Issued

 

2016213704 2016213704 1/12/2019 Phosphate-binding magnesium Salts and Uses
Thereof CA Pending   2756942  

 

 

Schedule 4.5

Page - 2- 

 

Patents Title Country Status Patent No. Appl. No Issue Date

Phosphate-binding magnesium Salts and Uses Thereof JP Issued 5878998 2015-104155
2/5/2016 Phosphate-binding magnesium Salts and Uses Thereof JP Pending  
2016-15699   Phosphate-binding magnesium Salts and Uses Thereof JP Pending  
2018-85300   Crystal polymorph of magnesium glycinate dihydrate and process for
its preparation US Issued

9,394,318

 

14/091,070 7/19/2016 Crystal polymorph of magnesium glycinate dihydrate and
process for its preparation US Issued 10,150,784 15/212,460 12/11/2018

 

Trademarks Mark Country Status Serial No. Reg. No. Reg. Date Cypress
Pharmaceutical, Inc. US Registered 75130214 2101153 09/30/1997

 

 

Domain Names Relating to Cypress Pharmaceuticals, Inc.

 

Domain Names eliphos.info eliphos.net

Schedule 4.5

Page - 3- 

Hawthorn Pharmaceuticals, Inc.

 

Trademarks Mark Country Status Serial No. Reg. No. Reg. Date Vituz US Registered
85615837 4440956 11/26/2013 Rezira US Registered 85384426 4303591 03/13/2013
Arbinoxa US Registered 85301155 4059980 11/22/2011 Zutripro US Registered
85384468 4105641 02/28/2012 [image_013.gif] US Registered 77785140 3749753
02/16/2010 [image_014.gif] US Registered 77763186 3749059 02/16/2010
[image_014.jpg] US Registered 76525101 2850561 06/08/2004

 

 

Domain Names relating to Hawthorn Pharmaceuticals, Inc.

 

Domain Names cypresspharmaceutical.com hawthornpharma.com icariron.com
icarrx.com zutripro.com

Pernix Sleep, Inc.

 

Patents PERNIX SLEEP, INC. OWNED PATENTS AND PATENT APPLICATIONS Title Country
Status Patent No. Appl. No Issue Date Methods of Improving the Pharmacokinetics
of Doxepin US Issued 7,915,307 11/781,165 3/29/2011 Methods of Improving the
Pharmacokinetics of Doxepin US Issued 9,572,814 13/653,213 2/21/2017 Methods of
Improving the Pharmacokinetics of Doxepin US Pending   15/436,293   Methods of
Improving the Pharmacokinetics of Doxepin CA Issued 2693992 2693992 1/31/2017
Low-dose Doxepin Formulations and Methods of Making and US Issued 9,532,971
13/898,364 1/3/2017

 

 

Schedule 4.5

Page - 4- 

 

Using the Same           Low-dose Doxepin Formulations and Methods of Making and
Using the Same US Issued 9,907,780 15/394,912 3/6/2018 Low-dose Doxepin
Formulations and Methods of Making and Using the Same US Pending   15/911,496  
Low-dose Doxepin Formulations and Methods of Making and Using the Same CA Issued
2721133 2721133 11/6/2018

 

 

PERNIX SLEEP CO-OWNED PATENT APPLICATIONS Title Country Status Patent No. Appl.
No Issue Date N-Desmethyl-Doxepin and Methods of Using the Same to Treat Sleep
Disorders US Pending   13/933,975   Ultra-Low Dose Doxepin and Methods of Using
the Same to Treat Sleep Disorders US Issued 9,907,779 14/045,645 3/6/2018
Ultra-Low Dose Doxepin and Methods of Using the Same to Treat Sleep Disorders US
Pending   15/911,832   Methods of Using Low-Dose Doxepin for the Improvement of
Sleep US Issued 8,513,299 11/804,720 8/20/2013 Methods of Using Low-Dose Doxepin
for the Improvement of Sleep US Issued 9,107,898 13/492,559 8/18/2015 Methods of
Using Low-Dose Doxepin for the Improvement of Sleep US Issued 9,486,437
14/804,595 11/8/2016 Methods of Using Low-Dose Doxepin for the Improvement of
Sleep US Issued 9,861,607 15/344,710 1/9/2018 Methods of Using US Allowed  
15,864,440  

 

 

Schedule 4.5

Page - 5- 

 

 

PERNIX SLEEP CO-OWNED PATENT APPLICATIONS Title Country Status Patent No. Appl.
No Issue Date

Low-Dose Doxepin for the Improvement of Sleep           Methods of Using
Low-Dose Doxepin for the Improvement of Sleep CA Pending   2687118   Methods of
Using Low-Dose Doxepin for the Improvement of Sleep JP Pending   2017-243448  
Doxepin Isomers and Isomeric Mixtures and Methods of Using the Same to Treat
Sleep Disorders US Issued 9,463,181 13/692,415 10/11/2016 Doxepin Isomers and
Isomeric Mixtures and Methods of Using the Same to Treat Sleep Disorders US
Issued 9,801,847 15/289,288 10/31/2017 Doxepin Isomers and Isomeric Mixtures and
Methods of Using the Same to Treat Sleep Disorders US Issued 9,498,462
13/692,715 11/22/2016 Doxepin Isomers and Isomeric Mixtures and Methods of Using
the Same to Treat Sleep Disorders US Issued 10,143,676 15/357,171 12/4/2018
Doxepin Isomers and Isomeric Mixtures and Methods of Using the Same to Treat
Sleep Disorders US Allowed   15/797,195   Doxepin Isomers and Isomeric Mixtures
and Methods of Using the Same to Treat Sleep Disorders US Pending   16/217,584  
Methods of Using Low-Dose Doxepin for the Improvement of US Pending   13/764,467
 

 

Schedule 4.5

Page - 6- 

 

PERNIX SLEEP CO-OWNED PATENT APPLICATIONS Title Country Status Patent No. Appl.
No Issue Date

Sleep           Low-Dose Doxepin for Treatment of Sleep Disorders in Elderly
Patients US Pending   14/789,911   Combination Therapy Using Low-Dose Doxepin
for the Improvement of Sleep US Pending   13/612,328   Low-Dose Doxepin
Formulations, Including Buccal, Sublingual and Fast-Melt Formulations, and Uses
of the Same to Treat Insomnia US Pending   12/301,223   Low-Dose Doxepin
Formulations, Including Buccal, Sublingual and Fast-Melt Formulations, and Uses
of the Same to Treat Insomnia CA Pending   2687124  

  

Trademarks PERNIX SLEEP, INC.  OWNED MARKS Mark Country Status Serial No. Reg.
No. Reg. Date SILENOR US Registered 78/640,504 3477986 7/29/2008 SILENOR CA
Registered 1280190 TMA744387 7/30/2009 SILENOR EU Registered 4737284 4737284
12/11/2006 SILENOR KR Pending 2012-57808     SILENOR (Korean Transliteration) KR
Registered 40-2012-0058236 40-1168898 3/25/2016

SILENOR

A Good Day Starts at Night

US Registered 86570195 4,884,994 11/3/2015 A Good Day Starts at Night US
Registered 86570159 4862464 12/1/2015 A Good Day Starts at Night KR Pending
40-2015-0069145    

 

 

Schedule 4.5

Page - 7- 

Trademarks PERNIX SLEEP, INC.  OWNED MARKS Mark Country Status Serial No. Reg.
No. Reg. Date [image_015.gif] US Registered 86714322 4967840 5/31/2016
[image_016.gif] CA Pending 1742897     [image_017.gif] KR Registered
40-2015-0080234 40-1194101 8/3/2016

 

 

 

PERNIX SLEEP LICENSED PATENTS Title Country Status Patent No. Appl. No Issue
Date Treatment of Transient and Short-term Insomnia US Issued 6,211,229
09/506,348 4/3/2001 Treatment for Insomnia US Issued 6,344,487 09/586,706
2/5/2002

 

Domain Names Relating to Silenor®

 

Domain Names 4sleeptonight.com 4sleeptonite.com forsleeptonight.com
forsleeptonite.com silenor.com silenor.info silenor.net silenor.org

Schedule 4.5

Page - 8- 

Pernix Ireland Limited

 

Trademarks PERNIX IRELAND LIMITED OWNED TRADEMARKS Mark Country Status Serial
No. Reg. No. Reg. Date [image_018.gif] US Registered 77583186 3583386 3/3/2009
Treximet US Registered 77230134 3493620 8/26/2008 Treximet US Registered
87822189 5580314 10/9/2018

 

 

 

Patents PERNIX IRELAND LIMITED IN-LICENSED PATENTS Title Country Status Patent
No. Appl. No Issue Date Formulations of 5-HT agonist and NSAID for treatment of
migraine US Issued 5,872,145 08/907,826 2/16/1999 Anti-migraine methods and
compositions using 5-HT agonists with long-acting NSAIDS US Issued 6,060,499
09/151,912 5/9/2000 Methods of treating headaches using 5-HT agonists in
combination with long-acting NSAIDS US Issued 6,586,458 09/559,753 7/01/2003
Multilayer dosage forms containing NSAIDS and Triptans US Issued 7,332,183
10/741,592 2/19/2008 Methods of treating headaches using 5-HT agonist in
combination with long-acting NSAIDS US Issued 8,022,095 10/414,493 9/20/2011

Schedule 4.5

Page - 9- 

Pernix Ireland Pain Designated Activity Company

 

PERNIX IRELAND PAIN DESIGNATED ACTIVITY COMPANY OWNED PATENTS Title Country
Status Patent No. Appl. No Issue Date Treating pain in patients with hepatic
impairment US Pending   13/950,969   Treating pain in patients with hepatic
impairment US Pending/Allowed   14/523,162   Treating pain in patients with
hepatic impairment US Issued 9,265,760 14/815,219 2/23/2016 Treating pain in
patients with hepatic impairment US Issued 9,339,499 14/978,217 5/17/2016
Treating pain in patients with hepatic impairment US Issued 9,326,982 14/978,223
5/3/2016 Treating pain in patients with hepatic impairment US Issued 9,333,201
14/978,302 5/10/2016 Treating pain in patients with hepatic impairment US Issued
9,421,200 15/154,524 8/23/2016 Treating pain in patients with hepatic impairment
US Issued 9,433,619 15/154,527 9/6/2016 Treating pain in patients with hepatic
impairment US Issued 9,421,201 15/160,359 8/23/2016 Treating pain in patients
with hepatic impairment US Issued 9,522,147 15/243,432 12/20/2016 Treating pain
in patients with hepatic impairment US Issued 9,610,286 15/340,502 4/04/2017
Treating pain in patients with hepatic impairment US Issued 10,028,946
15/477,561 7/24/2018 Treating pain in patients with hepatic impairment US
Pending   16/042,196  

Schedule 4.5

Page - 10- 

PERNIX IRELAND PAIN DESIGNATED ACTIVITY COMPANY OWNED TRADEMARKS Mark Country
Status Serial No. Reg. No. Reg. Date Zohydro US Registered 85340408 4538117
5/27/2014 Zohydro ER US Registered 85646921 4534120 5/20/2014 Zohydro CA Pending
1660668     Zohydro ER CA Pending 1660669  

 

 

Patents PERNIX IRELAND PAIN DESIGNATED ACTIVITY COMPANY IN-LICENSED PATENTS
Title Country Status Patent No. Appl. No Issue Date Multiparticulate modified
release composition US Issued 6,228,398 09/566,636 5/8/2001 Multiparticulate
modified release composition US Issued 6,902,742 10/331,754 6/7/2005 Abuse
resistant pharmaceutical compositions US Issued 9,132,096 14/484,761 9/15/2015
Abuse resistant pharmaceutical compositions US Issued 9,452,163 14/851,019
9/27/2016 Abuse resistant pharmaceutical compositions US Issued 9,486,451
14/851,056 11/8/2016 Abuse resistant pharmaceutical compositions US Issued
9,713,611 15/172,643 7/25/2017 Abuse resistant pharmaceutical compositions US
Issued 10,092,559 15/626,268 10/9/2018 Abuse resistant pharmaceutical
compositions US Pending   16/124,899  

 

Trademarks PERNIX IRELAND PAIN DESIGNATED ACTIVITY COMPANY LICENSED TRADEMARKS
Mark Country Status Serial No. Reg. No. Reg. Date BeadTek US Registered 86452063
5,413,163 2/27/2018 [image_005.gif] US Registered 86530165 5,469,955 5/15/2018

Schedule 4.5

Page - 11- 

Pernix Therapeutics Holding, Inc.

 

Domain Names Relating to Pernix Therapeutics Holdings, Inc.

 

Domain Names AGOODDAYSTARTSATNIGHT.COM ANOTHERNOTRIGHTMORNING.COM
CII-HYDROCODONE.COM CII-HYDROCODONE-AVAILABLE.COM CYPRESSRX.COM
EXTENDEDRELEASEHYDROCODONE.COM formulationmatters.com
HAWTHORNPHARMACEUTICALS.COM HAWTHORNRX.COM HYDROCODONE-CII.COM HYLIRA.COM
MACOVENPHARMA.COM MOREFORMYMIGRAINE.COM MORETHANATRIPTAN.COM
mychronicpainfeedback.com nallpropion.com nalpropion.net nalpropion.org
nalpropion.us nalpropione.com nalproprion.com NOSUBSTITUTEFORSLEEP.COM
painoutlifein.com PERNIXMANUFACTURING.COM PERNIXMFG.COM PERNIXPRODUCTS.COM
PERNIXTHERA.COM PERNIXTHERAPEUTICS.COM PERNIXTX.BIZ PERNIXTX.COM PERNIXTX.INFO
PERNIXTX.NET PERNIXTX.ORG

 

 

Schedule 4.5

Page - 12- 

Domain Names PERNIXTX.US ptxinet.com PTXMANUFACTURING.COM PTXTEST.COM
PTXTEST2.COM PXTX.CO reliefinreach.com reliefwithinreach.com REZIRA.COM
RX-SLEEP-AID.COM serioussleeping.com serioussleeping.info serioussleeping.net
serioussleeping.org SILENORSAVINGS.COM SIMPLIFYMYMIGRAINE.COM
SLEEP-TREATMENT-HELP.COM treatinsomniadifferently.com treatwithtreximet.com
TREXIMET.COM TROUBLESTAYINGASLEEP.COM true12hour.com trytreximet.com
WANTTOSLEEPMORE.COM yourpatientssleep.com ZOHIDRO.COM ZOHYDRO.COM ZOHYDRO.INFO
ZOHYDRO.MOBI ZOHYDRO.NET ZOHYDRO.ORG ZOHYDRO.US ZOHYDROER.COM ZOHYDRO-ER.COM
ZOHYDROER.NET ZOHYDRO-ER.NET

 

 

Schedule 4.5

Page - 13- 

Domain Names ZOHYDROERCOVERAGE.COM ZOHYDROERHCP.COM ZOHYDROERREMS.COM
ZOHYDRO-ER-REMS.COM ZOHYDROERREMS.ORG ZOHYDRO-ER-REMS.ORG ZOHYDROHCP.COM
ZOHYDROREMS.COM ZOHYRDO.COM ZUTRIPRO.COM ZYBERPHAR.COM ZYBERPHARMACEUTICALS.COM
ZYBERRX.COM

IP Licenses

 

Pernix Therapeutics

 

1.Product License and Distribution Agreement dated as of August 19, 2014, by and
between Pernix Ireland Limited (f/k/a Worrigan Limited) and Pernix Therapeutics,
LLC.

 

2.Product License and Distribution Agreement dated as of April 24, 2015, by and
between Ferrimill Limited and Pernix Therapeutics, LLC.

 

3.Settlement and License Agreement dated January 26, 2018 by and among Pernix
Ireland Pain DAC, Pernix Therapeutics, LLC, Recro Gainesville LLC and Actavis
Laboratories FL, Inc.

 

4.Settlement Agreement dated September 29, 2016 by and between Recro Gainesville
LLC and Alvogen Malta Operations Ltd.

 

PERNIX SLEEP, INC.

 

1.License Agreement dated August 25, 2003 by and between ProCom One and Somaxon.

 

2.Amended and Restated License Agreement between Somaxon and ProCom dated
September 15, 2010.

 

3.License Agreement dated June 7, 2011, by and between Somaxon and Paladin Labs
Inc.

 

4.License Agreement dated April 26, 2012, by and between Somaxon and CJ
CheilJedang Corporation assigned from CJ Cheiljedang Corporation to CJ
HealthCare Corporation on April 1, 2014, then assigned to Kolmar Korea Co., Ltd.
on February 20, 2018 under a share purchase agreement

 

5.Amendment Agreement dated as of March 2, 2015 by and between CJ HealthCare
Corporation and Pernix Therapeutics Holdings, Inc.

 

6.Amendment No. 2 to the License Agreement dated as of February 15, 2016 by and
between Pernix Therapeutics Holdings., Inc. and CJ HealthCare Corporation.

 

7.Settlement and License Agreement dated July 18, 2012, by and between Somaxon,
ProCom One, Inc., Zydus Pharmaceuticals, Inc. and Cadila Healthcare Ltd.

 

Schedule 4.5

Page - 14- 

8.Settlement and License Agreement dated July 18, 2012, by and between Somaxon,
ProCom One, Inc., Par Pharmaceutical, Inc. and Par Pharmaceutical Companies

 

9.Settlement and License Agreement dated July 17, 2012, by and between Somaxon,
ProCom One, Inc., Mylan Inc. and Mylan Pharmaceuticals Inc.

 

10.Settlement and License Agreement dated February 1, 2013, by and between
Somaxon, ProCom One, Inc., Actavis Elizabeth LLC and Actavis Inc.

 

11.Product License and Distribution Agreement dated on September 12, 2017,
between Pernix Sleep, Inc. and Pernix Therapeutics LLC

 

Macoven Pharmaceuticals, L.L.C.

 

1.Midrin License, Distribution and Supply Agreement dated March 25, 2013 by and
between Macoven Pharmaceuticals, L.L.C. and ECI Pharmaceuticals, LLC.

 

2.First Amendment to the Midrin License, Distribution and Supply Agreement,
dated December 23, 2014, by and between Macoven Pharmaceuticals, L.L.C. and ECI
Pharmaceuticals, LLC.

 

Respicopea Inc.

 

1.Amended and Restated Patent License Agreement dated May 14, 2012 between
Respicopea Limited and Respicopea Inc.

 

Pernix Ireland Limited

 

1.License Agreement dated November 27, 2007 by and between Zogenix, Inc and
Daravita Limited, assigned to Pernix Ireland Limited under an Asset Purchase
Agreement dated March 10, 2015 by and between Pernix Ireland Limited and
Zogenix, Inc. wherein Pernix acquired a license to the marks herein. Pernix
Ireland Limited, a subsidiary of Pernix Therapeutics Holdings, Inc., assigned
rights acquired from Zogenix to Pernix Ireland Pain Limited, a separate
subsidiary of Pernix Therapeutics Holdings, Inc. As of August 21, 2017, Pernix
Ireland Pain Limited is now Pernix Ireland Pain Designated Activity Company

 

2.Product Development and Commercialization Agreement dated June 2003 by and
between Pozen, Inc. and Glaxo Group Ltd. (amended as of May 2014 and July 2014)
was assigned by GSK to Pernix Ireland Limited (May 14, 2014).

 

a.Settlement Agreement dated July 8, 2013 by and among Pozen Inc, Sun Pharma
Global FZE and Sun Pharmaceutical Industries Ltd.

 

b.Settlement Agreement dated April 13, 2010 by and between Pozen Inc. and Teva
Pharmaceuticals USA, Inc.

 

3.License Agreement dated November 27, 2007 by and between Elan Pharma
International Ltd. and Zogenix, Inc, as assigned to Pernix Ireland Limited under
the Asset Purchase Agreement dated March 10, 2015 by and between Pernix Ireland
Limited and Zogenix, Inc. Pernix Ireland Limited, a subsidiary of Pernix
Therapeutics Holdings, Inc., assigned rights acquired from Zogenix to Pernix
Ireland Pain Limited, a separate subsidiary of Pernix Therapeutics Holdings,
Inc.

 

a.First Amendment to License Agreement dated as of September 28, 2009 by and
between Elan Pharma International Ltd. and Zogenix, Inc.

 

b.Second Amendment to License Agreement dated as of March 12, 2013 by and
between Alkermes Pharma Ireland Limited and Zogenix, Inc.

 

c.Third Amendment to License Agreement Dated as of September 5, 2014 by and
between Alkermes Science One Limited and Zogenix, Inc.

 

d.Fourth Amendment to License Agreement dated as of March 5, 2015 by and between
Daravita Limited and Zogenix, Inc.

 

Schedule 4.5

Page - 15- 

Schedule 4.6(b)

 

Litigation

 

1.U.S. ex. Rel. Conrad v. Abbott Labs, Inc., et al. (U.S.D.C. Mass.).

 

2.State of Louisiana v. Abbott Laboratories, Inc., et al. (U.S.D.C., M.D. La.).

 

3.GlaxoSmithKline Arbitration.

 

4.Medicine to Go Pharmacies, Inc. v. Macoven Pharmaceuticals, L.L.C. and Pernix
Therapeutics Holdings, Inc., District Court of New Jersey (10/23/16).

 

5.Presswood v. Pernix Therapeutics Holdings, Inc., Circuit Court of St. Louis
County, Missouri (3/18/15).

 

6.Pernix Ireland Pain, Ltd. and Pernix Therapeutics, LLC v. Actavis Laboratories
FL, Inc., District of Delaware Case No. 16-138; Pernix Ireland Pain, Ltd. and
Pernix Therapeutics, LLC v. Alvogen Malta Operations, Ltd., District of Delaware
Case No. 16-139.

 

7.Ghirsig Employment Dispute (EEOC Claim).

 

8.Beginning in 2014 and continuing to the present, a number of pharmaceutical
companies have been named in numerous lawsuits brought by certain state and
local governments related to the marketing of opioid pain medications,
including, UFCW Local 23 Health Fund v. Endo Pharmaceuticals, Inc., et al., Iron
Workers Dist. Council of Philadelphia & Vicinity, Benefit Fund v. Abbott
Laboratories, Inc., et al. and certain matter brought by the State of Arkansas
against the Seller (collectively, the “Opioid Litigations”).

 

9.Navigators Insurance Company v. Pernix Therapeutics Holdings, Inc. (U.S.
District Court, Eastern District of PA).

 

10. Pernix Therapeutics Holdings, Inc. - FINRA Matter No: 20180608629.

 

11.Musachia v Pernix (U.S.D.C., N.D. Alabama).

 

Schedule 4.6(b)

Schedule 4.11

 

Environmental Matters

 

None.

 

Schedule 4.11

Schedule 4.14

 

Permitted Indebtedness

 

1.The Settlement Agreement and Release dated as of February 6, 2014 with the
State of Texas and the Texas Health & Human Services Commission, pursuant to
which Cypress Pharmaceuticals, Inc. is required to pay $12 million, payable in
annual amounts of $2.0 million until the settlement ispaid in full. As of the
Petition Date, $2 million of payment obligations remain under such Settlement
Agreement and Release.

 

2.The Settlement and License Agreement dated as of July 17, 2012 by and among
Somaxon Pharmaceuticals, Inc. (as predecessor to Pernix Sleep, Inc.), ProCom
One, Inc., Mylan, Inc., and Mylan Pharmaceuticals, Inc.

 

3.Amounts owed to Glaxo Group Limited, GlaxoSmithKline LLC, GlaxoSmithKline
Intellectual Property Holdings Limited, and GlaxoSmithKline Intellectual
Property Management Limited (collectively, “GSK”) by Pernix Therapeutics
Holdings Inc. and Pernix Ireland Limited pursuant to that certain interim
settlement agreement between GSK and Pernix Therapeutics Holdings Inc. and
Pernix Ireland Limited, originally entered into on July 27, 2015 and as
subsequently amended on March 17, 2017 and July 21, 2017. As of the Petition
Date, no more than $2 million of contingent payment obligations remained under
such Interim Settlement Agreement, as amended.

 

4.Indebtedness in respect of contingent consideration pursuant to the asset
purchase agreement, dated as of March 10, 2015, among Pernix Ireland Limited,
Pernix Therapeutics Holdings, Inc. and Zogenix, Inc.

 

5.Indebtedness incurred under the 4.25% Convertible Senior Notes Due 2021,
issued by Pernix Therapeutics Holdings, Inc. As of the Petition Date, the
aggregate outstanding principal amount of such notes is $78,225,000.

 

6.Indebtedness incurred under the 12% Senior Secured Notes Due 2020.

 

7.Indebtedness under the Credit Agreement, dated as of July 21, 2017, by and
among the lenders party thereto, Cantor Fitzgerald Securities, as administrative
agent, and Pernix Ireland Pain Designated Activity Company (f/k/a Pernix Ireland
Pain Limited), as borrower.

 

8.Promissory Note dated as of August 19, 2014, in the principal outstanding
amount of $225,000,000 as of the Petition Date, executed by Pernix Ireland
Limited in favor of Pernix Therapeutics Holdings, Inc. As of the Petition Date,
the aggregate outstanding principal balance under such note is $225,000,000.

 

9.Indebtedness incurred under the 4.25%/5.25% Exchangeable Senior Notes due 2022
issued by Pernix Ireland Pain Designated Activity Company (f/k/a Pernix Ireland
Pain Limited). As of the Petition Date, the aggregate outstanding principal
amount of such notes is $35,742,500.

 

Schedule 4.14 

Schedule 4.15

 

Tax Related Proceedings

 

None.

 

Schedule 4.15

Schedule 4.26

 

Regulatory Disclosure

 

1.Matters disclosed in public filings of the Borrower with the SEC prior to the
Closing Date.

 

Schedule 4.26

Schedule 4.29

 

Insurance

 

[See attached.]

 

 

Schedule 4.29

[image_006.gif] 

Pernix Therapeutics Holdings, Inc.

Schedule of Insurance

 

 

 

 

NO. Coverage Insurance Carrier Policy Period Policy Number Insurance Costs
Limits / Coverages Deductibles / Other Considerations 1 Primary Products
Liability $15,000,000 Limit Ironshore Specialty
Insurance Company 11/30/2018 - 11/30/2019 002174804

$643,750.00 18-19 Premium

+ $32,187.50 Surplus Lines Tax
$675,937.50 Total Policy Cost 

$15,000,000 - Each Claim

$15,000,000 - Aggregate

$250,000 - Withdrawal Expense Reimbursement (Class 1 Recall Only)

$50,000 - Repair and Replacement of Impaired Property Aggregate

$250,000 - Class 1 Product Recall Expenses Aggregate

$2,000 - Clinical Trial Medical Expenses Each Person

$20,000 - Clinical Trial Medical Expenses Aggregate 

100,000 Each Claim / $500,000 Aggregate (All Other Products not subject to $250K
deductible described below)

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

$250,000 Each Claim / $1,250,000 Aggregate (Treximet Pediatric and
Cardiovascular Thrombotic, Heart Failure and Edema events, and ZohydroER 1st
Generation)

$50,000 SIR Each Claim for Withdrawal Expenses

Retroactive Dates:

08/20/2014 - Treximet

10/25/2013 - ZohydroER but only for this product sold by the named insured after
4/25/2015, from inventory acquired on 4/25/2015 and controlled by the named
insured

02/18/2000 - All Other Products

2 Excess Products Liability $10M xs $15M Underwriters at Lloyd’s (Life Science
Risk) 11/30/2018 - 11/30/2019 LSRXS0038118

$215,000 18-19 Premium

+ $10,750 Surplus Lines Tax
$225,750 Total Policy Cost

 

$10,000,000 - Each Occurrence
$10,000,000 - Aggregate

Retroactive Date: 12/10/2010

 

Underlying Policy:

Ironshore Primary Products
$15,000,000 - Each Claim
$15,000,000 - Aggregate 

3 Excess Products Liability $10M xs $25M TDC Specialty Insurance Company
11/30/2018 - 11/30/2019 LSX000631800 $120,000 18-19 Premium
+ $6,000 Surplus Lines Tax
$126,000 Total Policy Cost $10,000,000 - Each Occurrence
$10,000,000 - Aggregate

Retroactive Date: 11/30/2014

 

Underlying Policies:

Ironshore Primary Products
$15,000,000 - Each Claim
$15,000,000 - Aggregate

 

Life Science Risk Excess Products
$10,000,000 - Each Claim
$10,000,00 - Aggregate

 

6 Commercial Property Federal Insurance
Company

11/30/2017 - 05/31/2019

 

Policy
Extension from 11/30/2018 to 05/31/2019

 

36051359

$48,955 11/30/17-18 Premium
+$2,606 Taxes & Surcharges
$51,561 Total 17-18 Policy Cost

 

$23,955.31 Extension Premium
+$1,340.69 NJ PLIGA
$25,296.00 Total Extension Cost

 

*$76,857 Total Costs for 11/30/2017 - 05/31/2019

 

Business Personal Property - Varies by Location

Business Income & Extra Expense - Varies by Location

Perishable or Contaminated Property - Varies by Location

Equipment Breakdown - Included

Unlimited Extended Period of Indemnity

Earthquake - $5,000,0000 Limit
Flood - Varies by Location 

$2,500 - All Other Perils Deductible
24 Hour Waiting Period - BI & EE

 

Earthquake - $50,000 / 48 Hours (BI & EE)

 

Flood - Varies by Location

 

Wind - 5% Property Damage Minimum of $25,000 / 96 Hour Waiting Period - NC, FL.
TX, & SC 

4 Coverage Workers Compensation & Employers Liability Insurance Carrier Federal
Insurance Company Policy Period 11/30/2018 - 05/30/2019 Policy Number 71751699
$54,824 Short-Term Policy Premium
+ $223 Expense Constant
+$1,352 Taxes & Surcharges
$56,399 Total Short-Term Policy Cost

Statutory Benefits - Workers Compensation & Employers Liability

$1,000,000 - Each Employee

$1,000,000 - Disease - Per Employee

$1,000,000 - Disease - Aggregate

 

$1,000,000 - Stop Gap Liability - OH
$1,000,000 - Stop Gap Liability - WA

Covered States: AL, AZ, AR, CA, CO, CT, DC, DE, FL, GA, ID, IL, IN, IA, KS, KY,
LA, MD, MI, MN, MS, MO, NE, NV, NH, NJ, NY, NC, OH, OK, OR, PA, RI, SC, TN, TX,
UT, VA, WA, WI, WV 5 Business Automobile - Fleet Federal Insurance
Company

11/30/2017 - 05/31/2019

 

Policy
Extension
from
11/30/2018 to
05/31/2019

 

73588735

$199,474.00 11/30/17-18 Premium
+ $614.76 Taxes & Surcharges
$200,088.76 Total 17-18 Policy Cost

 

$101,204.52 Extension Premium

 

+ $312.48 NJ PLIGA
$101,516.00 Total Extension Cost

 

*$301,604.76 Total Costs for 11/30/2017 - 05/31/2019

 

$1,000,000 - Combined Single Limit - Symbol 1 (Any Auto)
Various - PIP - Symbol 5 (Owned Autos Subject to No - Fault)
$10,000 - Auto Medical Payments - Symbol 2 (Owned Autos)
Minimum / Statutory Required - Uninsured / Underinsured Motorists - Symbol 10 

$ACV or Cost of Repair - Physical Damage Comp and Collision
Coverage - Symbols 2,8 (Owned & Hired)

 

$50 - each disablement - Towing & Labor

$50/per day / $1,500 max for Rental Reimbursement for a max of 30 Days 

$1,000 each Comprehensive & Collision Coverages 7 Commercial General Liability
Navigators Insurance
Company

11/30/2017 - 05/30/2019

 

Policy
Extension
from
11/30/2018 to
05/30/2019

 

CH17NCP02048000

$33,483.00 11/30/17-18 Premium

 

+ $198.91 NJ PLIGA

 

$33,681.91 Total 17-18 Policy Cost

 

$17,096.00 Extension Premium
+ $101.56 NJ PLIGA
$17,197.56 Total Extension Cost

 

*$50,879.47 Total Costs for 11/30/2017 - 05/30/2019

 

$2,000,000 - General Aggregate

Not Covered - Products and Completed Operations
$1,000,000 - Personal & Advertising Injury
$1,000,000 - Each Occurrence Limit

$1,000,000 - Damage to Premises Rented to You
$10,000 - Medical Expense

$1,000,000 - Employee Benefits Liability - Each Employee
$1,000,000 - Employee Benefits Liability - Aggregate
Retroactive Date: 10/01/2014 

$1,000 - Employee Benefits Liability

Schedule 4.29 to Credit Agreement

 

NO. Coverage Insurance Carrier Policy Period Policy Number Insurance Costs
Limits / Coverages Deductibles / Other Considerations 8 Foreign Package Policy
Navigators Insurance
Company

11/30/2017 - 05/31/2019

 

Policy
Extension
from
11/30/2018 to
05/31/2019

 

PH17FPK0BIG0RNV

$2,500 11/30/17-18 Premium

 

$1,247 Extension Premium

 

*$3,747 Total Costs for 11/30/2017 - 05/31/2019

 

Includes International GL, Accident, International Auto, Kidnap and Ransom &
Workers Compensation Coverages

 

$1,000,000 - International GL - Each Occurrence
$2,000,000 - International GL – Aggregate
$1,000,000 - International Auto - BI & PD
$25,000 - Auto Medical Payments - Any One Accident
Statutory - State of Hire / Country of Origin Benefits – International
Voluntary Workers Compensation
$1,000,000 - International Employers Liability
$250,000 - International Blanket Accident Insurance
$1,500,000 - Maximum Limit Per Accident
$2,500,000 - Kidnap & Ransom

The International General Liability coverage does not provide coverage for
Products / Completed Operations.

 

This Automobile coverage does not replace compulsory local requirements
overseas.

 

9 Commercial Umbrella Liability Navigators Insurance
Company

11/30/2017 - 05/30/2019

 

Policy
Extension
from
11/30/2018 to
05/30/2019

 

CH17UMF922034IV

$40,253.00 11/30/17-18 Premium
+ $241.51 NJ PLIGA
$40,494.52 Total 17-18 Policy Costs

 

$19,961.00 Extension Premium
+ $119.77 NJ PLIGA
$20,080.77 Total Extension Costs

 

*$60,575.29 Total Costs for 11/30/2017 - 05/30/2019

$5,000,000 - Each Occurrence
$5,000,000 – Aggregate
Excluded - Products / Completed Operations

$10,000 - Retention

 

Underlying Policies: General Liability, Employer’s Liability, Employee Benefits
Liability, Foreign Liability

 

10 Excess Liability Endurance American Insurance Company

11/30/2017 - 05/30/2019

 

Policy
Extension
from
11/30/2018 to
05/30/2019

 

Policy Number EXC30000516400

$35,350 11/30/17-18 Premium
+ $212 NJ PLIGA
$35,562 Total 17-18 Policy Costs

 

$17,534 Extension Premium
+ $105 NJ PLIGA
$17,639 Total Extension Costs

 

*$53,201 Total Costs for 11/30/2017 - 05/30/2019

$10,000,000 - Each Occurrence
$10,000,000 - Aggregate (excludes Products / Completed Operations) Underlying
Policy:
Navigators Commercial Umbrella
$5,000,000 - Each Occurrence
$5,000,000 - Aggregate 11 Inland Marine - Transit Underwriters At Lloyds
(Falvey Cargo) 11/30/2018 - 05/31/2019 MC3763-WC3763 $5,235.62 Short-Term Policy
Premium
+ $373.97 Terrorism Premium
$5,609.59 Total Short-Term Policy Costs $1,500,000 - Air Conveyance
$1,500,000 - Land Conveyance
$1,500,000 - Vessel Conveyance
$150,000 - Non Containerized On Deck Conveyance
$50,000 - Exhibition/Trade Fairs
$50,000 - Research Animals (while on any one approved conveyance or at any one
approved location)
$50,000 - Extra Expense Each Occurrence
$50,000 - Extra Expense Aggregate
$25,000 - Sales Samples in the care, custody, or control of any one salesperson
$25,000 – Messenger
$10,000 - By any one package shipped via Registered Mail

$10,000 - All Other Perils
$5,000 - Any one package shipped via Registered Mail $20,000 - With respect to
any one shipment in excess of $1,000,000 in values

 

Includes $1,500,000 Sublimit for War

 

Note: policy is auditable based on actual values shipped

 

  Total Insurance Program Cost     $ 1,636,560.61    

Schedule 4.29 to Credit Agreement

 

No. Coverage Insurance Carrier Policy Period Policy Number Bound Cost* Limits /
Coverages Retentions / Other
Considerations 1 Primary Directors & Officers Liability and Entity Securities
Liability Chubb Insurance
Company of NJ 06/09/2015 - 06/09/2019 82238952 $252,250

$10,000,000 Aggregate Limit (each Policy Period)

 

Prior & Pending Litigation Date: 03/09/2010

 

$1,000,000 Each Claim for Company Reimbursement $1,500,000 Per Claim Securities
Retention
$1,500,000 Each Merger & Acquisition Claim 2 Excess Directors & Officers
Liability and Entity Securities Liability XL Specialty Insurance Company
06/09/2015 - 06/09/2019 ELU13931615 $75,525 $5,000,000 Each Claim and in the
Policy Aggregate, excess of above captioned $10,000,000   3 Excess Directors &
Officers Liability and Entity Securities Liability Illinois National
Insurance Company
(AIG) 06/09/2015 - 06/09/2019 013637659 $61,229 $5,000,000 Each Claim and in the
Policy Aggregate, excess of above captioned $15,000,000   4 Excess Directors &
Officers (Side A Only) Continental Insurance
Company of New
Jersey
(C.N.A) 06/09/2015 - 06/09/2019 592410463 $43,405 $5,000,000 Each Claim excess
of above captioned $20,000,000 - solely with respect to non-indemnifiable loss
(Side A Coverage) Includes Drop Down provision 5 Excess Directors & Officers
(Side A Only) QBE Insurance
Corporation 06/09/2015 - 06/09/2019 QPL0051964 $34,442 $5,000,000 Each Claim and
in the Aggregate, excess of above captioned $5,000,000 - solely with respect to
non-indemnifiable loss (Side A Coverage), which in turn is excess of $25,000,000
Includes Drop Down provision 6 Excess Directors & Officers (Side A Only)
National Union Fire
Ins Co Pittsburgh, PA
(AIG) 06/09/2016 - 06/09/2019 014570541 $30,470 $5,000,000 Each Claim and in the
Aggregate, excess of above captioned $5,000,000 - solely with respect to
non-indemnifiable loss (Side A Coverage), which in turn is excess of $30,000,000
    SubTotal D&O Tower     $ 497,322    

Schedule 4.29 to Credit Agreement

 

No. Coverage Insurance Carrier Policy Period Policy Number Bound Cost* Limits /
Coverages Retentions / Other
Considerations 7 Employment Practices Liability National Union Fire
Ins Co Pittsburgh, PA
(AIG) 06/01/2018 - 06/01/2019 014570515 $22,243

$2,000,000 - Per Claim
$2,000,000 - Aggregate

 

Prior & Pending Litigation Dates:
02/08/2006 with respect to the first $1,000,000 Limit

 

06/01/2015 with respect to $1,000,000 excess of $1,000,000

$50,000 - Per Claim
$50,000 - Third Party Retention 8 Fiduciary Liability National Union Fire
Ins Co Pittsburgh, PA
(AIG) 06/01/2018 - 06/01/2019 014570655 $1,213

$1,000,000 - Per Claim
$1,000,000 - Aggregate

 

Continuity Date: 06/01/2006

$0 Retention Per Claim 9 Crime National Union Fire
Ins Co Pittsburgh, PA
(AIG) 06/01/2018 - 06/01/2019 014570285 $5,840 $1,000,000 Employee Dishonesty
Coverage (including ERISA)
$1,000,000 Forgery or Alteration Coverage $1,000,000 Inside the Premises - Theft
of Money and Securities Coverage
$1,000,000 Inside the Premises - Robbery & Safe Burglary Coverage
$1,000,000 Outside the Premises Coverage $1,000,000 Computer Fraud Coverage
$1,000,000 Funds Transfer Fraud Coverage $1,000,000 Money Orders & Counterfeit
Money Coverage
$1,000,000 Credit, Debit or Charge Card Forgery Coverage
$250,000 Impersonation Fraud Coverage

$25,000 - applies for each coverage separately; except $50,000 - Impersonation
Fraud (per occurrence)

 

$0 with respect to ERISA Coverage for Employee Dishonesty

 

  TOTAL Management Liability Insurance Coverages   $ 526,618    

 

Schedule 4.29 to Credit Agreement

 

 

Schedule 5.1

 

Financial Statements, Reports, Certificates

 

Deliver to Agent (and if so requested by Agent, with copies for each Lender)
each of the financial statements, reports, or other items set forth below at the
following times:

 

by no later than March 20, 2019 and thereafter on a monthly basis no later than
20 days after the end of the relevant month, (a) an unaudited consolidated
monthly balance sheet and related consolidated statements of income and cash
flows of the Borrower and its consolidated Subsidiaries for each month
(commencing with the month ended February 28, 2019), in each case prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved and in a manner consistent with the unaudited financial statements
referred to in Section 4.8 of the Agreement, accompanied by a certification of
an Authorized Person of the Borrower substantially consistent with the first
sentence of Section 4.8 of the Agreement.     concurrently with delivery
thereof, (a) any financial statements or other financial reporting of any of the
Debtors delivered pursuant to any Sale Agreement.     promptly, but in any event
within 5 days after Borrower has knowledge of,

(a)       any event or condition that constitutes a Default or an Event of
Default, notice of such event or condition and a statement of the curative
action that Borrower and/or the relevant Subsidiary proposes to take with
respect thereto,

 

(b)       any default or breach under, or termination of, any Material Contract
of a Loan Party or its Subsidiary, notice of such default, breach or termination
and a statement of the curative action that Borrower and/or the relevant
Subsidiary proposes to take with respect thereto,

 

(c)       any material development in connection with disputes with suppliers to
or customers of the Borrower and its Subsidiaries, including, without
limitation, commencement and completion of arbitration, notice of such material
development,

 

(d)       that any Loan Party or its Subsidiaries, an owner, officer, manager,
employee or Person with a “direct or indirect ownership interest” (as that
phrase is defined in 42 C.F.R. §420.201) in any Group Member: (i) has had a
civil monetary penalty assessed against him or her pursuant to 42 U.S.C.
§1320a-7a or is the subject of a proceeding seeking to assess such penalty; (ii)
has been excluded from participation in a Federal Health Care Program (as that
term is defined in 42 U.S.C. §1320a-7b) or Government Drug Rebate Program or is
the subject of a proceeding seeking to assess such penalty; (iii) has been
convicted (as that term is defined in 42 C.F.R. §1001.2) of any of those
offenses described in 42 U.S.C. §1320a-7b or 18 U.S.C. §§669, 1035, 1347, 1518
or is the subject of a proceeding seeking to assess such penalty; or (iv) has
been involved or named in a U.S. Attorney complaint made or any other action
taken pursuant to the False Claims Act under 31 U.S.C. §§3729-3731 or in any qui
tam action brought pursuant to 31 U.S.C. §3729 et seq.; any pending or
threatened revocation, suspension, termination, probation, restriction,
limitation, denial, or non-renewal with

 

 

Schedule 5.1

Page - 1 - 

 

 

respect to any Health Care Permit or Registration,

 

(e)       any allegations of licensure violations or fraudulent acts or
omissions involving any Loan Party or any of its Subsidiaries,

 

(f)       the pending or threatened imposition of any material fine or penalty
by any Governmental Authority under any Health Care Law against any Loan Party
or any of its Subsidiaries, and

 

(g)        the exclusion or debarment from any Governmental Drug Rebate Program
or other federal healthcare program or debarment or disqualification by any
Governmental Authority of any Loan Party, any of its Subsidiaries, or any of
their officers, directors, employees, agents, or contractors.

    at least five (5) Business Days in advance of the termination of any Sale
Agreement, (a) written notice of the termination of such Sale Agreement.    
promptly, but in any event within 5 days of Borrower providing or receiving, as
applicable,

(a)        copies of all settlement agreements entered into by a Loan Party or
any of its Subsidiaries,

 

(b)       any notice received by a Loan Party or any of its Subsidiaries
alleging potential or actual violations of any Health Care Law,

 

(c)       any notice that any Regulatory Authority is limiting, suspending or
revoking any Registration, requiring adverse changes to the marketing
classification, distribution pathway or parameters, or labeling of the products
of any Loan Party or any of its Subsidiaries, or considering any of the
foregoing,

 

(d) any notice, including, but not limited to, a Form FDA-483, untitled letter,
warning letter, or notice of violation letter, that any Loan Party or any of its
Subsidiaries has become subject to any Regulatory Action, and

 

(e)       any notice that any Product of any Loan Party or any of its
Subsidiaries has been seized, withdrawn, recalled, detained, or subject to a
suspension of manufacturing, or the commencement of any proceedings seeking the
withdrawal, recall, suspension, import detention, or seizure of any Product are
pending or threatened against any Loan Party or any of its Subsidiaries.

   

Promptly, but in any

event within 15 days

after the same are

required to be filed with

the SEC,

 

(a)        form 10-K annual reports, and

 

(b)        form 10-Q quarterly reports.

 

promptly after the commencement thereof or any material development (a) notice
of the commencement or any material development in all actions, suits, or
proceedings brought by or against Borrower or any of its Subsidiaries before any
Governmental Authority (i) alleging a potential or

 

 

Schedule 5.1

Page - 2 - 

 

therein, but in any event within 5 days after the service of process with
respect thereto on Borrower or any of its Subsidiaries, actual violation of
Health Care Laws, or (ii) which could otherwise reasonably could be expected to
result in a Material Adverse Effect.     promptly after any request from the
Agent or any Lender, (a) daily revenue reporting with respect to the Debtors.  
  upon the reasonable request of Agent or the Required Lenders, (a) any other
information reasonably requested relating to the financial condition of Borrower
or its Subsidiaries.       Documents required to be delivered pursuant to
Section 5.1 of the Agreement in respect of information filed by any Loan Party
with any securities exchange or with the SEC or any analogous governmental or
private regulatory authority with jurisdiction over matters relating to
securities shall be deemed to have been delivered on the date on which such
items have been made publicly available on the SEC website or the website of the
relevant analogous governmental or private regulatory authority or securities
exchange.

 

 

 

Schedule 5.1

Page - 3 - 

Schedule 5.18

 

Post-Closing Obligations

 

N/A

 

Schedule 5.18

Page - 1 - 

Schedule 5.22

 

Milestones

 

(a)       Not later than March 3, 2019, Borrower and each of its Subsidiaries
shall file voluntary petitions for relief commencing a case under chapter 11 of
the Bankruptcy Code in the Bankruptcy Court, and file and serve one or more
motions, each in form and substance reasonably acceptable to the Lenders,
seeking approval of (i) the Agreement and the related guarantees and liens
contemplated to be provided with respect to the Agreement on an interim and
final basis, (ii) the Sale Procedures Order and the Sale Order and (iii) the
assumption of the Services Agreement (if not earlier terminated).

 

(b)       Not later than five (5) days following the Petition Date, the
Bankruptcy Court shall have entered the Interim DIP Order.

 

(c)       Not later than thirty-five (35) days after the Petition Date, the
Bankruptcy Court shall have entered the Final DIP Order and the Sale Procedures
Order.

 

(d)       Not later than sixty (60) days after the Petition Date, the Auction
(if necessary) shall have been held pursuant to the Sale Procedures Order, and
the Sale Procedures Order shall be in full force and effect, and shall not have
been (A) vacated, reversed, or stayed, or (B) amended or modified except as
otherwise agreed to in writing by Lenders in their sole discretion.

 

(e)       Not later than seventy-five (75) days following the Petition Date, the
Bankruptcy Court shall have entered the Sale Order, and the Sale Order shall be
in full force and effect, and shall not have been (A) vacated, reversed, or
stayed, or (B) amended or modified except as otherwise agreed to in writing by
Lenders in their sole discretion.

 

Schedule 5.22

Page - 2 - 

 

 

EXHIBIT A-1

 

[FORM OF] ASSIGNMENT AND ACCEPTANCE AGREEMENT

 

This ASSIGNMENT AND ACCEPTANCE AGREEMENT (“Assignment Agreement”) is entered
into as of __________________ between ______________________ (“Assignor”)
and______________________ (“Assignee”). Reference is made to the Agreement
described in Annex I hereto (the “Credit Agreement”). Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to them in the
Credit Agreement.

 

1.       In accordance with the terms and conditions of Section 13 of the Credit
Agreement, the Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, that interest in and to
the Assignor's rights and obligations under the Loan Documents as of the date
hereof with respect to the Obligations owing to the Assignor, and Assignor’s
portion of the Commitments, all to the extent specified on Annex I.

 

2.       The Assignor (a) represents and warrants that (i) it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim and (ii) it has full power and
authority, and has taken all action necessary, to execute and deliver this
Assignment Agreement and to consummate the transactions contemplated hereby; (b)
makes no representation or warranty and assumes no responsibility with respect
to (i) any statements, representations or warranties made in or in connection
with the Loan Documents, or (ii) the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan Documents or any
other instrument or document furnished pursuant thereto; (c) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or any Guarantor or the performance or
observance by the Borrower or any Guarantor of any of their respective
obligations under the Loan Documents or any other instrument or document
furnished pursuant thereto, and (d) represents and warrants that the amount set
forth as the Purchase Price on Annex I represents the amount owed by the
Borrower to Assignor with respect to Assignor’s share of the Loans assigned
hereunder, as reflected on Assignor’s books and records.

 

3.       The Assignee (a) confirms that it has received copies of the Credit
Agreement and the other Loan Documents, together with copies of the financial
statements referred to therein and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment Agreement; (b) agrees that it will, independently and
without reliance upon Agent, Assignor, or any other Lender, based upon such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking any action under the Loan
Documents; (c) appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under the Loan Documents as are delegated
to Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; [and] (d) agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender[ and (e) attaches the forms
prescribed by the Internal Revenue Service of the United States certifying as to
the Assignee's status for purposes of determining exemption from United States
withholding taxes with respect to all payments to be made to the Assignee under
the Credit Agreement or such other documents as are necessary to indicate that
all such payments are subject to such rates at a rate reduced by an applicable
tax treaty].

 

4.       Following the execution of this Assignment Agreement by the Assignor
and Assignee, the Assignor will deliver this Assignment Agreement to the Agent
for recording by the Agent. The effective date of this Assignment (the
“Settlement Date”) shall be the latest to occur of (a) the date of the execution
and delivery hereof by the Assignor and the Assignee, (b) the receipt by Agent
for its sole

 

Exhibit A-1

and separate account a processing fee in the amount of $3,500 (unless waived by
Agent), (c) the receipt of any required consent of the Agent, (d) the receipt by
Agent of an Administrative Questionnaire from the Assignee and (e) the date
specified in Annex I.

 

5.       As of the Settlement Date (a) the Assignee shall be a party to the
Credit Agreement and, to the extent of the interest assigned pursuant to this
Assignment Agreement, have the rights and obligations of a Lender thereunder and
under the other Loan Documents (and for the avoidance of doubt, shall have no
greater rights under Section ‎16 than the assigning Lender), and (b) the
Assignor shall, to the extent of the interest assigned pursuant to this
Assignment Agreement, relinquish its rights (except with respect to Section
‎10.3) and be released from any future obligations under the Credit Agreement
and the other Loan Documents, provided, however, that nothing contained herein
shall release any assigning Lender from obligations that survive the termination
of this Agreement, including such assigning Lender’s obligations under Section
15, Section 16 and Section 17.9(a) of the Credit Agreement.

 

6.       Upon the Settlement Date, Assignee shall pay to Assignor the Purchase
Price (as set forth in Annex I). From and after the Settlement Date, Agent shall
make all payments that are due and payable to the holder of the interest
assigned hereunder (including payments of principal, interest, fees and other
amounts) to Assignor for amounts which have accrued up to but excluding the
Settlement Date and to Assignee for amounts which have accrued from and after
the Settlement Date. On the Settlement Date, Assignor shall pay to Assignee an
amount equal to the portion of any interest, fee, or any other charge that was
paid to Assignor prior to the Settlement Date on account of the interest
assigned hereunder and that are due and payable to Assignee with respect
thereto, to the extent that such interest, fee or other charge relates to the
period of time from and after the Settlement Date.

 

7.       This Assignment Agreement may be executed in counterparts and by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute one
and the same instrument. This Assignment Agreement may be executed and delivered
by telecopier or other facsimile transmission all with the same force and effect
as if the same were a fully executed and delivered original manual counterpart.

 

8.       THIS ASSIGNMENT AGREEMENT SHALL BE SUBJECT TO THE PROVISIONS REGARDING
CHOICE OF LAW AND VENUE, JURY TRIAL WAIVER, AND JUDICIAL REFERENCE SET FORTH IN
SECTION 12 OF THE CREDIT AGREEMENT, AND SUCH PROVISIONS ARE INCORPORATED HEREIN
BY THIS REFERENCE, MUTATIS MUTANDIS.

 

Exhibit A-2

The terms set forth in this Assignment and Acceptance are hereby agreed to:

 

 

  ASSIGNOR:       [NAME OF ASSIGNOR]           By:               Name:     
Title:          ASSIGNEE:       [NAME OF ASSIGNEE]           By:   Name: Title:
   

 

Consented to and Accepted:       Cantor Fitzgerald Securities, as Agent        
  By:       Name:     Title:           [Consented to:]1       Pernix
Therapeutics Holdings, Inc.             By:              Name:   Title:      

 

 

 

1To be added only if the consent of the Borrower is required by the terms of the
Credit Agreement.

 

 

Exhibit A-3

ANNEX FOR ASSIGNMENT AND ACCEPTANCE

 

ANNEX I

 

1.Borrower: Pernix Therapeutics Holdings, Inc., a Maryland corporation and a
debtor and a debtor-in-possession (the “Borrower”).

 

2.Name and Date of Credit Agreement:

 

Senior Secured Superpriority Debtor-In-Possession Credit Agreement, dated as of
February 22, 2019 (as amended, restated, supplemented, or otherwise modified
from time to time, the “Credit Agreement”), by and among the Borrower, the
lenders party thereto as “Lenders”, and Cantor Fitzgerald Securities, as
administrative agent for each member of the Lender Group (in such capacity,
together with its successors and assigns in such capacity, the “Agent”).

 

3.Date of Assignment Agreement: ____________

 

4.Amounts: ____________

 

a.Assigned Amount of Commitment $____________

 

b.Assigned Amount of Loans $____________

 

5.Settlement Date: ____________

 

6.Purchase Price $____________

 

7.Notice and Payment Instructions, etc.

 

 

Assignee:   Assignor:                

 

 

Exhibit A-4

EXHIBIT B-1

 

[FORM OF] NOTICE OF BORROWING

 

[NOTE: No Notice of Borrowing shall be delivered to the Agent or any Lender
during the hours of 9:00 a.m. through 4:00 p.m., New York City time, on any
Business Day]

 

Cantor Fitzgerald Securities

 

Attention: [●]
Tel: [●]

 

Email: [●]

 

[●][●], 20[●]2

 

Ladies and Gentlemen:

 

Reference is hereby made to that certain Senior Secured Superpriority
Debtor-In-Possession Credit Agreement, dated as of February 22, 2019 (as
amended, restated, supplemented, or otherwise modified from time to time, the
“Credit Agreement”), by and among Pernix Therapeutics Holdings, Inc., a Maryland
corporation and a debtor and a debtor-in-possession (the “Borrower”), the
lenders party thereto as “Lenders”, and Cantor Fitzgerald Securities, as
administrative agent for each member of the Lender Group (in such capacity,
together with its successors and assigns in such capacity, the “Agent”). Terms
defined in the Credit Agreement are used herein with the same meanings unless
otherwise defined herein.

 

The undersigned hereby gives you notice pursuant to Section 2.3(a) of the Credit
Agreement that it requests Borrowings under the Credit Agreement to be made on
[●], 20[●], and in that connection sets forth below the terms on which the
Borrowings are requested to be made:

 

(A)Borrower: Pernix Therapeutics Holdings, Inc.

 

(B)Funding Date (which shall be a Business Day) [●]

 

(C)Aggregate Amount of Borrowing $[●]

 

(D)Type of Borrowing [Base Rate][LIBOR Rate] Loan

 

(E)Interest Period (in the case of a LIBOR Rate Borrowing) [●]

 

 

 

2 The Agent must be notified in writing, which must be received by the Agent no
later than 11:00 a.m. on the Business Day that is three (3) Business Days prior
to the requested Funding Date; provided, that (i) a Notice of Borrowing in
respect of any Borrowing to be made on the Closing Date may be delivered no
later than 6:00 p.m. on the Business Day prior to the Closing Date (or such
later time as may be reasonably agreed by the Required Lenders), (ii) Agent may,
at the direction of the Required Lenders in their sole discretion, elect to
accept as timely requests that are received later than 11:00 a.m. on the
applicable Business Day and (iii) no Notice of Borrowing shall be delivered to
the Agent or any Lender during the hours of 9:00 a.m. through 4.00 p.m. New York
City time, on any Business Day. At Agent’s election, in lieu of delivering the
above-described written request, any Authorized Person may give Agent telephonic
notice of such request by the required time. In such circumstances, the Borrower
agrees that any such telephonic notice will be confirmed in writing within one
(1) Business Day of the giving of such telephonic notice, but the failure to
provide such written confirmation shall not affect the validity of the request.

 

Exhibit B-1

(F)Amount, Account Number and Location

 

Wire Transfer Instructions: Amount $[●] Bank: [●] ABA No.: [●] Account No.: [●]
Account Name: [●]    

 

The undersigned hereby certifies that the following statements are true on the
date hereof, and will be true on the Funding Date:

 

(A)              The representations and warranties of the Loan Parties set
forth in the Credit Agreement and the other Loan Documents are true and correct
in all material respects (except 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) on and as of the date of the
Borrowing with the same effect as though such representations and warranties had
been made on and as of the date of such Borrowing; provided that to the extent
that any representation and warranty specifically refers to a given date or
period, it is true and correct in all material respects (except 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) as of such earlier date or for such period.

 

(B)              At the time of and immediately after giving effect to the
Borrowing, no Default or Event of Default has occurred and is continuing.

 

(C)              The amount of the requested Borrowing, together with all other
Loans outstanding as of the Funding Date, does not exceed the amount authorized
by the [Interim DIP Order][Final DIP Order].

 

[Signature Page Follows]

 

Exhibit B-2

  PERNIX THERAPEUTICS HOLDINGS, INC.           By:           Name:   Title:    
 

 

 

 

[Signature Page to Notice of Borrowing (Pernix DIP)]

EXHIBIT I-1

 

[FORM OF] INTERCOMPANY SUBORDINATION AGREEMENT

 

This INTERCOMPANY SUBORDINATION AGREEMENT (as amended, restated, supplemented,
or otherwise modified from time to time, this “Agreement”), dated as of February
22, 2019, is entered into by and among the Obligors listed on the signature
pages hereof and those additional entities that hereafter become parties hereto
by joinder (collectively, jointly, and severally, the “Obligors” and each,
individually, an “Obligor”), in favor of CANTOR FITZGERALD SECURITIES, in its
capacity as administrative agent for each member of the Lender Group (in such
capacity, together with its successors and assigns in such capacity, “Agent”),
in light of the following:

 

WHEREAS, pursuant to that certain Senior Secured Superpriority
Debtor-In-Possession Credit Agreement of even date herewith (as amended,
restated, supplemented, or otherwise modified from time to time, the “Credit
Agreement”) by and among the lenders party thereto as “Lenders” (each of such
Lenders, together with its successors and permitted assigns, is referred to
hereinafter as “Lender”), the Agent and PERNIX THERAPEUTICS HOLDINGS, INC., a
Maryland corporation, a Debtor and a Debtor-in-Possession as Borrower (the
“Borrower”), the Lender Group has agreed to make certain financial
accommodations available to the Borrower from time to time pursuant to the terms
and conditions thereof;

 

WHEREAS, each Obligor has made or may make certain loans or advances from time
to time to one or more other Obligors; and

 

WHEREAS, in order to induce Agent and the Lender Group to enter into the Credit
Agreement and the other Loan Documents and to induce the Lender Group to make
financial accommodations to the Borrower pursuant to the Loan Documents, and in
consideration thereof, and in consideration of any loans or other financial
accommodations heretofore or hereafter extended by the below defined Lender
Group to the Borrower pursuant to the Loan Documents, each Obligor has agreed to
subordinate the indebtedness of each other Obligor owed to such Obligor to the
below defined Senior Debt upon the terms and subject to the conditions set forth
in this Agreement.

 

NOW, THEREFORE, for and in consideration of the mutual promises, covenants,
conditions, representations, and warranties set forth herein and for other good
and valuable consideration, the receipt, sufficiency, and adequacy of which are
hereby acknowledged, each Obligor and Agent hereby agree as follows:

 

Section 1.             Definitions and Construction. (a) Terms Defined in Credit
Agreement. All initially capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings assigned to them in the Credit
Agreement.

 

Certain Defined Terms. As used in this Agreement, the following terms shall have
the following meanings:

 

“Agent” has the meaning specified therefor in the preamble hereto.

 

“Agreement” has the meaning specified therefor in the preamble hereto.

 

“Borrower” has the meaning specified therefor in the recitals to this Agreement.

 

“Credit Agreement” has the meaning specified therefor in the recitals hereto.

 

Exhibit I-1-1

“Creditor Obligor” has the meaning specified therefor in the definition of
Subordinated Debt.

 

“Debtor Obligor” has the meaning specified therefor in the definition of
Subordinated Debt.

 

“Discharge of Senior Debt” means (i) the payment or repayment in full in cash of
(A) the principal amount of, and interest accrued with respect to, all
outstanding Loans, together with the payment of any premium applicable to the
repayment of the Loans, (B) all Lender Group Expenses that have accrued
regardless of whether demand has been made therefor and (C) all fees or charges
that have accrued under the Credit Agreement or under any other Loan Document,
(ii) the receipt by Agent of cash collateral in order to secure any other
contingent Senior Debt for which a claim or demand for payment has been made at
such time or in respect of matters or circumstances known to Agent or a Lender
at the time that are reasonably expected to result in any loss, cost, damage or
expense (including attorney’s fees and legal expenses), such cash collateral to
be in such amount as Agent reasonably determines is appropriate to secure such
contingent Senior Debt, (iii) the payment or repayment in full in cash of all
other Senior Debt other than unasserted contingent indemnification obligations
and  (iv) the termination of all of the Commitments of the Lenders.

 

“Insolvency Event” has the meaning specified therefor in ‎Section 3.

 

“Lender” and “Lenders” have the respective meanings specified therefor in the
recitals to this Agreement.

 

“Obligor” and “Obligors” have the respective meanings specified therefor in the
preamble hereto.

 

“Senior Debt” means all obligations (including the Obligations and the
Indebtedness evidenced by the Guaranty (as defined in the Guaranty and Security
Agreement)) and all amounts owing, due, or secured under, or in connection with,
the terms of, or evidenced by, the Credit Agreement or any other Loan Document,
whether now existing or arising hereafter, including all principal, premium,
interest, fees, attorney’s fees, costs, charges, expenses, reimbursement
obligations, any other indemnities or guarantees, and all other amounts payable
under or secured by any Loan Document (including all amounts accruing on or
after the commencement of any Insolvency Proceeding relating to any Loan Party,
or that would have accrued or become due under the terms of any Loan Document
but for the commencement of any Insolvency Proceeding with respect to any Loan
Party and irrespective of whether a claim for all or any portion of such amounts
is allowable or allowed in such Insolvency Proceeding).

 

“Subordinated Debt” means, with respect to each Obligor (each, a “Creditor
Obligor”), all Indebtedness, liabilities, and other obligations, whether now
existing or arising hereafter, of any other Obligor (each, a “Debtor Obligor”),
including all principal, premium, interest, fees, attorney’s fees, costs,
charges, expenses, reimbursement obligations and any other amounts, in each
case, that are owing or due to the Creditor Obligor by such Debtor Obligor,
whether now existing or hereafter arising, and whether due or to become due,
absolute or contingent, liquidated or unliquidated, determined or undetermined,
including all fees and all other amounts payable by such Debtor Obligor to such
Creditor Obligor under or in connection with any documents or instruments
related thereto.

 

“Subordinated Debt Payment” means any payment or distribution by or on behalf of
any of the Obligors, directly or indirectly, of assets of any of the Obligors of
any kind or character, whether in cash, property, or securities, including on
account of the purchase, redemption, or other acquisition of Subordinated Debt,
as a result of any collection, sale, or other disposition of Collateral, or by
setoff, exchange, or in any other manner, for or on account of the Subordinated
Debt.

 

Exhibit I-1-2

(b) Construction. The construction provisions set forth in Section 1.4 of the
Credit Agreement shall apply mutatis mutandis to this Agreement as if expressly
set forth therein and herein. Without limitation of the foregoing, the captions
and headings of this Agreement are for convenience of reference only and shall
not affect the construction of this Agreement.

 

Section 2.             Subordination to Payment of Senior Debt. All payments on
account of the Subordinated Debt shall be subject, subordinate, and junior, in
right of payment and exercise of remedies, to the extent and in the manner set
forth herein, to the Discharge of Senior Debt.

 

Section 3.             Subordination upon Any Distribution of Assets of the
Obligors. In the event of any payment or distribution of assets of any Debtor
Obligor of any kind or character, whether in cash, property, or securities, upon
the dissolution, winding up, or total or partial liquidation or reorganization,
readjustment, arrangement, or similar proceeding relating to such Debtor Obligor
or its property, whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership, arrangement, or similar proceedings or upon an assignment for the
benefit of creditors, or upon any other marshaling or composition of the assets
and liabilities of such Debtor Obligor, or upon the occurrence of an Insolvency
Proceeding, or otherwise (such events, collectively, the “Insolvency Events”):
(a) the Discharge of Senior Debt must have occurred before any Subordinated Debt
Payment is made; and (b) any Subordinated Debt Payment to which any Creditor
Obligor would be entitled except for the provisions hereof, shall be paid or
delivered by the trustee in bankruptcy, receiver, assignee for the benefit of
creditors, or other liquidating lender making such payment or distribution
directly to Agent for application to the payment of the Senior Debt until the
Discharge of Senior Debt has occurred, after giving effect to any concurrent
payment or distribution or provision therefor to Agent or any member of the
Lender Group in respect of such Senior Debt.

 

Section 4.             Payments on Subordinated Debt. (a) Permitted Payments. So
long as no Event of Default has occurred and is continuing, each Debtor Obligor
may make, and each Creditor Obligor shall be entitled to accept and receive
Subordinated Debt Payments permitted by Section 6.6(a) of the Credit Agreement,
to the extent such payments are made in the Ordinary Course of Business;
provided that, notwithstanding anything to the contrary herein or in any Loan
Document, without the express written consent of the Agent (at the direction of
the Required Lenders), (i) none of the Debtor Obligors that are Loan Parties
shall at any time make any Subordinated Debt Payments to any Creditor Obligor
that is not a Loan Party and (ii) none of the Creditor Obligors that are not
Loan Parties shall be at any time entitled to accept or receive any Subordinated
Debt Payments from or on behalf of any Debtor Obligor that is a Loan Party.

 

(b)        No Payment upon Senior Debt Defaults. Upon the occurrence and during
the continuance of any Event of Default, and until such Event of Default is
waived in accordance with the Credit Agreement, no Debtor Obligor shall make,
and no Creditor Obligor shall accept or receive, any Subordinated Debt Payment.
For the avoidance of doubt, once such Event of Default is cured or waived, and
so long as no other Event of Default has occurred and is continuing, any Debtor
Obligor may make and any Creditor Obligor may accept or receive, in the Ordinary
Course of Business any Subordinated Debt payment, including payments scheduled
for the period of time when such Event of Default existed to the extent
permitted by Section 6.6(a) of the Credit Agreement, but subject in all respects
to the proviso to Section 4(a) set forth above.

 

Section 5.             Subordination of Remedies. Until the Discharge of Senior
Debt has occurred, whether or not any Insolvency Event has occurred, no Creditor
Obligor will:

 

(a) accelerate, make demand, or otherwise make due and payable prior to the
original due date thereof any Subordinated Debt;

 

Exhibit I-1-3

(b) bring, commence, institute, prosecute, or participate in any lawsuit,
action, or proceeding, whether private, judicial, equitable, administrative, or
otherwise to enforce its rights or interests in respect of the Subordinated
Debt;

 

(c) exercise any rights under or with respect to guaranties of the Subordinated
Debt, if any;

 

(d) exercise any of its rights or remedies in connection with the Subordinated
Debt with respect to any Collateral of any Debtor Obligor;

 

(e) exercise any right to set-off or counterclaim in respect of any
Indebtedness, liabilities, or obligations of such Creditor Obligor to any Debtor
Obligor against any of the Subordinated Debt;

 

(f) in its capacity as a Creditor Obligor, contest, protest, or object to any
exercise of secured creditor remedies by Agent, any other member of the Lender
Group in connection with the Senior Debt;

 

(g) object to any forbearance by Agent or any other member of the Lender Group
in connection with the Senior Debt; or

 

(h) commence, or cause to be commenced, or join with any creditor other than
Agent or any Lender in commencing, any Insolvency Proceeding against any Debtor
Obligor.

 

Section 6.             Payment over to Agent. In the event that, notwithstanding
the provisions of Sections ‎2, ‎3, ‎4, and ‎5, any Subordinated Debt Payments
shall be received in contravention of any such Sections ‎2, ‎3, ‎4, and ‎5 by
any Creditor Obligor before the Discharge of Senior Debt has occurred, such
Subordinated Debt Payments shall be segregated and held in trust for the benefit
of the Lender Group and shall be forthwith paid over or delivered to Agent, in
the same form as received and with any necessary endorsements, for application
to the payment of the Senior Debt in accordance with the terms of the Loan
Documents. Agent is authorized to make any such endorsements as Agent for the
Creditor Obligors. Such authorization is coupled with an interest and is
irrevocable until the Discharge of Senior Debt.

 

Section 7.             Authorization to Agent. If, while any Subordinated Debt
is outstanding and before Discharge of Senior Debt has occurred, any Insolvency
Event shall occur and be continuing with respect to any Obligor or its property:
(a) Agent hereby is irrevocably authorized and empowered (in the name of each
Obligor or otherwise), but shall have no obligation, to demand, sue for,
collect, and receive every payment or distribution in respect of the
Subordinated Debt and give acquittance therefor and to file claims and proofs of
claim and take such other action (including voting the Subordinated Debt) as it
may deem necessary or advisable for the exercise or enforcement of any of the
rights or interests of Agent (or any member of the Lender Group) under any of
the Loan Documents; and (b) each Obligor shall promptly take such action as
Agent may reasonably request (i) to collect the Subordinated Debt for the
account of the Lender Group and to file appropriate claims or proofs of claim in
respect of the Subordinated Debt, (ii) to execute and deliver to Agent such
powers of attorney, assignments, and other instruments as it may reasonably
request to enable it to enforce any and all claims with respect to the
Subordinated Debt, and (iii) to collect and receive any and all Subordinated
Debt Payments.

 

Section 8.             Certain Agreements of Each Obligor. (a) No Benefits. Each
Obligor understands that there may be various agreements between the Lender
Group and any other Obligor evidencing and governing the Senior Debt, and each
Obligor acknowledges and agrees that such agreements are not intended to confer
any benefits on such Obligor unless such Obligor is also a party thereto (in
which case, the rights of such Obligor are as set forth therein) and that Agent
and the other members of the Lender Group shall have no obligation to such
Obligor or any other Person to exercise any rights, enforce any remedies, or
take any actions which may be available to them under such agreements unless
such Obligor

 

Exhibit I-1-4

is also a party thereto (in which case, the rights of such Obligor are as set
forth therein).

 

(b) No Interference. Each Obligor acknowledges that certain other Obligors have
granted to Agent for the benefit of the Lender Group security interests in
certain of such other Obligor’s assets, and agrees not to interfere with or in
any manner oppose a disposition of any Collateral by Agent in accordance with
the applicable Loan Documents or applicable law.

 

(c) Reliance by Agent and Lender Group. Each Obligor acknowledges and agrees
that Agent and each member of the Lender Group will have relied upon and will
continue to rely upon the subordination provisions provided for herein and the
other provisions hereof in entering into the Loan Documents and making or
issuing the Loans or other financial accommodations thereunder.

 

(d) Waivers. Except as provided under the Credit Agreement or any other Loan
Document, each Obligor hereby waives any and all notice of the incurrence of the
Senior Debt or any part thereof and any right to require marshaling of assets.

 

(e) Obligations of Each Obligor Not Affected. Each Creditor Obligor hereby
agrees that at any time and from time to time, without notice to or the consent
of such Creditor Obligor, without incurring responsibility to such Creditor
Obligor, and without impairing or releasing the subordination provided for
herein or otherwise impairing the rights of Agent or any other member of the
Lender Group hereunder: (i) the time for any Debtor Obligor’s performance of or
compliance with any of its agreements contained in the Loan Documents may be
extended or such performance or compliance may be waived by Agent or any other
member of the Lender Group; (ii) the agreements of any Debtor Obligor with
respect to the Loan Documents may from time to time be modified by such other
Debtor Obligor, Agent or any other member of the Lender Group for the purpose of
adding any requirements thereto or changing in any manner the rights and
obligations of such Debtor Obligor, Agent or any other member of the Lender
Group thereunder; (iii) the manner, place, or terms for payment by any Debtor
Obligor of Senior Debt or any portion thereof may be altered or the terms for
payment extended, or the Senior Debt of any Debtor Obligor may be renewed in
whole or in part; (iv) the maturity of the Senior Debt of any Debtor Obligor may
be accelerated in accordance with the terms of any present or future agreement
by any Debtor Obligor, Agent or any other member of the Lender Group; (v) any
Collateral may be sold, exchanged, released, or substituted and any Lien in
favor of Agent may be terminated, subordinated, or fail to be perfected or
become unperfected; (vi) any Person liable in any manner for Senior Debt may be
discharged, released, or substituted; and (vii) all other rights against the
Debtor Obligors, any other Person, or with respect to any Collateral may be
exercised (or Agent or any other member of the Lender Group may waive or refrain
from exercising such rights as provided in the Loan Documents or under
applicable law) in each case, in accordance with the applicable Loan Documents
and applicable law.

 

(f) Rights of Agent Not to be Impaired. No right of Agent or any other member of
the Lender Group to enforce the subordination provided for herein or to exercise
its other rights hereunder shall at any time in any way be prejudiced or
impaired by any act or failure to act by any Obligor, Agent or any other member
of the Lender Group hereunder or under or in connection with the other Loan
Documents or by any noncompliance by the other Obligors with the terms and
provisions and covenants herein or in any other Loan Document, regardless of any
knowledge thereof Agent or any other member of the Lender Group may have or
otherwise be charged with.

 

(g) Financial Condition of the Obligors. No Obligor shall have any right to
require Agent to obtain or disclose any information with respect to: (i) the
financial condition or character of any other Obligor or the ability of any
other Obligor to pay and perform any or all of Senior Debt; (ii) the Senior
Debt; (iii) the Collateral or other security for any or all of the Senior Debt;
(iv) the existence or nonexistence of any guarantees of, or any other
subordination agreements with respect to, all or any part

 

Exhibit I-1-5

of the Senior Debt; (v) any action or inaction on the part of Agent or any other
Person; or (vi) any other matter, fact, or occurrence whatsoever.

 

(h) Acquisition of Liens or Guaranties. Except as expressly permitted by the
Credit Agreement, no Creditor Obligor shall (i) acquire any Lien on any asset of
any Debtor Obligor or (ii) accept any guaranties from any other Obligor or from
any other Subsidiary of any Loan Party for the Subordinated Debt.

 

Section 9.             Subrogation. With respect to any payments or distribution
in cash, property, or other assets that any Creditor Obligor pays over to Agent
(for the benefit of the Lender Group) under the terms of this Agreement, each
Creditor Obligor shall be subrogated to the rights of Agent, the other members
of the Lender Group; provided, however, that each Creditor Obligor agrees not to
assert or enforce any such rights of subrogation it may acquire as a result of
any such payment or distribution hereunder until the Discharge of Senior Debt
has occurred; provided further, however, that no Creditor Obligor shall exercise
or enforce any such rights against any Debtor Obligor (including after the
Discharge of Senior Debt) if all or any portion of the Senior Debt shall have
been satisfied in connection with an exercise of remedies by Agent in respect of
the Equity Interests of such Debtor Obligor whether pursuant to the Guaranty and
Security Agreement or otherwise.

 

Section 10.         Continuing Agreement; Reinstatement. (a) Continuing
Agreement. This Agreement is a continuing agreement of subordination and shall
continue in effect and be binding upon each Obligor until the Discharge of
Senior Debt has occurred. The subordinations, agreements, and priorities set
forth herein shall remain in full force and effect regardless of whether any
party hereto in the future seeks to rescind, amend, terminate, or reform, by
litigation or otherwise, its respective agreements with the other Obligor. This
Agreement shall be applicable both before and after the commencement of any
Insolvency Proceeding and all converted or succeeding cases in respect thereof.
The relative rights of parties hereto in or to any distributions from or in
respect of any Collateral or proceeds of Collateral, shall continue after the
commencement of any Insolvency Proceeding. Accordingly, the provisions of this
Agreement are intended to be and shall be enforceable as a subordination
agreement within the meaning of Section 510 of the Bankruptcy Code.

 

(b) Reinstatement. This Agreement shall continue to be effective or shall be
reinstated (and the amount of Senior Debt shall be reinstated), as the case may
be, if, for any reason, any payment of the Senior Debt shall be rescinded or
must otherwise be restored by Agent or any other member of the Lender Group to
any Loan Party or any other Person, whether as a result of an Insolvency Event
or otherwise.

 

Section 11.         Transfer of Subordinated Debt. No Obligor may assign or
transfer its rights and obligations in respect of the Subordinated Debt without
the prior written consent of Agent, and any such transferee or assignee, as a
condition to acquiring an interest in the Subordinated Debt shall agree to be
bound hereby, in form reasonably satisfactory to Agent.

 

Section 12.         Obligations of the Obligors Not Affected. The provisions of
this Agreement are intended solely for the purpose of defining the relative
rights of each Creditor Obligor against each Debtor Obligor, on the one hand,
and of Agent and the other members of the Lender Group against each Creditor
Obligor, on the other hand. Nothing contained in this Agreement shall (i)
impair, as between each Creditor Obligor and any Debtor Obligor, the obligation
of the Debtor Obligor to pay its respective obligations with respect to the
Subordinated Debt as and when the same shall become due and payable, or (ii)
otherwise affect the relative rights of any Creditor Obligor against any Debtor
Obligor, on the one hand, and of the creditors (other than Agent or the other
members of the Lender Group) of the Debtor Obligors against the Debtor Obligors,
on the other hand.

 

Exhibit I-1-6

Section 13.         Endorsement of Obligor Documents; Further Assurances And
Additional Acts. (a) Endorsement of Obligor Documents. Upon the written request
of Agent, all documents and instruments evidencing any of the Subordinated Debt,
if any, shall be endorsed with a legend noting that such documents and
instruments are subject to this Agreement, and each Obligor shall promptly
deliver to Agent evidence of the same.

 

(b) Further Assurances and Additional Acts. Each Obligor shall execute,
acknowledge, deliver, file, notarize, and register at its own expense all such
further agreements, instruments, certificates, financing statements, documents,
and assurances, and perform such acts as the Required Lenders reasonably shall
deem necessary or appropriate to effectuate the purposes of this Agreement, and
promptly provide Agent with evidence of the foregoing reasonably satisfactory in
form and substance to the Required Lenders.

 

Section 14.         Notices. All notices and other communications provided for
hereunder shall be given in the form and manner provided in the Credit
Agreement, and, if to Agent, shall be mailed, sent, or delivered to Agent at its
address as specified in the Credit Agreement and, if to any Obligor, shall be
mailed, sent or delivered in care of the Borrower in accordance with the notice
provisions set forth in Credit Agreement or, as to any party, at such other
address as shall be designated by such party in a written notice to the other
party in writing.

 

Section 15.         No Waiver; Cumulative Remedies. No failure on the part of
Agent or any other member of the Lender Group to exercise, and no delay in
exercising, any right, remedy, power, or privilege hereunder or under any other
Loan Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, remedy, power, or privilege preclude any other or
further exercise thereof or the exercise of any other right, remedy, power, or
privilege. The rights and remedies under this Agreement are cumulative and not
exclusive of any rights, remedies, powers, and privileges that may otherwise be
available to Agent or the other members of the Lender Group.

 

Section 16.         Costs and Expenses. The Obligors, jointly and severally,
agree to pay to Agent promptly after demand therefor all Lender Group Expenses
in connection with this Agreement in accordance with Section 15.7 of the Credit
Agreement.

 

Section 17.         Survival. All covenants, agreements, representations and
warranties made in this Agreement shall, except to the extent otherwise provided
herein, survive the execution and delivery of this Agreement, and shall continue
in full force and effect until the Discharge of Senior Debt has occurred. The
foregoing to the contrary notwithstanding, the obligations of each Obligor under
‎Section 9 and ‎Section 16 shall survive the Discharge of Senior Debt.

 

Section 18.         Benefits of Agreement. This Agreement is entered into for
the sole protection and benefit of the Obligors, the Agent and the other members
of the Lender Group and their respective successors and permitted assigns and no
other Person shall be a direct or indirect beneficiary of, or shall have any
direct or indirect cause of action or claim in connection with, this Agreement.

 

Section 19.         Binding Effect. This Agreement shall be binding upon, inure
to the benefit of and be enforceable by each Obligor, Agent and the other
members of the Lender Group and their respective successors and permitted
assigns.

 

Section 20.         Governing Law; Venue; Jury Trial Waiver; Judicial Reference
Provision. THIS AGREEMENT SHALL BE SUBJECT TO THE PROVISIONS REGARDING CHOICE OF
LAW AND VENUE, JURY TRIAL WAIVER, AND JUDICIAL REFERENCE SET FORTH IN SECTION 12
OF THE CREDIT AGREEMENT, AND SUCH PROVISIONS ARE INCORPORATED HEREIN BY THIS

 

Exhibit I-1-7

REFERENCE, MUTATIS MUTANDIS.

 

Section 21.         Entire Agreement; Amendments and Waivers; Conflicts. (a)
Entire Agreement. This Agreement, together with the other Loan Documents,
constitutes the entire agreement of each of the Obligors and the Lender Group
with respect to the matters set forth herein and shall not be contradicted or
qualified by any other agreement, oral or written, before the date hereof.

 

(b) Amendments and Waivers. No amendment to or waiver of any provision of this
Agreement shall in any event be effective unless the same shall be in writing
and signed by each of the Obligors and Agent; and no waiver of any provision of
this Agreement, or consent to any departure by any Obligor from any provision
hereof, shall in any event be effective unless the same shall be in writing and
signed by Agent. Any such amendment, waiver, or consent shall be effective only
in the specific instance and for the specific purpose for which given.

 

(c) Conflicts with Subordinated Debt Documents. In case of any conflict or
inconsistency between any terms of this Agreement, on the one hand, and any
documents or instruments in respect of the Subordinated Debt, on the other hand,
then the terms of this Agreement shall control.

 

(d) Conflicts with Credit Agreement. In case of any conflict or inconsistency
between any terms of this Agreement, on the one hand, and any of the terms and
provisions of the Credit Agreement, on the other hand, then the terms and
provisions of the Credit Agreement shall control.

 

Section 22.         Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.

 

Section 23.         Interpretation. Neither this Agreement nor any uncertainty
or ambiguity herein shall be construed against any member of the Lender Group or
any Obligor, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be construed
and interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.

 

Section 24.         Counterparts; Telefacsimile or Other Electronic Delivery.
This Agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when executed and delivered,
shall be deemed to be an original, and all of which, when taken together, shall
constitute but one and the same agreement. Delivery of an executed counterpart
of this Agreement by telefacsimile or other electronic method of transmission
shall be equally as effective as delivery of an original executed counterpart of
this Agreement. Any party delivering an executed counterpart of this Agreement
by telefacsimile or other electronic method of transmission also shall deliver
an original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.

 

Section 25.         New Subsidiaries. Each Obligor shall cause any newly
acquired or formed Subsidiary of any Loan Party that is required pursuant to
Section 5.11 of the Credit Agreement to execute a joinder to the Guaranty and
Security Agreement or the Credit Agreement, within 20 days of such acquisition
or formation (or such later date as permitted by Agent in its sole discretion),
as the case may be, to execute and deliver to Agent a joinder to this Agreement
in a form reasonably satisfactory to Agent. Upon the execution and delivery of
such a joinder by such Subsidiary, such Subsidiary shall become an Obligor
hereunder with the same force and effect as if originally named as an Obligor
herein. The execution and delivery of any agreement or instrument adding an
additional Obligor as a party to this Agreement shall not require the consent of
any other Obligor hereunder. The rights and obligations of

 

Exhibit I-1-8

each Obligor hereunder shall remain in full force and effect notwithstanding the
addition of any new Obligor hereunder as though such new Obligor had originally
been named an Obligor hereunder on the date of this Agreement.

 

[Signature page follows]

 

Exhibit I-1-9

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

 

OBLIGORS:

 

  [____]           By:       Name:     Title:

 

 

 

Exhibit I-1-10

AGENT:

 

  CANTOR FITZGERALD SECURITIES, as Agent           By:       Name:     Title:

Exhibit I-1-11

EXHIBIT I-2

 

[FORM OF] INTERIM DIP ORDER

 

Exhibit I-2

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE

 

In re:

 

PERNIX SLEEP, INC., et al.1

 

Debtors.

 

Chapter 11

 

Case No. 19-10323 (CSS)

 

Joint Administration Requested
Ref No. 19

 

 

INTERIM ORDER PURSUANT TO 11 U.S.C. §§ 105,
361, 362, 363, 364, AND 507 AND FED. R. BANKR. P. 2002,
4001 AND 9014 (I) AUTHORIZING THE DEBTORS TO OBTAIN
POSTPETITION FINANCING, (II) AUTHORIZING USE OF
CASH COLLATERAL, (III) GRANTING LIENS AND SUPERPRIORITY
CLAIMS, (IV) GRANTING ADEQUATE PROTECTION, (V) SCHEDULING
A FINAL HEARING, AND (VI) GRANTING RELATED RELIEF

 

Upon the motion (the “Motion”)2 of Pernix Therapeutics Holdings, Inc. (“Pernix”)
and certain of its affiliates, as debtors and debtors in possession in the
above-captioned cases (collectively, the “Debtors”) for the entry of an interim
order (this “Interim Order”) and a final order (the “Final Order”) under
sections 105, 361, 362, 363(c), 363(e), 364(c), 364(d)(1), 364(e), and 507 of
title 11 of the United States Code (the “Bankruptcy Code”), and Rules 2002, 4001
and 9014 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”),
and Rule 4001-2 of the Local Bankruptcy Rules for the United States Bankruptcy
Court for the District of Delaware (the “Local Rules”), granting, inter alia,
the following relief:

 

____________________

1The Debtors in these cases, along with the last four digits of each Debtor’s
federal tax identification number, where applicable, are: Pernix Therapeutics
Holdings, Inc. (4736), Pernix Therapeutics, LLC (1128), Pernix Manufacturing,
LLC (1236), Pernix Sleep, Inc. (1599), Cypress Pharmaceuticals, Inc. (1860),
Hawthorn Pharmaceuticals, Inc. (2769), Macoven Pharmaceuticals, L.L.C. (4549),
Gaine, Inc. (3864), Respicopea, Inc. (1303), Pernix Ireland Limited (3106PH),
Pernix Ireland Pain Designated Activity Company (0190LH), Pernix Holdco 1, LLC,
Pernix Holdco 2, LLC, Pernix Holdco 3, LLC. The Debtors’ corporate headquarters
and mailing address is 10 North Park Place, Suite 201, Morristown, NJ 07960.

 

2Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the DIP Credit Agreement (as defined below).

 

 

 

 

(i)       authorizing Pernix (the “Borrower”) to enter into that certain Senior
Secured Superpriority Debtor-In-Possession Credit Agreement (as amended,
supplemented or otherwise modified from time to time, the “DIP Credit
Agreement”), the form of which is attached to the Motion as Exhibit B, among the
Borrower, Cantor Fitzgerald Securities as administrative agent (in such
capacity, the “DIP Agent”), and the lenders from time to time party thereto (the
“DIP Lenders”), and for certain of the other Debtors3 (collectively, the “DIP
Guarantors” and together with the Borrower, the “DIP Loan Parties”) to guaranty
the obligations of the Borrower in connection with the DIP Facility pursuant to
the Guarantee and Security Agreement (as defined below), and for the DIP Loan
Parties to obtain a senior secured, priming superpriority multi-draw
debtor-in-possession term loan facility (the “DIP Facility”), which shall
consist of a superpriority priming term loan facility with an aggregate
principal amount of up to $34.1 million, and such other financial
accommodations, allocated as follows:

 

(a)Delayed Draw Loans. A delayed draw term loan facility in an aggregate
principal amount of up to $20.0 million (the “Delayed Draw Commitments”) (which
is inclusive of Incremental Commitments (as defined in the DIP Credit Agreement)
of up to $5.0 million) with (i) $6.0 million of the Delayed Draw Commitments
available to be funded in cash upon entry of this Interim Order; and (ii) the
remaining $14.0 million of the Delayed Draw Commitments available following
entry of the Final Order, subject in each case to the DIP Loan Parties’
satisfaction of applicable draw conditions pursuant to the terms of the DIP Loan
Documents (as defined below); and

 

(b)Refinance of the Prepetition Revolving Debt. A superpriority term loan
facility in the aggregate principal amount of $14.1 million to refinance the
outstanding amount of the Prepetition Revolving Debt (as defined below).

 

 

____________________

3Pernix Ireland Limited (“PIL”), Pernix Ireland Pain Designated Activity Company
(“PIP DAC”) and Pernix Manufacturing, LLC are not DIP Guarantors.

 

2

 

(ii)       authorizing the Debtors to use the proceeds of the DIP Facility as
provided in the DIP Loan Documents and solely in accordance with the Approved
Budget, including use of the proceeds of the DIP Facility and Cash Collateral
(as defined below), to refinance and discharge the Prepetition Revolving Debt
outstanding as of the entry of this Interim Order in full, including
postpetition interest and fees through the date of repayment, which refinancing
and discharge shall be indefeasible upon the occurrence of the Revolver
Discharge (as defined below);

 

(iii)       authorizing the DIP Loan Parties to execute and enter into the DIP
Loan Documents and to perform such other and further acts as may be required in
connection with the DIP Loan Documents;

 

(iv)       authorizing the Debtors to use Cash Collateral and all other
Prepetition Collateral on the terms and conditions set forth in this Interim
Order, the DIP Loan Documents, and the Intercreditor Agreement;

 

(v)       authorizing the DIP Loan Parties to grant adequate protection to the
Prepetition Secured Parties and Prepetition Agents under and in connection with
the Prepetition Financing Documents or the TSA, as applicable, and this Interim
Order, including without limitation, granting the Adequate Protection Liens (as
defined below) in accordance with the relative priorities set forth herein;

 

(vi)       authorizing the DIP Loan Parties to grant security interests, liens
and superpriority claims (including a superpriority administrative claim
pursuant to section 364(c)(1) of the Bankruptcy Code, liens pursuant to sections
364(c)(2) and 364(c)(3) of the Bankruptcy Code and priming liens pursuant to
section 364(d) of the Bankruptcy Code) in favor of the DIP

 

3

 

Agent, for the benefit of itself and the DIP Lenders, to secure the repayment of
all obligations of the DIP Loan Parties under the DIP Facility and the DIP Loan
Documents;

 

(vii)       authorizing the DIP Agent, upon the occurrence of a Termination
Event and following the Default Notice Period, to, inter alia, (a) terminate the
funding commitments, accelerate the amounts owing under the DIP Loan Documents
and exercise other remedies set forth thereunder, and (b) terminate the Debtors’
use of Cash Collateral in accordance with this Interim Order, the Intercreditor
Agreement, and the DIP Loan Documents;

 

(viii)       authorizing the Debtors, subject to entry of the Final Order, to
waive their right to (a) any claims to surcharge against the DIP Collateral and
the Prepetition Collateral pursuant to Bankruptcy Code section 506(c), (b) any
“equities of the case” claims under Bankruptcy Code section 552(b), and (c) the
equitable doctrine of “marshaling” or any similar doctrine with respect to the
DIP Collateral and the Prepetition Collateral;

 

(ix)       authorizing the Debtors to modify the automatic stay imposed by
section 362 of the Bankruptcy Code to the extent necessary to implement and
effectuate the terms and provisions of the DIP Loan Documents, the Interim
Order, and as later applicable, the Final Order;

 

(x)       authorizing the waiver of any applicable stay (including Bankruptcy
Rule 6004) and the provision of immediate effectiveness of this Interim Order,
and as later applicable, the Final Order; and

 

(xi)       scheduling a final hearing (the “Final Hearing”) to consider entry of
the Final Order; and granting related relief.

 

The Court having found that the relief requested in the Motion is in the best
interests of the Debtors’ estates, their creditors and other parties in
interest; and the Court having

 

4

 

found that the Debtors’ notice of the Motion and the opportunity for a hearing
on the Motion was appropriate and no other notice need be provided; and the
Court having reviewed the Motion, the exhibits thereto, and the documents filed
in support thereof and any responses thereto, and having heard the statements in
support of the relief requested therein at a hearing before the Court on
__________ __, 2019 (the “Interim Hearing”); and the Court having determined
that the legal and factual bases set forth in the Motion, the Declaration of
John A. Sedor in Support of the Debtors’ Chapter 11 Petitions and First Day
Pleadings (Docket No. 3) (the “Sedor Declaration”), and the Declaration of
Stuart Erickson in Support of Motion of Debtors for Interim and Final Orders (I)
Authorizing Debtors (A) to Obtain Postpetition Financing and (b) to Use Cash
Collateral, (II) Granting Adequate Protection to Certain Prepetition Secured
Parties, (III) Scheduling a Final Hearing and (IV) Granting Related Relief,
attached as Exhibit A to the Motion (the “Erickson Declaration”), and at the
Interim Hearing establish just cause for the relief granted herein; and upon all
of the proceedings had before the Court; and after due deliberation and
sufficient cause appearing therefor, it is HEREBY FOUND AND CONCLUDED THAT:

 

A.                Disposition. The Motion is granted on an interim basis in
accordance with the terms of this Interim Order. Any objections to the Motion
with respect to the entry of the Interim Order that have not been withdrawn,
waived or settled are hereby denied and overruled on their merits.

 

B.                 Commencement of Cases. On February 18, 2019 (the “Petition
Date”), the Debtors filed with this Court voluntary petitions for relief under
Chapter 11 of the Bankruptcy Code. The Debtors are in possession of their
properties and are continuing to operate their businesses as debtors and debtors
in possession under sections 1107 and 1108 of the Bankruptcy

 

5

 

Code. No official committee of unsecured creditors (a “Committee”) has been
appointed in the above-captioned cases (the “Chapter 11 Cases”).

 

C.                 Jurisdiction and Venue. This Court has jurisdiction over the
Chapter 11 Cases and the Motion pursuant to 28 U.S.C. §§ 157(b) and 1334, and
the Amended Standing Order of Reference from the United States District Court
for the District of Delaware dated as of February 29, 2012. Consideration of the
Motion constitutes a core proceeding pursuant to 28 U.S.C. § 157(b)(2). The
Court may enter a final order consistent with Article III of the United States
Constitution. Venue of the Chapter 11 Cases in this District is proper pursuant
to 28 U.S.C. §§ 1408 and 1409. The predicates for the relief sought herein are
Bankruptcy Code sections 105, 361, 362, 363(c), 363(e), 364(c), 364(d)(1),
364(e), and 507, Bankruptcy Rules 2002, 4001 and 9014, and Local Rule 4001-2.

 

D.                Adequate Notice. On the Petition Date, the Debtors filed the
Motion with this Court pursuant to Bankruptcy Rules 2002, 4001 and 9014, and
provided notice of the Motion and the Interim Hearing by electronic mail,
facsimile, hand delivery or overnight delivery to the following parties or, in
lieu thereof, their counsel, if known: (a) the Office of the United States
Trustee for the District of Delaware (the “U.S. Trustee”), (b) each of the
Debtors’ thirty (30) largest unsecured creditors on a consolidated basis; (c)
the Prepetition Treximet Notes Trustee; (d) Highbridge (as defined in the Sedor
Declaration); (e) all parties asserting a security interest in the DIP
Collateral to the extent any such interest is known to the Debtors; (f)
Nalpropion Pharmaceuticals, Inc. (“Nalpropion”) and (g) all parties requesting
service in these Chapter 11 Cases pursuant to Bankruptcy Rule 2002
(collectively, the “Notice Parties”). Given the nature of the relief sought in
the Motion, this Court concludes that the foregoing notice was sufficient and
adequate under the circumstances and complies with the Bankruptcy Code, the
Bankruptcy

 

6

 

Rules, the Local Rules and any other applicable law, and no further notice
relating to this proceeding and the hearing on this Motion is necessary or
required.

 

E.                 Debtors’ Stipulations. Subject to the rights of any Committee
or other parties-in-interest as and to the extent set forth in paragraph ‎33
below, the Debtors acknowledge, admit, represent, stipulate and agree that:

 

(i)                 Prepetition Term Facility. Pursuant to that certain Credit
Agreement, dated as of July 21, 2017 (as the same has been amended, amended and
restated, supplemented, modified, extended, renewed, restated and/or replaced at
any time prior to the Petition Date, the “Prepetition Term Credit Agreement”),
by and among, PIP DAC, as borrower, the lenders party thereto (the “Prepetition
Term Lenders”), Cantor Fitzgerald Securities as the administrative agent (in
such capacity, the “Prepetition Term Agent”), the Prepetition Term Lenders made
loans pursuant to the Prepetition Term Credit Agreement to PIP DAC, and
otherwise extended credit to PIP DAC. As of the Petition Date, PIP DAC was
justly and lawfully indebted and liable to the Prepetition Term Lenders, without
defense, counterclaim, recoupment or offset of any kind, in the aggregate
principal amount of not less than approximately $39.2 million, plus an
additional $1.1 million of accrued pay-in-kind interest, under and in connection
with, the Prepetition Term Credit Agreement, including all other agreements,
documents and instruments executed and/or delivered with, to or in favor of the
Prepetition Term Lenders, including, without limitation, all security
agreements, notes, guarantees, mortgages, Uniform Commercial Code financing
statements, documents and instruments, including any fee letters, executed
and/or delivered in connection therewith or related thereto (all the foregoing,
together with the Prepetition Term Credit Agreement, the “Prepetition Term
Financing Documents”). All obligations arising under

 

7

 

the Prepetition Term Financing Documents shall hereinafter be referred to as the
“Prepetition Term Obligations.”

 

(ii)              Prepetition Term Liens. Pursuant to the Prepetition Term
Financing Documents, PIP DAC granted to the Prepetition Term Agent for the
benefit of the Prepetition Term Lenders to secure the Prepetition Term
Obligations, a first-priority security interest in and continuing lien (the
“Prepetition Term Liens”) on all Collateral (as defined in the Prepetition Term
Credit Agreement) (the “Prepetition Term Collateral”), subject to Permitted
Liens (as defined in the Prepetition Term Credit Agreement).

 

(iii)            Validity of Prepetition Term Liens. The Prepetition Term Liens
(a) constitute valid, binding, enforceable, nonavoidable, properly perfected,
first-priority liens on the Prepetition Term Collateral, that are senior in
priority (except for any senior Permitted Liens, as defined in and to the extent
expressly permitted under the Prepetition Term Credit Agreement) over any and
all other liens on the Prepetition Term Collateral; and (b) are not subject to
avoidance, reductions, recharacterization, set-off, subordination (whether
equitable, contractual or otherwise), counterclaims, cross-claims, defenses or
any other challenges under the Bankruptcy Code or any other applicable law or
regulation.

 

(iv)             Prepetition Treximet Notes. Pursuant to that certain Indenture,
dated as of August 19, 2014 (as amended, restated, supplemented or otherwise
modified from time to time, the “Prepetition Treximet Notes Indenture”), among
Pernix, as Issuer, each other Debtor other than PIP DAC, as guarantors (together
with the Issuer, the “Prepetition Treximet Notes Parties”), and U.S. Bank
National Association, as Trustee and Collateral Trustee (the “Prepetition
Treximet Notes Trustee”), Pernix issued 12% senior secured notes (the
“Prepetition Treximet Notes” and the holders of the Prepetition Treximet Notes,
the “Prepetition Treximet

 

8

 

Noteholders”). As of the Petition Date, the Prepetition Treximet Notes Parties
are justly and lawfully indebted and liable, without defense, counterclaim,
recoupment or offset of any kind, in the aggregate principal amount of not less
than approximately $154 million of the Prepetition Treximet Notes, under and in
connection with the Prepetition Treximet Notes Indenture, including all other
agreements, documents and instruments executed and/or delivered with, including,
without limitation, all security agreements, notes, guarantees, mortgages,
Uniform Commercial Code financing statements, documents and instruments,
including any fee letters, executed and/or delivered in connection therewith or
related thereto (all the foregoing, together with the Prepetition Treximet Notes
Indenture, the “Prepetition Treximet Notes Financing Documents”). All
obligations arising under the Prepetition Treximet Notes Financing Documents
shall hereinafter be referred to as the “Prepetition Treximet Notes
Obligations”.

 

(v)               Prepetition Treximet Notes Liens. Pursuant to the Prepetition
Treximet Notes Financing Documents, PIL granted to the Prepetition Treximet
Notes Trustee to secure the Prepetition Treximet Notes Obligations, a continuing
first-priority security interest (the “Prepetition Treximet Notes Liens”) in
substantially all of the assets of PIL related to Treximet other than the ABL
Collateral (as defined in the Prepetition Treximet Notes Indenture) (the
“Prepetition Treximet Notes Collateral”), subject to Permitted Liens (as defined
in the Prepetition Treximet Notes Indenture).

 

(vi)             Validity of Prepetition Treximet Notes Liens. The Prepetition
Treximet Notes Liens (a) constitute valid, binding, enforceable, nonavoidable,
properly perfected, first-priority liens in the Prepetition Treximet Notes
Collateral for the benefit of the Prepetition Treximet Noteholders; and (b) are
not subject to avoidance, reductions, recharacterization, set-off, subordination
(whether equitable, contractual or otherwise), counterclaims, cross-claims,

 

9

 

defenses or any other challenges under the Bankruptcy Code or any other
applicable law or regulation.

 

(vii)          Prepetition Revolving Facility. Pursuant to that certain Credit
Agreement, dated as of July 21, 2017 (as the same has been amended, amended and
restated, supplemented, modified, extended, renewed, restated and/or replaced at
any time prior to the Petition Date, the “Prepetition Revolving Credit
Agreement”), by and among Pernix and certain of its affiliates (collectively,
“Prepetition Revolving Borrowers”), certain subsidiary guarantors (together with
the Prepetition Revolving Borrowers, the “Prepetition Revolving Credit
Parties”), the lenders thereto (the “Prepetition Revolving Lenders”), and Cantor
Fitzgerald Securities as the administrative agent (in such capacity, the
“Prepetition Revolving Agent,” and together with the Prepetition Term Agent, the
“Prepetition Agents”), the Prepetition Revolving Lenders agreed to extend a
revolving asset-based credit facility (the “Prepetition Revolving Facility”) to
the Prepetition Revolving Borrowers from time to time, including, inter alia,
the Prepetition Revolving Obligations in an aggregate principal committed amount
of up to $40 million. As of the Petition Date, the Prepetition Revolving Credit
Parties are truly and justly indebted to the Prepetition Revolving Lenders,
without defense, counterclaim, recoupment or offset of any kind, in the
aggregate principal amount of not less than approximately $14.1 million (the
“Prepetition Revolving Debt”), under and in connection with, the Prepetition
Revolving Credit Agreement, including all other agreements, documents and
instruments executed and/or delivered with, to or in favor of the Prepetition
Revolving Lenders, including, without limitation, all security agreements,
notes, guarantees, mortgages, Uniform Commercial Code financing statements,
documents and instruments, including any fee letters, executed and/or delivered
in connection therewith or related thereto (all the foregoing, together with
Prepetition Revolving Credit

 

10

 

Agreement, the “Prepetition Revolving Financing Documents”). All obligations
arising under the Prepetition Revolving Financing Documents shall hereinafter be
referred to as the “Prepetition Revolving Obligations.”

 

(viii)        Prepetition Revolving Liens. Pursuant to the Prepetition Revolving
Financing Documents, the Prepetition Revolving Borrowers granted to the
Prepetition Agent for the benefit of the Prepetition Revolving Lenders to secure
the Prepetition Revolving Obligations, a first-priority security interest in and
continuing lien (the “Prepetition Revolving Liens”) on all Collateral (as
defined in the Prepetition Revolving Credit Agreement) (the “Prepetition
Revolving Collateral”).

 

(ix)             Validity of Prepetition Revolving Liens. The Prepetition
Revolving Liens (a) constitute valid, binding, enforceable, nonavoidable,
properly perfected, first-priority liens on the Prepetition Revolving
Collateral, that prior to entry of this Interim Order, were senior in priority
(except for any senior Permitted Liens, as defined in and to the extent
expressly permitted under the Prepetition Revolving Credit Agreement) over any
and all other liens on the Prepetition Revolving Collateral; and (b) are not
subject to avoidance, reductions, recharacterization, set-off, subordination
(whether equitable, contractual or otherwise), counterclaims, cross-claims,
defenses or any other challenges under the Bankruptcy Code or any other
applicable law or regulation.

 

(x)               Prepetition Nalpropion Second Liens. Pursuant to that
Transitional Distribution Services Agreement, dated January 6, 2019 (as the same
has been amended, amended and restated, supplemented, modified, extended,
renewed, restated and/or replaced at any time prior to the Petition Date, the
“TSA”), between Pernix Therapeutics, LLC (“Pernix Therapeutics”) and Nalpropion,
Pernix Therapeutics granted to Nalpropion to secure the

 

11

 

complete and prompt payment and performance of all the Secured Obligations (as
defined in the TSA, the “Nalpropion Secured Obligations”), a second-priority
security interest in and continuing lien (the “Prepetition Nalpropion Liens,”
and together with the Prepetition Term Liens and Prepetition Revolving Liens,
the “Prepetition Liens”) on certain assets relating to the pharmaceutical assets
and proceeds thereof that are subject to the TSA (such assets granted or pledged
as “Collateral” pursuant to the TSA, the “Nalpropion Collateral” and together
with the Prepetition Revolving Collateral and Prepetition Term Collateral, the
“Prepetition Collateral”). All obligations arising under the Prepetition
Revolving Financing Documents, Prepetition Term Financing Documents, and the TSA
(collectively, the “Prepetition Financing Documents”) shall hereinafter be
referred to as the “Prepetition Obligations.”

 

(xi)             Validity of Prepetition Nalpropion Liens. The Prepetition
Nalpropion Liens (a) constitute valid, binding, enforceable, nonavoidable,
properly perfected, second-priority liens in the Nalpropion Collateral; and (b)
are not subject to avoidance, reductions, recharacterization, set-off,
subordination (whether equitable, contractual or otherwise), counterclaims,
cross-claims, defenses or any other challenges under the Bankruptcy Code or any
other applicable law or regulation.

 

(xii)          Intercreditor Agreement. The Prepetition Revolving Agent and
Nalpropion are parties to that certain Intercreditor Agreement, dated January 6,
2019 (as the same may be amended, restated, supplemented, waived and/or
otherwise modified from time to time in accordance with the terms thereof, the
“Intercreditor Agreement”), which governs the respective rights, obligations and
priorities of the Prepetition Revolving Lenders and Nalpropion with respect to
certain Prepetition Collateral. The DIP Loan Parties have acknowledged and

 

12

 

agreed to be bound by the terms of the Intercreditor Agreement, which is binding
and enforceable against the DIP Loan Parties.

 

(xiii)        No Claims. The Debtors have no valid claims (as such term is
defined in Bankruptcy Code section 101(5)) or causes of action against, or with
respect to, the Prepetition Revolving Lenders, Prepetition Term Lenders,
Nalpropion (collectively, with the Prepetition Revolving Lenders and the
Prepetition Term Lenders, the “Prepetition Secured Parties”), the Prepetition
Agents, the Prepetition Treximet Notes Trustee or the Prepetition Treximet
Noteholders under any agreements by and among the Debtors and any party that is
in existence as of the Petition Date, including without limitation, any
challenge, recharacterization, subordination, avoidance or other claims arising
under or pursuant to Bankruptcy Code sections 105, 510, 541 or 542 through 553,
other than any claim that constitutes a right to payment arising pursuant to and
in accordance with the terms of the Services Agreement (as defined in the Sedor
Declaration) or the TSA. As of the date hereof, the net balance of such claims
due and owing to the Debtors by Nalpropion under the Services Agreement or the
TSA is equal to $0.

 

(xiv)         Indemnity. The Debtors shall indemnify and hold harmless the DIP
Agent, the DIP Lenders and each other Indemnified Person (as defined in the DIP
Credit Agreement) in accordance with the terms and conditions of the DIP Credit
Agreement.

 

(xv)           Release. The Debtors hereby stipulate and agree that they forever
and irrevocably release, discharge and acquit the DIP Agent, Prepetition Agents,
Prepetition Treximet Notes Trustee, all former, current and future Prepetition
Secured Parties, Prepetition Treximet Noteholders and DIP Lenders, in each case
in their capacities as such, and each of their respective successors, assigns,
affiliates, subsidiaries, parents, officers, shareholders, directors, employees,
attorneys and agents, past, present and future, and their respective heirs,

 

13

 

predecessors, successors and assigns (collectively, the “Releasees”) of and from
any and all claims, controversies, disputes, liabilities, obligations, demands,
damages, expenses (including, without limitation, reasonable attorneys’ fees),
debts, liens, actions and causes of action of any and every nature whatsoever,
in each case arising prior to the date hereof, and relating to, as applicable,
the DIP Facility, the DIP Loan Documents, Prepetition Financing Documents, the
Prepetition Treximet Notes Financing Documents and/or the transactions
contemplated thereunder including, without limitation, (x) any so-called “lender
liability” or equitable subordination claims or defenses, (y) any and all claims
and causes of action arising under the Bankruptcy Code, and (z) any and all
claims and causes of action with respect to the validity, priority, perfection
or avoidability of the liens or claims of the Prepetition Secured Parties,
Prepetition Agents, Prepetition Treximet Noteholders, Prepetition Treximet Notes
Trustee, DIP Agent and the DIP Lenders. The Debtors further waive and release
any defense, right of counterclaim, right of set-off or deduction to the payment
of Prepetition Secured Parties, Prepetition Treximet Noteholders and the DIP
Lenders which the Debtors now have or may claim to have against the Releasees,
arising out of, connected with or relating to any and all acts, omissions or
events occurring prior to this Court entering this Interim Order.
Notwithstanding the foregoing, nothing in this Interim Order shall release or
otherwise affect Nalpropion’s contractual payment obligations to the Debtors
arising pursuant to and in accordance with the terms of the Services Agreement
or the TSA.

 

(xvi)         Limitation of Liability. None of the Prepetition Secured Parties,
Prepetition Agents, Prepetition Treximet Notes Trustee, Prepetition Treximet
Noteholders, DIP Agent, or the DIP Lenders are control persons or insiders of
the Debtors or any of their affiliates by virtue of any of the actions taken
with respect to, in connection with, related to, or arising

 

14

 

from the DIP Facility, the DIP Loan Documents, the Prepetition Financing
Documents and/or the Prepetition Treximet Notes Financing Documents. The DIP
Lenders shall not, by virtue of making the DIP Loans, be deemed to be in control
of the operations of Debtors, to owe any fiduciary duty to the Debtors, their
respective creditors, shareholders, or estates or to be acting as a “responsible
person” or managing agent with respect to the operation or management of the
Debtors.

 

(xvii)      Any payment or obligation requested to be made by the Debtors in
connection with the First Day Motions (as defined in the Sedor Declaration) is
expressly provided for in the Approved Budget (as defined below).

 

F.                  Cash Collateral. For purposes of this Interim Order, the
term “Cash Collateral” shall mean and include all “cash collateral” as defined
in Bankruptcy Code section 363, in which the Prepetition Secured Parties have a
lien or security interest, in each case whether existing on the Petition Date,
arising pursuant to this Interim Order or any Final Order, or otherwise. The
Debtors represent and stipulate that all of the cash, cash equivalents,
negotiable instruments, investment property, and securities of the Prepetition
Revolving Borrowers constitute Cash Collateral.

 

G.                Use of DIP Facility and Cash Collateral. The Debtors have an
immediate and critical need to use proceeds of the DIP Facility and Cash
Collateral to, among other things, continue to operate their business in an
orderly manner, maintain business relationships with vendors, fund the Debtors’
marketing and sale process, and to satisfy other working capital and operational
needs. Without the use of proceeds of the DIP Facility and Cash Collateral, the
Debtors will have insufficient liquidity to conduct a successful sale process
and otherwise preserve and maximize the value of the Debtors’ estates. The
adequate protection provided

 

15

 

herein and other benefits and privileges contained herein are consistent with
and authorized by the Bankruptcy Code and are necessary in order to obtain such
consent and to adequately protect the parties’ interests in the Prepetition
Collateral. Absent authorization to immediately use proceeds of the DIP Facility
and Cash Collateral, the Debtors’ estates and their creditors would suffer
immediate and irreparable harm.

 

H.                Other Financing Unavailable. As discussed in the Erickson
Declaration, the Debtors are unable to obtain (i) adequate unsecured credit
allowable either (a) under sections 364(b) and 503(b)(1) of the Bankruptcy Code
or (b) under section 364(c)(1) of the Bankruptcy Code; (ii) adequate credit
secured by (x) a senior lien on unencumbered assets of their estates under
section 364(c)(2) of the Bankruptcy Code or (y) a junior lien on encumbered
assets of their estates under section 364(c)(3) of the Bankruptcy Code; or (iii)
secured credit under section 364(d)(1) of the Bankruptcy Code on terms more
favorable than the terms of the DIP Facility. The Debtors require financing
under the DIP Facility and the continued use of Cash Collateral under the terms
of this Interim Order to satisfy their post-petition liquidity needs.

 

I.                    Best Financing Presently Available. The DIP Agent and the
DIP Lenders have agreed to provide the Debtors with financing solely on the
terms and conditions set forth in this Interim Order (and, subject to entry by
the Court, the Final Order) and the other DIP Loan Documents. After considering
all of their alternatives, the Debtors have concluded, in an exercise of their
sound business judgment, that the financing to be provided by the DIP Lenders
pursuant to the terms of this Interim Order (and, subject to entry by the Court,
the Final Order) and the other DIP Loan Documents, represents the best financing
presently available to the Debtors.

 

J.                   Good Cause for Immediate Entry. Good cause has been shown
for immediate entry of this Interim Order pursuant to Bankruptcy Rules
4001(b)(2) and (c)(2) and Local Rule

 

16

 

4001-2. In particular, the authorization granted herein for the Debtors to enter
into the DIP Facility, to continue using Cash Collateral and to obtain interim
financing, including on a priming lien basis, is necessary to avoid immediate
and irreparable harm to the Debtors and their estates. Entry of this Interim
Order is in the best interest of the Debtors, their estates and creditors. The
extensions of credit under the DIP Facility (including the Debtors’ continued
use of Cash Collateral) are fair and reasonable under the circumstances, reflect
the Debtors’ exercise of prudent business judgment consistent with their
fiduciary duties, and are supported by reasonably equivalent value and fair
consideration.

 

K.                Good Faith and Arm’s Length Negotiation. The DIP Lenders are
good faith financiers. The Debtors, DIP Agent, and DIP Lenders have negotiated
the terms and conditions of the DIP Facility and this Interim Order in good
faith and at arm’s length, and any credit extended and loans made to the DIP
Loan Parties pursuant to this Interim Order shall be, and hereby are, deemed to
have been extended, issued or made, as the case may be, in “good faith” within
the meaning of section 364(e) of the Bankruptcy Code.

 

L.                 Application of Proceeds of the DIP Collateral. Subject to and
effective upon entry of the Final Order, and notwithstanding anything to the
contrary herein, the Debtors shall apply the cash proceeds from any sale of the
DIP Collateral outside of the ordinary course of business to repay the
then-outstanding amount of the DIP Obligations, with interest being paid first
followed by principal, and any remaining proceeds in accordance with this
Interim Order and the DIP Loan Documents.

 

M.               Adequate Protection for the Prepetition Secured Parties. The
Prepetition Secured Parties and Prepetition Agents have negotiated and acted in
good faith regarding the DIP Facility and the Debtors use of Cash Collateral to
fund the administration of the Debtors’ estates and

 

17

 

continued operation of their businesses. The Prepetition Secured Parties have
agreed to permit the Debtors to use the Prepetition Collateral, including the
Cash Collateral, in accordance with the terms hereof, the Approved Budget
subject to Permitted Variances (each as defined below), and the Intercreditor
Agreement. The Prepetition Secured Parties are entitled to the adequate
protection provided in this Interim Order as and to the extent set forth herein
pursuant to Bankruptcy Code sections 361, 362 and 363. Based on the Motion and
on the record presented to the Court at the Interim Hearing, the terms of the
proposed adequate protection arrangements and of the use of the Prepetition
Collateral (including the Cash Collateral) are fair and reasonable, reflect the
Debtors’ prudent exercise of business judgment and constitute reasonably
equivalent value and fair consideration for the consent thereto of the
Prepetition Collateral (including the Cash Collateral); provided, that nothing
in this Interim Order or the other DIP Loan Documents shall (x) be construed as
a consent by the Prepetition Secured Parties (or their respective agents) that
they would be adequately protected in the event debtor-in-possession financing
is provided by a third party (i.e., other than the DIP Lenders) or a consent to
the terms of any other such financing or any lien encumbering the DIP Collateral
(whether senior or junior) or to the use of Cash Collateral except as provided
in this Interim Order and the DIP Loan Documents, or (y) prejudice, limit or
otherwise impair the rights of the Prepetition Secured Parties to seek new,
different or additional adequate protection in the event circumstances change
after the date hereof (subject to the Intercreditor Agreement).

 

N.                Sections 506(c) and 552(b). In light of the Prepetition
Secured Parties agreement to subordinate their liens and claims to the
Carve-Out, the DIP Liens, and the Adequate Protection Liens, to permit the use
of the DIP Facility and Cash Collateral for payments made in accordance with the
Approved Budget and the terms of this Interim Order, subject to entry of a

 

18

 

Final Order, the Prepetition Secured Parties are entitled to a waiver of (a) the
provisions of Bankruptcy Code section 506(c), and (b) any “equities of the case”
claims under Bankruptcy Code section 552(b).

 

O.                Order of the Court. Based upon the foregoing findings,
acknowledgements, and conclusions, and upon the record made before this Court at
the Interim Hearing, and good and sufficient cause appearing therefor:

 

IT IS HEREBY FOUND, DETERMINED, ORDERED, ADJUDGED AND DECREED THAT:

 

1.                  Motion Granted. The Motion is granted on an interim basis,
subject to the terms set forth herein. Any objections to the Motion with respect
to the entry of the Interim Order that have not previously been withdrawn or
resolved are hereby denied and overruled on their merits. This Interim Order
shall be valid, binding on all parties in interest, and fully effective
immediately upon entry notwithstanding the possible application of Bankruptcy
Rules 6004(h), 7062 and 9014.

 

2.                  Authority to Enter Into the DIP Loan Documents. The DIP Loan
Parties are hereby authorized to incur and perform the obligations arising from
and after the date of this Interim Order under the DIP Facility, on the terms
set forth in this Interim Order and the DIP Credit Agreement, and such
additional documents, instruments and agreements as may be reasonably required
by the DIP Agent to implement the terms or effectuate the purposes of and
transactions contemplated by this Interim Order, the Final Order (when entered
by the Court) and the DIP Credit Agreement (collectively, this Interim Order,
the Final Order, the Approved Budget, the DIP Credit Agreement, the Guarantee
and Security Agreement (as defined in the DIP Credit Agreement) and such other
additional documents, instruments and agreements, including

 

19

 

any fee letters, the “DIP Loan Documents”). Subject to paragraph ‎20 of this
Interim Order, the DIP Loan Parties are hereby authorized to borrow money under
the applicable DIP Loan Documents, on an interim basis, and perform all other
obligations thereunder, provided that until the entry of the Final Order, the
DIP Loan Parties are only authorized to borrow an aggregate principal amount of
up to $20.1 million, comprised of (i) $6.0 million in Delayed Draw Commitments,
and (ii) $14.1 million to refinance the outstanding amounts owed under the
Prepetition Revolving Facility. In furtherance of the forgoing and without
further approval of the Court, each Debtor is authorized to perform all acts, to
make, execute and deliver all instruments and documents (including, without
limitation, the execution and delivery of security agreements, mortgages and
financing statements), and to pay all fees that may be reasonably required or
necessary for the DIP Loan Parties’ performance of their obligations under or
related to the DIP Facility.

 

3.                  Refinancing of Prepetition Revolving Facility. Subject to
the rights of any Committee or other parties-in-interest as and to the extent
set forth in paragraph ‎33 below, the Debtors are hereby authorized to use
proceeds of the DIP Facility and Cash Collateral to pay in full the Prepetition
Revolving Debt. The Prepetition Revolving Liens shall be automatically released
and terminated upon the Revolver Discharge.4 Until then, subject to the terms
and conditions contained in this Interim Order (including, without limitation,
the DIP Liens (as defined below) granted hereunder and the Carve-Out (as defined
below)), any and all prepetition

 

____________________ 

4“Revolver Discharge” means the indefeasible refinancing of the Prepetition
Revolving Debt in full, including postpetition interest and fees through the
date of repayment (at the non-default contract rate), which shall be deemed to
have occurred if no adversary proceeding or contested matter is timely and
properly asserted in accordance with this Interim Order with respect to the
Prepetition Revolving Debt or against the Prepetition Revolving Agent or the
Prepetition Revolving Lenders, or if an adversary proceeding or contested matter
is timely and properly asserted, upon the final disposition of such adversary
proceeding or contested matter in favor of the Prepetition Revolving Lenders by
order of a court of competent jurisdiction; provided that all amounts of
interest outstanding as of the Petition Date shall be waived by the Prepetition
Revolving Lenders.

 

20

 

or postpetition liens and security interests (including, without limitation, any
adequate protection replacement liens at any time granted to the Prepetition
Revolving Lenders by this Court) that the Prepetition Revolving Lenders have or
may have in the Prepetition Revolving Collateral shall, subject to paragraph ‎33
of this Interim Order, (a) continue to secure the unpaid portion of the
Prepetition Revolving Facility (including, without limitation, any Prepetition
Revolving Obligations subsequently reinstated after the repayment thereof
because such payment (or any portion thereof) is required to be returned or
repaid, and the liens securing the Prepetition Revolving Facility shall not have
been avoided) and (b) be junior and subordinate in all respects to the Carve-Out
and the DIP Liens (such junior liens and security interests of the Prepetition
Revolving Lenders, other than the Prepetition Revolving Adequate Protection
Liens, are hereinafter referred to as the “Contingent Revolving Liens,” and any
such reinstated Prepetition Revolving Debt described in clause (a) of this
paragraph is hereinafter referred to as the “Contingent Prepetition Revolving
Debt”).

 

4.                  Use of Cash Collateral and DIP Loans. The Debtors are hereby
authorized to use Cash Collateral and the proceeds of any DIP Loans (as defined
below) solely in accordance with the Approved Budget, this Interim Order, the
DIP Loan Documents, and the Intercreditor Agreement.

 

5.                  Validity of DIP Loan Documents. The DIP Loan Documents shall
constitute valid and binding obligations of the DIP Loan Parties, enforceable
against each DIP Loan Party thereto in accordance with the terms thereof. No
obligation, payment, transfer or grant of security under the DIP Loan Documents
as approved under this Interim Order shall be stayed, restrained, voided,
voidable or recoverable under the Bankruptcy Code or under any applicable
non-bankruptcy law, or subject to any defense, reduction, setoff, recoupment or
counterclaim.

 

21

 

6.                  DIP Loans. All loans made to or for the benefit of any of
the DIP Loan Parties on or after the Petition Date in accordance with the DIP
Loan Documents (collectively, the “DIP Loans”), (a) shall be evidenced by the
books and records of the DIP Agent or the DIP Lenders and, upon the request of
any DIP Lender, a note executed and delivered to such DIP Lender by the Borrower
in accordance with the terms of the DIP Loan Documents, which note shall
evidence such DIP Lender’s DIP Loans in addition to such accounts and records;
(b) shall bear interest payable and incur fees at the rates set forth in the DIP
Credit Agreement; (c) shall be secured in the manner specified below; (d) shall
be payable in accordance with the DIP Loan Documents; and (e) shall otherwise be
governed by the terms set forth in this Interim Order and the other DIP Loan
Documents. All interest thereon and all fees, costs, expenses, indemnification
obligations and other liabilities owing by the DIP Loan Parties to the DIP
Lenders or the DIP Agent in accordance with and relating to this Interim Order
and the other DIP Loan Documents shall hereinafter be referred to as the “DIP
Obligations.”

 

7.                  Conditions Precedent. The DIP Lenders and the DIP Agent
shall have no obligation to make any DIP Loans or any other financial
accommodation under the DIP Loan Documents unless the conditions precedent to
make such extensions of credit under the DIP Loan Documents have been satisfied
in full or waived in accordance with such DIP Loan Documents.

 

8.                  Approved Budget.

 

(a)               The budget attached hereto as Exhibit 1 is hereby approved.
Proceeds of the DIP Loans and Cash Collateral under this Interim Order shall be
used by the Debtors only in

 

22

 

accordance with the Approved Budget5 and this Interim Order, subject to any
Permitted Variances. Subject to the Carve-Out, the DIP Lenders’ consent to the
Approved Budget shall not be construed as consent to the use of DIP Loans or
Cash Collateral beyond the occurrence of a Termination Event (as defined below),
regardless of whether the aggregate funds shown on the Approved Budget have been
expended.

 

(b)               Subject to paragraph ‎32 of this Interim Order, upon the
written consent of the DIP Lenders and the Debtors, and without further order of
the Court, the Approved Budget may be amended from time to time. The Debtors
shall provide a copy of any so amended revised budget to the U.S. Trustee and
counsel to the Committee, if any.

 

9.                  Permitted Variance.

 

(a)               Compliance with the Approved Budget shall be tested on a
cumulative basis, beginning the fourth week after the Petition Date and each
subsequent week thereafter. For each Budget Test Period6, the Borrower will not
permit:

 

(i)                 the actual aggregate amount of net receipts collected to be
less than 80% of the aggregate budgeted amount of net receipts set forth in the
Approved Budget for such Budget Test Period (“Net Receipt Permitted Variance”);
provided that the Required Lenders (as defined in the DIP Credit Agreement) may
authorize the Borrower in writing to exceed the Net Receipt Permitted Variance
for any Budget Test Period; or

 

____________________

5“Approved Budget” means (i) the initial budget projecting operations for the
ensuing thirteen (13) week period, including cash flow, forecasts of receipts,
and disbursements, attached hereto as Exhibit 1, and (ii) each subsequent
thirteen (13) week cash flow forecast of receipts and disbursements (in
substantially the same format as the prior monthly cash flow forecast of
receipts and disbursements) submitted by the Borrower to the DIP Lenders no less
frequently than once every four (4) weeks commencing on the Thursday of the
fourth (4th) week following the Petition Date.

 

6“Budget Test Period” means the period, commencing on the Monday of the first
week following the Petition Date, during which the Borrower’s compliance with
each Approved Budget shall be tested in accordance with the terms of this
Interim Order or the Final Order.

 

 

23

 

(ii)              the actual aggregate amount of disbursements to be more than
120% of the aggregate budgeted amount of disbursements for such Budget Test
Period set forth in the Approved Budget (excluding the fees and expenses of the
DIP Lenders that are required to be reimbursed under the other provisions of
this Agreement) (“Disbursements Permitted Variance” and together with the Net
Receipt Permitted Variance, the “Permitted Variances”); provided that the
Required Lenders (as defined in the DIP Credit Agreement) may authorize the
Borrower in writing to exceed the Disbursements Permitted Variance for any
Budget Test Period.

 

(b)               The Borrower shall deliver a Budget Reconciliation (as defined
below) to the DIP Lenders in accordance with the terms of paragraph ‎45. In
addition, the Borrower shall notify the DIP Lenders in writing as soon as
reasonably practicable if the Borrower anticipates that it will violate the Net
Receipt Permitted Variance or the Disbursements Permitted Variance for any
Budget Test Period.

 

(c)               In the event that the Borrower projected a disbursement in the
budget which is instead taken as a deduction to receipts, or vice versa, the
Borrower will be permitted to apply the actual results to the category it was
originally projected for budget testing purposes.

 

10.              Continuation of Prepetition Liens. Until (a) the Debtors have
indefeasibly paid in full and in cash all DIP Obligations, all Prepetition
Obligations and all Prepetition Treximet Notes Obligations, (b) the DIP Lenders’
obligations under the DIP Facility have terminated, (c) all objections and
challenges to (i) the liens and security interests of the Prepetition Secured
Parties (including, without limitation, liens granted for adequate protection
purposes) and the Prepetition Treximet Noteholders, and (ii) the Prepetition
Obligations and Prepetition Treximet Notes Obligations, have been waived, denied
or barred, and (d) all of the Debtors’ stipulations contained in this Interim
Order have become binding upon their estates and parties in interest in

 

24

 

accordance with paragraph ‎33 below, all liens and security interests of the
Prepetition Secured Parties (including, without limitation, liens granted for
adequate protection purposes) and the Prepetition Treximet Noteholders shall
remain valid and enforceable with the same continuing priority as described
herein; provided, that this paragraph shall not apply to any liens or security
interests of the Prepetition Secured Parties or the .Prepetition Treximet
Noteholders to the extent any such liens are successfully challenged in
accordance with paragraph ‎33 below; provided, further, that all Prepetition
Revolving Liens and Contingent Revolving Liens shall be indefeasibly released
upon the Revolver Discharge.

 

11.              DIP Liens and Collateral. Effective immediately upon entry of
this Interim Order, pursuant to sections 364(c)(2), 364(c)(3) and 364(d) of the
Bankruptcy Code, and without the necessity of the execution by the DIP Loan
Parties (or recordation or other filing or notice) of security agreements,
control agreements, pledge agreements, copyright security agreements, trademark
security agreements, patent security agreements, financing statements,
mortgages, schedules or other similar documents, or the possession or control by
the DIP Agent or any other DIP Lenders of any DIP Collateral, the DIP Agent is
hereby granted, as collateral agent for the DIP Lenders, continuing valid,
binding, enforceable, non-avoidable, priming and automatically and properly
perfected, nunc pro tunc to the Petition Date, post-petition security interests
in and liens (the “DIP Liens”) on any and all owned and hereafter acquired
assets and real and personal property of the DIP Loan Parties (the “DIP
Collateral”), including, without limitation, the following: (a) all Prepetition
Revolving Collateral; (b) all Nalpropion Collateral; (c) all money, accounts,
chattel paper, deposit accounts, documents, equipment, contract rights, general
intangibles, payment intangibles, instruments, inventory, patents, trademarks,
copyrights, and licenses therefor, letter-of-credit rights, and investment
property and support obligations; (d)

 

25

 

commercial tort claims; (e) all books and records pertaining to the other
property described in this paragraph; (f) all property of such DIP Loan Party
held by any DIP Lenders, including all property of every description, in the
custody of or in transit to such DIP Lender for any purpose, including
safekeeping, collection or pledge, for the account of such DIP Loan Party or as
to which such DIP Loan Party may have any right or power, including but not
limited to cash; (g) all other goods (including but not limited to fixtures) and
personal property of such DIP Loan Party, whether tangible or intangible and
wherever located; and (h) to the extent not covered by the foregoing, all other
assets or property of the DIP Loan Parties, whether tangible, intangible, real,
personal or mixed, and all proceeds and products of each of the foregoing and
all accessions to, substitutions and replacements for, and rents, profits and
products of, each of the foregoing, any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to any DIP Loan Party from time to time
with respect to any of the foregoing, and in each case to the extent of any such
DIP Loan Party’s respective interest therein; provided, however, the DIP
Collateral shall not include (i) Excluded Property (as defined in the DIP Credit
Agreement) but shall include any proceeds of Excluded Property that do not
otherwise constitute Excluded Property in their own right; (ii) all claims and
causes of action under Chapter 5 of the Bankruptcy Code or any other avoidance
actions under the Bankruptcy Code, whether pursuant to federal law or applicable
state law (collectively, the “Avoidance Actions”) of the DIP Loan Parties,
provided, however that DIP Collateral shall include, subject to entry of the
Final Order all proceeds of any Avoidance Actions (“Avoidance Proceeds”); (iii)
the Prepetition Treximet Notes Collateral; and (iv) the Prepetition Term
Collateral. The DIP Liens shall not, without the consent of the DIP Agent, be
made subject to, or pari passu with, any other lien or security interest (other
than to the extent expressly provided herein and subject to the Carve-Out, or by
any court order

 

26

 

heretofore or hereafter entered in the Chapter 11 Cases) and shall be valid and
enforceable against any trustee appointed in the Chapter 11 Cases, upon the
conversion of any of the Chapter 11 Cases to a case under Chapter 7 of the
Bankruptcy Code or in any other proceedings related to any of the foregoing
(such cases or proceedings, “Successor Cases”), and/or upon the dismissal of any
of the Chapter 11 Cases. The DIP Liens, Prepetition Liens (subject to
investigation), and Adequate Protection Liens shall not be subject to sections
510, 549, 550 or 551 of the Bankruptcy Code or, subject to and effective upon
entry of the Final Order, the “equities of the case” exception of section 552 of
the Bankruptcy Code or section 506(c) of the Bankruptcy Code.

 

12.              Priority of DIP Liens.

 

(a)               The DIP Liens (i) shall constitute first-priority security
interests in and liens upon all the DIP Collateral that is not otherwise subject
to any valid, perfected, enforceable and nonavoidable lien in existence as of
the Petition Date, pursuant to section 364(c)(2) of the Bankruptcy Code; and
(ii) shall, pursuant to section 364(c)(3) and 364(d)(1) of the Bankruptcy Code,
be senior to and prime all other liens and security interests in the DIP
Collateral, including, without limitation, the Prepetition Revolving Liens,
Prepetition Nalpropion Liens, and Adequate Protection Liens, and shall be junior
only to (I) any pre-existing liens as of the Petition Date held by a third party
other than the Prepetition Revolving Lenders or Nalpropion, but solely to the
extent that such liens and security interests were, in each case, as of the
Petition Date (x) valid, enforceable, perfected and non-avoidable liens or were
perfected subsequent to the Petition Date as permitted by section 546(b) of the
Bankruptcy Code, and (y) expressly permitted by the terms of the Prepetition
Revolving Financing Documents and senior to the Prepetition Revolving Liens (the
“Permitted Prior Liens”) and (II) validly existing statutory liens that existed
in the

 

27

 

Prepetition Revolving Collateral as of the Petition Date (together with the
Permitted Prior Liens, the “Prior Liens”).

 

(b)               The following table sets forth the relative priorities of the
Carve-Out, Prior Liens, DIP Liens, Adequate Protection Liens, Contingent
Revolving Liens, Prepetition Revolving Liens and Prepetition Nalpropion Liens on
some or all of the DIP Collateral upon entry of this Interim Order:

 

28

 

Priority Schedule7   Prepetition Revolving Collateral (other than collateral
held at Pernix Therapeutics) DIP Collateral held at Pernix Therapeutics Other
DIP Collateral 1. Carve-Out Carve-Out Carve-Out 2. Prior Liens Prior Liens Prior
Liens 3. DIP Liens DIP Liens DIP Liens 4.

·      Prepetition Term Loan Adequate Protection Liens

·      Prepetition Revolving Adequate Protection Liens

 

Prepetition Revolving Adequate Protection Liens

·      Prepetition Term Loan Adequate Protection Liens

·      Prepetition Revolving Adequate Protection Liens

 

5. Prepetition Revolving Liens/Contingent Revolving Liens Prepetition Revolving
Liens/Contingent Revolving Liens (Prepetition Revolving Collateral Only)   6.  
Nalpropion Adequate Protection Liens   7.   Prepetition Nalpropion Liens
(Nalpropion Collateral Only)   8.   Prepetition Term Loan Adequate Protection
Liens  

 

13.              Automatic Effectiveness of Liens. The automatic stay imposed
under section 362(a) of the Bankruptcy Code is hereby vacated and modified to
permit the DIP Loan Parties to grant (or continue to grant) the liens and
security interests to the Prepetition Secured Parties (and

 

____________________

7This chart provides an overview of the respective lien priorities upon some or
all of the DIP Collateral and is qualified in its entirety by the applicable
Prepetition Financing Documents, DIP Loan Documents, and Intercreditor
Agreement. For the avoidance of doubt, the Contingent Revolving Liens,
Prepetition Revolving Liens, and Prepetition Nalpropion Liens do not have liens
upon all the DIP Collateral, but rather, certain assets of the Prepetition
Collateral.

 

 

29

 

their respective agents), the DIP Agent, and the DIP Lenders contemplated by
this Interim Order and the other DIP Loan Documents.

 

14.              Automatic Perfection. The DIP Liens and Adequate Protection
Liens granted pursuant to this Interim Order shall constitute valid,
enforceable, nonavoidable and duly perfected security interests and liens, and
the DIP Agent, DIP Lenders, Prepetition Secured Parties and Prepetition Agents
(collectively, the “Adequate Protection Parties”) shall not be required to file
or serve financing statements, notices of lien, mortgage deeds, deeds of trust
or similar instruments which otherwise may be required under federal, state or
local law in any jurisdiction, or take any action, including taking possession,
to validate and perfect such security interests and liens; and the failure by
the DIP Loan Parties to execute any documentation relating to the DIP Liens or
Adequate Protection Liens shall in no way affect the validity, enforceability,
perfection or priority of such liens. The DIP Agent, the DIP Lenders and the
Adequate Protection Parties are hereby authorized, but not required, to file or
record financing statements, trademark filings, copyright filings, mortgages,
deeds of trust, notices of lien or similar instruments in any jurisdiction or
take any other action in order to validate and perfect the liens and security
interests granted to them hereunder. Whether or not the DIP Agent, DIP Lenders
or Adequate Protection Parties shall, in their sole discretion, choose to file
such financing statements, trademark filings, copyright filings, mortgages,
deeds of trust, notices of lien or similar instruments or otherwise confirm
perfection of the liens and security interests granted to them hereunder, such
liens and security interests shall be deemed valid, perfected, allowed,
enforceable, nonavoidable and not subject to challenge, dispute or
subordination, at the time and as of the date of entry of this Interim Order;
provided, that notwithstanding anything to the contrary herein, none of the
liens granted pursuant to this Interim Order shall relate back to any

 

30

 

date that precedes the Petition Date. Upon the request of the DIP Lenders or the
Prepetition Secured Parties, the DIP Loan Parties, without any further consent
of any party, are authorized to take, execute and deliver such instruments (in
each case without representation or warranty of any kind except as set forth in
the DIP Loan Documents) to enable the DIP Agent the DIP Lenders or the
applicable Adequate Protection Party to further validate, perfect, preserve and
enforce the DIP Liens and/or the Adequate Protection Liens. A certified copy of
this Interim Order may be filed with or recorded in filing or recording offices
in addition to or in lieu of such financing statements, mortgages, deeds of
trust, notices of lien or similar instruments, and all filing offices are hereby
authorized to accept such certified copy of this Interim Order for filing and
recording.

 

15.              Other Automatic Perfection Matters. To the extent that the
Prepetition Agents are secured parties under any account control agreements,
listed as loss payee under any of the DIP Loan Parties’ insurance policies or is
the secured party under any Prepetition Financing Document, the DIP Agent, on
behalf of the DIP Lenders, is also deemed to be the secured party under such
account control agreements, loss payee under the DIP Loan Parties’ insurance
policies and the secured party under each the Prepetition Financing Documents,
and shall have all rights and powers in each case attendant to that position
(including, without limitation, rights of enforcement), and shall act in that
capacity and distribute any proceeds recovered or received in accordance with
the terms of this Interim Order and/or the Final Order, as applicable, and the
other DIP Loan Documents. The Prepetition Revolving Agent shall serve as agent
for the DIP Agent for purposes of perfecting the DIP Agent’s security interests
in and liens on all DIP Collateral that is of a type such that perfection of a
security interest therein may be accomplished only by possession or control by a
secured party.

 

31

 

16.              DIP Superpriority Claims. In addition to the liens and security
interests granted to the DIP Agent on behalf of the DIP Lenders pursuant to this
Interim Order, subject to the Carve-Out and in accordance with sections
364(c)(1), 503 and 507 of the Bankruptcy Code, the DIP Obligations shall
constitute allowed superpriority administrative expense claims (the “DIP
Superpriority Claims”) with priority over any and all administrative expenses of
the Debtors, whether heretofore or hereafter incurred, of the kind specified in,
or ordered pursuant to, sections 105, 326, 328, 330, 331, 364, 365, 503(b),
506(c) (subject to entry of the Final Order), 507(a), 507(b), 726, 1113, 1114 or
any other provisions of the Bankruptcy Code.

 

17.              Contingent Liens and Adequate Protection of Prepetition
Revolving Lenders. Until the occurrence of the Revolver Discharge, the
Prepetition Revolving Lenders are entitled to (a) the Contingent Revolving Liens
and (b) pursuant to Bankruptcy Code sections 361, 362, 363(e), 364(d)(1) and
507, adequate protection of their interests in the Prepetition Revolving
Collateral, including the Cash Collateral, in an amount equal to the aggregate
diminution in the value of the Prepetition Revolving Lenders’ interests in the
Prepetition Revolving Collateral (including Cash Collateral) from and after the
Petition Date, if any, for any reason provided for under the Bankruptcy Code,
including, without limitation, any such diminution resulting from the
depreciation, sale, lease or use by the DIP Loan Parties (or other decline in
value) of the Prepetition Revolving Collateral, the priming of the Prepetition
Revolving Liens by the DIP Liens pursuant to the DIP Loan Documents and this
Interim Order and the imposition of the automatic stay pursuant to Bankruptcy
Code section 362 (the “Prepetition Revolving Adequate Protection Claim”). In
consideration of the foregoing, the Prepetition Revolving Lenders are hereby
granted the following, in each case, subject to the Carve-Out and the provisions
of

 

32

 

paragraph ‎33 of this Interim Order (collectively, the “Prepetition Revolving
Lenders Adequate Protection Obligations”):

 

(a)               Contingent Revolving Liens and Prepetition Revolving Adequate
Protection Liens. The Prepetition Revolving Agent (for itself and for the
benefit of the Prepetition Revolving Lenders) is hereby granted (effective and
perfected upon the date of this Interim Order and without the necessity of the
execution of any mortgages, security agreements, pledge agreements, financing
statements or other agreements), (i) in the amount of any Contingent Prepetition
Revolving Debt, the Contingent Revolving Liens, and (ii) in the amount of the
Prepetition Revolving Adequate Protection Claim, a valid, perfected replacement
security interest in and lien (the “Prepetition Revolving Adequate Protection
Liens”) (subject to the limitations and priorities set forth above) upon the DIP
Collateral;

 

(b)               Prepetition Revolving Superpriority Claim. The Prepetition
Revolving Lenders are hereby granted an allowed superpriority administrative
expense claim as provided for in section 507(b) of the Bankruptcy Code to the
extent that the Prepetition Revolving Adequate Protection Claim is insufficient
to protect the Prepetition Revolving Lenders’ interests in the Prepetition
Revolving Collateral with, except as set forth in this Interim Order, priority
in payment over any and all administrative expenses of the kind specified or
ordered pursuant to any provision of the Bankruptcy Code (the “Prepetition
Revolving Superpriority Claim”), which Prepetition Revolving Superpriority Claim
shall be payable from and have recourse to all DIP Collateral. The Prepetition
Revolving Superpriority Claim shall be subject and subordinate only to the
Carve-Out and the DIP Superpriority Claims granted in respect of the DIP
Obligations and shall sit pari passu with the Prepetition Term Lenders
Superpriority Claim (as defined below). Except to the extent expressly set forth
in this Interim Order or the DIP Credit Agreement, the

 

33

 

Prepetition Revolving Lenders shall not receive or retain any payments, property
or other amounts in respect of the Prepetition Revolving Superpriority Claim
unless and until the DIP Obligations and any claims having a priority superior
to or pari passu with the DIP Superpriority Claims have indefeasibly been paid
in cash in full;

 

(c)               Contingent Prepetition Revolving Debt. In the event that the
Prepetition Revolving Agent or any Prepetition Revolving Lender (each in their
capacities as such) is ordered by this Court to disgorge, refund or in any
manner repay to any of the Debtors or their estates any amounts (“Disgorged
Amounts”) leading to Contingent Prepetition Revolving Debt, the Disgorged
Amounts, unless otherwise ordered by the Court, shall be placed in a segregated
interest bearing account, pending a further final, non-appealable order of a
court of competent jurisdiction regarding the distribution of such Disgorged
Amounts (either returning the Disgorged Amounts to the Prepetition Revolving
Agent and the Prepetition Revolving Lenders, distributing such amounts to the
Debtors or otherwise).

 

18.              Adequate Protection of Prepetition Term Lenders. The
Prepetition Term Lenders are entitled, pursuant to Bankruptcy Code sections 361,
362, 363(e), 364(d)(1) and 507, to adequate protection of their interests in the
Prepetition Term Collateral, including Cash Collateral, for and equal in amount
to the aggregate diminution in the value of the Prepetition Term Lenders’
interests in the Prepetition Term Collateral from and after the Petition Date,
if any, including, without limitation, any such diminution resulting from the
depreciation, sale, lease or use by the Debtors (or other decline in value) of
the Prepetition Term Collateral, and the imposition of the automatic stay
pursuant to section 362 of the Bankruptcy Code (the “Prepetition Term Lenders
Adequate Protection Claim”). In consideration of the foregoing, the Prepetition
Term Lenders are hereby granted the following, in each case subject to the
Carve-Out

 

34

 

and the provisions of paragraph ‎33 of this Interim Order (the “Prepetition Term
Loan Adequate Protection Obligations”):

 

(a)               Prepetition Term Loan Adequate Protection Liens. The
Prepetition Term Lenders are hereby granted, in the amount of the Prepetition
Term Lenders Adequate Protection Claim, a replacement security interest in and
lien (the “Prepetition Term Loan Adequate Protection Liens”) (subject to the
limitations and priorities set forth above) upon the DIP Collateral and the
Prepetition Term Collateral;

 

(b)               Prepetition Term Lenders Superpriority Claim. The Prepetition
Term Lenders are hereby granted, subject to the Carve-Out, an allowed
superpriority claim as provided for in section 507(b) of the Bankruptcy Code,
junior to the DIP Superpriority Claims (the “Prepetition Term Lenders
Superpriority Claim” and, together with the Prepetition Revolving Superpriority
Claim, the “Superpriority Claims”). The Prepetition Term Lenders Superpriority
Claim shall be subject and subordinate to only the Carve-Out and the DIP
Superpriority Claims granted in respect of the DIP Obligations and shall sit
pari passu with the Prepetition Revolving Superpriority Claim. Except to the
extent expressly set forth in this Interim Order or the DIP Credit Agreements,
the Prepetition Term Lenders shall not receive or retain any payments, property
or other amounts in respect of the Prepetition Term Lenders Superpriority Claim
unless and until the DIP Obligations and any claims having a priority superior
to or pari passu with the DIP Superpriority Claims have indefeasibly been paid
in cash;

 

19.              Adequate Protection of Nalpropion. Nalpropion is entitled,
pursuant to Bankruptcy Code sections 361, 363(e), and 364(d)(1), to adequate
protection of its interests in the Nalpropion Collateral, including Cash
Collateral, for and equal in amount to the aggregate diminution in the value of
Nalpropion’s interest in the Nalpropion Collateral from and after the

 

35

 

Petition Date, if any, including without limitation, any such diminution
resulting from the depreciation, sale, lease or use by the DIP Loan Parties (or
other decline in value) of the Nalpropion Collateral, the priming of the
Prepetition Nalpropion Liens by the DIP Liens pursuant to the DIP Loan Documents
and this Interim Order and the imposition of the automatic stay pursuant to
Bankruptcy Code section 362. In consideration of the foregoing, Nalpropion is
hereby granted, in each case subject to the Carve-Out and paragraph ‎33 of this
Interim Order, (the “Nalpropion Adequate Protection Obligations,” and together
with the Prepetition Revolving Lenders Adequate Protection Obligations and
Prepetition Term Loan Adequate Protection Obligations, the “Adequate Protection
Obligations”):

 

(a)               Nalpropion Adequate Protection Liens. Nalpropion is hereby
granted a replacement security interest in and lien upon the DIP Collateral held
by Pernix Therapeutics (the “Nalpropion Adequate Protection Liens,” and together
with the Prepetition Term Loan Adequate Protection Liens and Prepetition
Revolving Adequate Protection Liens, the “Adequate Protection Liens”) (subject
to the limitations and priorities set forth above) securing the amount of the
Nalpropion Secured Obligations equal to the diminution in the value of
Nalpropion’s interest in the Nalpropion Collateral from and after the Petition
Date. Notwithstanding anything to the contrary herein, the Nalpropion Adequate
Protection Liens shall be junior to the DIP Liens, Prepetition Revolving
Adequate Protection Liens, Prepetition Revolving Liens and Contingent Revolving
Liens, but senior to the Prepetition Term Loan Adequate Protection Liens. As a
condition to the granting of such Nalpropion Adequate Protection Liens,
Nalpropion waives its right to any superpriority claim as provided for in
Section 507(b) of the Bankruptcy Code; provided, however, that for the avoidance
of doubt, the foregoing shall not constitute a waiver of any administrative
claim which Nalpropion may have pursuant to Bankruptcy Code Section

 

36

 

503(b)(1) in respect to transactions occurring under the TSA or Services
Agreement from and after the Petition Date.

 

(b)               Segregation of Payments. As additional adequate protection of
Nalpropion’s security interests in the Nalpropion Collateral, the DIP Loan
Parties are authorized and directed to segregate from their other cash, in a
manner satisfactory to Nalpropion, cash in an amount equal to any and all
amounts due and owing under the TSA, including all amounts relating to the
Nalpropion Secured Obligations, whether incurred before, on or after the
Petition Date, and all amounts that become due and payable under the TSA, in
each case as they come due.

 

20.              DIP Fees and Expenses. The Debtors are authorized to pay any
and all reasonable and documented out-of-pocket expenses of the DIP Agent and
DIP Lenders in connection with the DIP Facility and as provided in the DIP Loan
Documents, whether incurred before, on or after the Petition Date and whether or
not the transactions contemplated hereby are consummated or such fees and
expenses are set forth in the Approved Budget, including, without limitation,
fees and expenses, subject to the Carve-Out, incurred in connection with (i) the
preparation, negotiation and execution of the DIP Loan Documents; (ii) the
funding of the DIP Facility; (iii) the creation, perfection or protection of the
liens under the DIP Loan Documents (including all search, filing and recording
fees); (iv) the on-going administration of the DIP Loan Documents (including the
preparation, negotiation and execution of any amendments, consents, waivers,
assignments, restatements or supplements thereto) and the Chapter 11 Cases; (v)
the enforcement of the DIP Loan Documents; and (vi) any legal proceeding
relating to or arising out of the DIP Facility or the other transactions
contemplated by the DIP Loans Documents, including the Chapter 11 Cases. Payment
of all such professional fees and expenses shall not be subject to

 

37

 

allowance by the Court; provided, that notice of any such expenses shall be
provided to counsel to the Committee (if any). The Debtors shall pay the
uncontested, invoiced, reasonable and documented accrued and unpaid
out-of-pocket professional fees and expenses within ten (10) days following the
presentment of any invoices to the Debtors and the U.S. Trustee. Any written
objection raised by the Debtors or the U.S. Trustee with respect to such
invoices (with notice provided to the DIP Agent) within ten (10) days of receipt
thereof will be resolved by the Court (absent prior consensual resolution
thereof). Pending such resolution, the undisputed portion of any such invoice
shall be promptly paid by the Debtors. Such fees and expenses shall not be
subject to any offset, defense, claim, counterclaim or diminution of any type,
kind or nature whatsoever.

 

21.              Carve-Out.

 

(a)               Carve-Out. Upon the DIP Agent’s issuance of a Default Notice
(as defined below), all liens, claims and other security interests held by any
party, including the Superpriority Claims, Adequate Protection Liens, DIP Liens,
Prepetition Liens and Prepetition Treximet Notes Liens shall remain subject and
subordinate to the payment of the Carve-Out. “Carve-Out” shall mean the sum of:
(i) all fees required to be paid to the Clerk of this Court and to the U.S.
Trustee under section 1930(a) of title 28 of the United States Code (without
regard to the notice set forth in (iii) below); (ii) all reasonable fees and
expenses up to $50,000 incurred by a trustee under section 726(b) of the
Bankruptcy Code (without regard to the notice set forth in (iii) below); (iii)
subject to the terms of this Interim Order, to the extent allowed at any time,
whether by interim order, procedural order, or otherwise, all unpaid fees and
expenses (the “Allowed Professional Fees”) incurred by persons or firms retained
by the Debtors pursuant to section 327, 328 or 363 of the Bankruptcy Code (the
“Debtor Professionals”) and the Committee

 

38

 

pursuant to section 328 or 1103 of the Bankruptcy Code (the “Committee
Professionals” and, together with the Debtor Professionals, the “Professional
Persons”) (excluding fees and expenses of persons or firms retained by Committee
members) at any time before or on the first day following delivery by a DIP
Agent of a Default Notice, whether allowed by this Court prior to or after
delivery of a Default Notice (the “Pre-Default Notice Amount”); and (iv) Allowed
Professional Fees of Professional Persons in an aggregate amount not to exceed
$1.5 million incurred after the first day following delivery by the DIP Agent of
a Default Notice to the extent allowed at any time, whether by interim order,
procedural order or otherwise (the “Post-Default Notice Carve-Out Cap”).
Notwithstanding anything to the contrary herein or in the DIP Loan Documents,
the DIP Loans and Carve-Out shall not be used to fund aggregate cumulative
expenditures for Professional Persons that exceed the maximum amount with
respect thereto set forth in the Approved Budget (after giving effect to any
Permitted Variance).

 

(b)               Delivery of Weekly Fee Estimates. Not later than 7:00 p.m. EST
time on the third business day of each week starting with the first full
calendar week following the Petition Date, each Professional Person shall
deliver to the Debtors a statement (each such statement, a “Weekly Statement”)
setting forth a good-faith estimate of the amount of fees and expenses incurred
during the preceding week by such Professional Person (through Saturday of such
week, the “Calculation Date”), along with a good-faith estimate of the
cumulative total amount of unpaid fees and expenses incurred through the
applicable Calculation Date (collectively, “Estimated Fees and Expenses”) and a
statement of the amount of such fees and expenses that have been paid to date by
the Debtors. No later than one business day after the delivery of a Default
Notice, each Professional Person shall deliver one additional statement (the
“Final Statement”) to the Debtors setting forth a good-faith estimate of the
amount of fees and

 

39

 

expenses incurred during the period commencing on the calendar day after the
most recent Calculation Date for which a Weekly Statement has already been
delivered and concluding on the date of the Default Notice.

 

(c)               Carve-Out Account. Upon the occurrence and during the
continuance of a Termination Event, the DIP Agent may deliver a written Default
Notice, which may be delivered by any means permitted under the DIP Credit
Agreement, to the Debtors (such day, the “Termination Declaration Date”). The
Default Notice shall (x) constitute a demand to the Debtors to utilize all cash
on hand as of such date and any available cash thereafter held by any Debtor to
fund an account (the “Carve-Out Account”), and (y) be deemed a draw request and
notice of borrowing by the DIP Loan Parties for Delayed Draw Loans under the
Delayed Draw Commitment (each as defined in the DIP Credit Agreement) (on a pro
rata basis based on the then outstanding Delayed Draw Commitments), after taking
into account the funding described in the previous clause (x), in an amount
equal to the lesser of (1) the Carve-Out and (2) the remaining availability
under the Delayed Draw Commitments at the time the Default Notice is given (any
such amounts actually advanced shall constitute a Loan (as defined in the DIP
Credit Agreement)). Such amounts shall be held in trust in the Carve-Out Account
to pay the Pre-Default Notice Amount and the Post-Default Notice Carve-Out Cap.
Notwithstanding anything to the contrary in the DIP Loan Documents, this Interim
Order or the Final Order, following delivery of a Default Notice (x) the DIP
Agent shall not sweep or foreclose on cash (including cash received as a result
of the sale or other disposition of any assets) of the Debtors until the
Carve-Out Account has been funded in accordance with the terms of this
paragraph.

 

(d)               Requirement to Fund Carve-Out Account. On the first business
day after the Termination Declaration Date, notwithstanding anything in the DIP
Credit Agreement to the

 

40

 

contrary, including with respect to the existence of a Default (as defined in
the DIP Credit Agreement) or Event of Default, the failure of the DIP Loan
Parties to satisfy any or all of the conditions precedent for Delayed Draw Loans
under the DIP Facility, any termination of the Delayed Draw Commitments
following an Event of Default, or the occurrence of the Maturity Date (each as
defined in the DIP Credit Agreement), each DIP Lender with an outstanding
Delayed Draw Commitment (on a pro rata basis based on the then outstanding
Delayed Draw Commitments) shall extend Delayed Draw Loans pursuant to a deemed
draw and borrowing equal to such DIP Lender’s pro rata share of the total amount
required to fund the borrowings set forth in paragraph ‎21(c). Notwithstanding
anything to the contrary herein, in no event shall the DIP Agent or the DIP
Lenders be required to (x) extend Delayed Draw Loans to fund the Carve-Out other
than pursuant to paragraph ‎21(c) or (y) extend Delayed Draw Loans pursuant to a
deemed draw and borrowing pursuant to this paragraph ‎21 in an aggregate amount
exceeding the total available Delayed Draw Commitments as of the Termination
Declaration Date.

 

(e)               Application of Carve-Out Account. All funds in the Carve-Out
Account shall be used first to pay the obligations set forth in clauses (i)
through (iv) of the definition of Carve-Out set forth above until paid in full,
and then, to the extent the Carve-Out Account has not been reduced to zero, to
pay the DIP Agent for the benefit of the DIP Lenders, unless the DIP Obligations
have been indefeasibly paid in full, in cash and all Commitments (as defined in
the DIP Credit Agreement) have been terminated, in which case any such excess
shall be paid to the Prepetition Secured Parties in accordance with their rights
and priorities as of the Petition Date. All payments and reimbursements made
from the Carve-Out Account shall permanently reduce the Carve-Out on a
dollar-for-dollar basis. The DIP Agent shall have a security interest in any
residual amounts in the Carve-Out Account, which shall secure the DIP
Obligations.

 

41

 

(f)                Furthermore, notwithstanding anything to the contrary in the
DIP Loan Documents, this Interim Order or the Final Order, (i) disbursements by
the Debtors from the Carve-Out Account shall not constitute a Loan (as defined
in the DIP Credit Agreement) or increase or reduce the DIP Obligations, (ii) the
failure of the Carve-Out Account to satisfy in full the Allowed Professional
Fees shall not affect the priority of the Carve-Out and (iii) disbursements by
the Debtors from the Carve-Out Account shall be included in the Debtors’ monthly
operating reports filed with the Court. Finally, while the terms of this Interim
Order place limitations on the payment of Allowed Professionals Fees from
borrowings under the DIP Facility, Cash Collateral and the Carve-Out Account,
such provisions shall not operate to create a cap or limitation on the amount of
the Allowed Professional Fees due and payable by the Debtors.

 

(g)               The payment of any Allowed Professional Fees pursuant to the
Carve-Out shall not, and shall not be deemed to (i) reduce the Debtors’
obligations owed to the DIP Agent, DIP Lenders, the Prepetition Agents, or the
Prepetition Secured Parties (whether under this Interim Order or otherwise) or,
(ii) other than as necessary to permit the payment of such Allowed Professional
Fees (in each case, subject to the terms of and as expressly provided in this
Interim Order with respect to the Carve-Out), modify, alter or otherwise affect
any of the liens and security interests of such parties (whether granted under
this Interim Order or otherwise) in the Prepetition Collateral or the DIP
Collateral (or their claims against the Debtors). The DIP Agent, DIP Lenders,
Prepetition Agents, and the Prepetition Secured Parties shall not be responsible
for the direct payment or reimbursement of any Allowed Professional Fees, or any
fees or expenses of the U.S. Trustee or Clerk of the Court (or of any other
entity) incurred in connection with the Chapter 11 Cases or any Successor Cases.

 

42

 

22.              Excluded Professional Fees. The Debtors shall not assert or
prosecute, and no portion of the DIP Facility, the DIP Collateral, the Cash
Collateral, or the Carve-Out, and no disbursements set forth in the Approved
Budget, shall be used for the payment of professional fees, disbursements, costs
or expenses incurred in connection with (a) asserting or prosecuting any claims,
causes of action, or lodging an objection against the Prepetition Secured
Parties, Prepetition Agents, Prepetition Treximet Noteholders, Prepetition
Treximet Notes Trustee, DIP Agent, or DIP Lenders, (b) asserting or prosecuting
any claims, causes of action, or lodging an objection to the Prepetition
Obligations, Prepetition Treximet Notes Obligations, DIP Obligations, DIP Liens,
Prepetition Treximet Notes Liens or Prepetition Liens, (c) lodging an Objection
(as defined below), or (d) objecting to, contesting, delaying, preventing or
interfering with in any way the exercise of rights and remedies by the DIP Agent
and the DIP Lenders with respect to the DIP Collateral once a Termination Event
has occurred (except that the Borrower may contest or dispute whether a
Termination Event has occurred and the Borrower shall be entitled to any notice
provisions provided in this Interim Order). Notwithstanding the foregoing, (i)
the Debtors shall be permitted to enforce the terms of the DIP Facility or this
Interim Order, and (ii) no more than $50,000 of the proceeds of the DIP
Facility, DIP Collateral, or Cash Collateral may be used by the Committee in
connection with the investigation of, but not litigation, objection or any
challenge to, the Prepetition Liens or Prepetition Obligations (the
“Investigation Budget”).

 

23.              506(c) Waiver; Marshaling. Subject only to and effective upon
the entry of the Final Order, the Debtors (on behalf of themselves and their
estates) shall irrevocably waive, and shall be prohibited from asserting, any
surcharge claim under Bankruptcy Code section 506(c) or otherwise for any costs
and expenses incurred in connection with the preservation, protection or

 

43

 

enhancement of, or realization by the Prepetition Secured Parties upon, the
Prepetition Collateral. In no event shall the DIP Lenders, Prepetition Revolving
Lenders or Nalpropion be subject to the equitable doctrine of marshaling or any
similar doctrine with respect to the DIP Collateral.

 

24.              Restrictions on Granting Post-Petition Liens; Collateral
Rights; Limitations in Respect of Subsequent Court Orders and Subordination of
Liens. Except for the Carve-Out or as otherwise expressly set forth in this
Interim Order, it shall constitute a Termination Event if any of the Debtors
incur or request authority to incur a claim or grant a lien (or a claim or lien
is allowed) having a priority superior to or pari passu with those granted
pursuant to this Interim Order to the Prepetition Agents or Prepetition Secured
Parties at any time during which any portion of the DIP Obligations, Prepetition
Obligations, and Adequate Protection Obligations remains outstanding. Without
limiting any other provisions and protections of this Interim Order, unless the
DIP Lenders have provided their prior written consent, there shall not be
entered in these proceedings, or in any Successor Cases, any order which
authorizes the obtaining of credit or the incurring of indebtedness that is
secured by a security, mortgage, or collateral interest or other lien on all or
any portion of the DIP Collateral and/or entitled to priority administrative
status which is superior to or pari passu with those granted pursuant to this
Interim Order for any purpose other than as set forth in the Approved Budget.
Without limiting the provisions and protections of this paragraph, if at any
time prior to the indefeasible repayment and satisfaction in full and in cash of
all DIP Obligations and the Prepetition Obligations, any trustee, any examiner
with enlarged powers or any responsible officer subsequently appointed, shall
obtain credit or incur debt in violation of this Interim Order or the other DIP
Loan Documents, then all of the cash proceeds derived from such credit or debt
and all Cash Collateral shall immediately

 

44

 

be turned over to the DIP Agent or the Prepetition Agents, as the case may be,
for application in accordance with this Interim Order, the DIP Loan Documents,
the Prepetition Financing Documents, the Intercreditor Agreement, as applicable,
and under applicable law.

 

25.              Binding Nature of Order. The provisions of this Interim Order
shall be binding upon the Debtors and their respective successors and assigns,
including, without limitation, any trustee or other fiduciary hereafter elected
or appointed for or on behalf of any of the Debtors.

 

26.              Survival of Order. With respect to the DIP Lenders, Prepetition
Agents, Prepetition Secured Parties, Prepetition Treximet Notes Trustee and
Prepetition Treximet Noteholders, the provisions of this Interim Order and any
actions taken pursuant thereto (a) shall survive the entry of any order: (i)
confirming any plan of reorganization in any of the Chapter 11 Cases; (ii)
converting any of the Chapter 11 Cases to a case under Chapter 7 of the
Bankruptcy Code; or (iii) dismissing any of the Chapter 11 Cases; and (b) shall
continue in full force and effect notwithstanding the entry of any such order,
and the claims, liens, and security interests granted pursuant to this Interim
Order shall maintain their priority as provided by this Interim Order until all
of the DIP Obligations are indefeasibly paid in full and discharged in
accordance with the DIP Loan Documents. The DIP Obligations shall not be
discharged by the entry of any order confirming any plan of reorganization in
any of the Chapter 11 Cases that does not provide for the payment in full and in
cash of the DIP Obligations, and upon the entry of any such order, the Debtors
shall, and shall be deemed to, waive any such discharge pursuant to section
1141(d)(4) of the Bankruptcy Code.

 

27.              Protection under Section 364(e) of the Bankruptcy Code. If any
or all of the provisions of this Interim Order are hereafter reversed, modified,
vacated or stayed, such reversal, modification, vacatur or stay shall not affect
(i) the validity of any DIP Obligations or

 

45

 

Adequate Protection Obligations incurred prior to the actual receipt by the DIP
Lenders and the Prepetition Secured Parties of written notice of the effective
date of such reversal, modification, vacation or stay, or (ii) the validity or
enforceability of any claim, lien, security interest or priority authorized or
created hereby or pursuant to the DIP Loan Documents with respect to any DIP
Obligations or Adequate Protection Obligations. Notwithstanding any such
reversal, modification, vacatur or stay, any use of Cash Collateral or the
incurrence of DIP Obligations or Adequate Protection Obligations by the DIP Loan
Parties prior to the actual receipt by the Prepetition Secured Parties and
Prepetition Agents of written notice of the effective date of such reversal,
modification, vacatur, or stay, shall be governed in all respects by the
provisions of this Interim Order, and DIP Lenders, DIP Agent, Prepetition
Secured Parties, and Prepetition Agents shall be entitled to all of the rights,
remedies, protections and benefits granted under section 364(e) of the
Bankruptcy Code, this Interim Order, the Intercreditor Agreement, and the other
DIP Loan Documents with respect to all uses of Cash Collateral and the
incurrence of DIP Obligations and Adequate Protection Obligations.

 

28.              Termination Events. The following shall constitute a
termination event under this Interim Order and the DIP Loan Documents unless
waived in writing by the DIP Agent (each, a “Termination Event”): (a) The
occurrence of any “Event of Default” as defined under the DIP Credit Agreement;
(b) any other failure of the Debtors to comply with the terms and provisions of
this Interim Order in any material respect; and (c) unless otherwise agreed by
the Debtors and the DIP Lenders or to the extent necessary to accommodate the
Court’s calendar, the Debtors’ failure to timely comply with the Milestones (as
defined in the DIP Credit Agreement). Any Milestone that would otherwise fall on
a Saturday, Sunday or Federal holiday will be treated in accordance with
Bankruptcy Rule 9006.

 

46

 

29.              Modification of Stay; Rights and Remedies Upon Termination.

 

(a)               Upon the occurrence and during the continuance of any
Termination Event, and five (5) business days’ after written notice thereof (the
“Default Notice,” and such period of time, the “Default Notice Period”) is
provided by the DIP Agent to Debtors’ counsel, Committee’s counsel (if any), and
the U.S. Trustee, the automatic stay provisions of section 362 of the Bankruptcy
Code shall be automatically vacated and modified to the extent necessary to
permit the DIP Agent, the DIP Lenders, the Prepetition Agents and/or the
Prepetition Secured Parties, as applicable, to exercise all rights and remedies
provided in this Interim Order, the DIP Loan Documents, the Intercreditor
Agreement, or Prepetition Financing Documents, as applicable, and to take any or
all of the following actions without further order of or application to this
Court: (i) immediately terminate the Debtors’ use of Cash Collateral and cease
making any DIP Loans to the DIP Loan Parties; (ii) immediately declare all DIP
Obligations to be immediately due and payable; (iii) immediately terminate the
DIP Facility and the availability of any DIP Loans thereunder; (iv) immediately
set off any and all amounts in accounts maintained by the DIP Loan Parties with
(or subject to a security interest in favor of) the DIP Agent, DIP Lenders,
Prepetition Agents, or Prepetition Secured Parties, as applicable, against the
DIP Obligations or the Prepetition Obligations, or otherwise enforce rights
against the DIP Collateral in the possession of, or subject to a lien in favor
of the DIP Agent, DIP Lenders, Prepetition Agents, or the Prepetition Secured
Parties, as applicable, in each case for application towards the DIP Obligations
or the Prepetition Obligations, as applicable; (v) immediately exercise any of
their rights with respect to the Specified Contracts (as defined in the DIP
Credit Agreement) under paragraph ‎30 herein; (vi) direct any Debtor to file and
prosecute pleadings before this Court seeking relief under Bankruptcy Code
section 363 (including, without limitation,

 

47

 

subsections (b), (f), (k), and (m) thereof) and Bankruptcy Code section 365 in
order to sell and transfer the Prepetition Collateral and/or the DIP Collateral
to the DIP Agent, Prepetition Revolving Agent, Prepetition Term Agent, as
applicable, or the designees of any of the foregoing; and (vii) take any other
actions or exercise any other rights or remedies permitted under this Interim
Order, the DIP Loan Documents, the Intercreditor Agreement, the Prepetition
Financing Documents or applicable law to effect the repayment of the DIP
Obligations and the Prepetition Obligations. During the Default Notice Period,
the Debtors shall be entitled to an emergency hearing before the Court, with
proper notice to the DIP Agent and Prepetition Agents, for the purpose of
contesting whether a Termination Event has occurred and/or is continuing.

 

(b)               Subject to the Default Notice Period, the automatic stay under
section 362(a) of the Bankruptcy Code shall be automatically vacated and
modified as provided above, unless and until, the Court has determined that a
Termination Event has not occurred and/or is not continuing, and in such case,
the Debtors shall not seek to enjoin, hinder, delay or object to the (x) DIP
Agent’s exercise of rights and remedies in accordance with the DIP Loan
Documents, or (y) the Prepetition Term Agent’s and/or the Prepetition Term
Lenders’ exercise of rights and remedies in accordance with the Prepetition Term
Financing Documents.

 

(c)               The rights and remedies of the DIP Agent, DIP Lenders,
Prepetition Agents, Prepetition Secured Parties, Prepetition Treximet Notes
Trustee and Prepetition Treximet Noteholders specified herein are cumulative and
not exclusive of any rights or remedies that the DIP Agent, DIP Lenders,
Prepetition Agents, Prepetition Secured Parties, Prepetition Treximet Notes
Trustee and/or Prepetition Treximet Noteholders may respectively have under the
DIP Loan Documents, the Prepetition Financing Documents, the Intercreditor
Agreement, the Prepetition Treximet Notes Financing Documents or otherwise. The
Debtors

 

48

 

shall cooperate fully with the DIP Lenders and the Prepetition Secured Parties
in their exercise of rights and remedies under this Interim Order (including,
without limitation, paragraph ‎30 herein), DIP Loan Documents, Prepetition
Financing Documents, and the Intercreditor Agreement, as applicable.

 

30.              Assignment of Specified Contracts. As a requirement and
precondition to the DIP Lenders’ willingness to fund the Debtors’ Chapter 11
Cases, permit the use of Cash Collateral, and in furtherance of the
Superpriority Claims, which are payable from, among other things, all of the
Specified Contracts (as defined in the DIP Credit Agreement), the DIP Lenders
shall have the following protections with respect to the Specified Contracts,
which protections shall be enforced by the DIP Agent as authorized, approved,
and granted pursuant to the provisions of this Interim Order and in accordance
with the terms of the DIP Credit Agreement:8

 

(a)               Remedies Upon a Termination Event. If a Termination Event has
occurred and is continuing, the DIP Agent shall, with respect to the Specified
Contracts, be permitted, and is hereby authorized: (i) to exercise the Debtors’
rights pursuant to section 365(f) of the Bankruptcy Code with respect to any
such Specified Contract(s) and, subject to this Court’s approval after notice
and hearing, assign any such Specified Contract(s) in accordance with section
365 of the Bankruptcy Code notwithstanding any language to the contrary in such
Specified Contract; (ii) to require any Debtor to complete promptly, pursuant to
Section 363 of the Bankruptcy Code, subject to the rights of the DIP Lenders to
credit bid pursuant to Bankruptcy Code section 363(k) or otherwise, a sale or
disposition of any such Specified

 

 ____________________

8Until the indefeasible repayment in full in cash of the Prepetition Term
Obligations, the Prepetition Term Agent and Prepetition Term Lenders shall be
deemed to have the protections afforded the DIP Agent and DIP Lenders,
respectively, under this paragraph ‎30 with respect to the Specified Contract(s)
relating to the Prepetition Term Collateral. All references to the DIP Agent and
the DIP Lenders solely in this paragraph ‎30 shall be deemed substituted in
their entirety by reference to the Prepetition Term Agent or Prepetition Term
Lenders, as applicable.

 

 

49

 

Contract(s); (iii) (a) find an acceptable (in the DIP Agent’s good faith and
reasonable discretion) replacement counterparty, which may include the DIP Agent
or any of its affiliates, to whom such Specified Contract(s) may be assigned,
and/or (b) notify the Debtors of the selection of any replacement counterparty
pursuant to this paragraph, upon such notification the Debtors shall promptly
(1) file a motion seeking, on an expedited basis, approval of the Debtors’
assumption and assignment of such Specified Contract(s) to such proposed
assignee, and (2) cure any defaults, if any, that have occurred and are
continuing under such Specified Contract(s) to the extent required by the Court,
subject to the DIP Agent’s right to cure any defaults as set forth under
paragraph ‎30(d); or (iv) direct the Debtors to (a) assign any such Specified
Contract(s) to the DIP Agent and as Collateral securing the DIP Obligations,
subject to clause (b), if applicable, (b) seek this Court’s approval of the
assumption of any such Specified Contract(s) to the extent that this Court
determines pursuant to a final order that an assumption is required in order to
assign such contract as Collateral, and (c) promptly cure any default that has
occurred and is continuing under such Specified Contract(s) to the extent
required by the Court.

 

(b)               Right to Credit Bid. The DIP Agent, on behalf of the
applicable DIP Lenders, shall be permitted to credit bid pursuant to Bankruptcy
Code section 363(k) some or all of the outstanding DIP Obligations as
consideration in exchange for any Specified Contract(s). Pursuant to Bankruptcy
Code section 364(e), absent a stay pending appeal, the DIP Lenders’ right to
credit bid shall not be affected by the reversal or modification on appeal of
the Debtors’ authorization pursuant to this Interim Order to obtain credit and
incur debt as and in accordance with the terms set forth herein.

 

(c)               Assumption Orders. Any order of this Court approving the
assumption of any Specified Contract(s) in accordance with this paragraph ‎30
shall specifically provide that the

 

50

 

applicable Debtor shall be authorized to assign such Specified Contract pursuant
to, and to enjoy the protections of, Bankruptcy Code section 365 subsequent to
the date of such assumption.

 

(d)               DIP Agent’s Right to Cure Defaults. If any of the Debtors is
required to cure any monetary defaults under any Specified Contract pursuant to
any order of this Court or otherwise in connection with any assumption and
assignment of any such Specified Contract pursuant to section 365 of the
Bankruptcy Code, and such monetary default is not, within five (5) business days
of the receipt by such Debtor of notice from the DIP Agent pursuant to the
applicable provision(s) of the DIP Credit Agreement or any other notice from the
DIP Agent requesting the cure of such monetary default, cured in accordance with
the provisions of such applicable court order as arranged by the DIP Agent, the
DIP Agent may cure any such monetary defaults on behalf of the applicable
Debtor(s).

 

31.              Limitations on Borrowings. It shall constitute a Termination
Event if any of the Debtors seeks authorization for the Debtors or their estates
to borrow money from any person other than the DIP Lenders to the extent that
the repayment of such borrowings is to be secured pursuant to section 364(d)(1)
of the Bankruptcy Code by a security interest, lien or mortgage that is senior
to or pari passu with any of the security interests, liens or mortgages held by
the DIP Lenders or Prepetition Secured Parties, unless (A) such authorization is
sought with the prior written consent of the DIP Lenders or (B) in connection
with such borrowings, the DIP Obligations and any remaining Prepetition
Obligations are indefeasibly paid in full in cash as a condition to the closing
of such borrowings.

 

32.              Modifications of DIP Loan Documents and Budgets. The DIP Loan
Parties are hereby authorized, without further order of this Court, to enter
into agreements with the DIP Agent and the DIP Lenders providing for any
modifications to the Approved Budget or non-

 

51

 

material modifications to the DIP Loan Documents, or any other modifications to
the DIP Loan Documents necessary to conform the terms of the DIP Loan Documents
to this Interim Order; provided, however, that the DIP Loan Parties shall
provide notice of any material modification or amendment to the Approved Budget
or the DIP Loan Documents that is adverse to the Debtors’ estates to Committee’s
counsel (if any), and the U.S. Trustee, each of whom shall have five (5) days
from the date of such notice within which to object in writing to such material
modification or amendment. If any Committee or the U.S. Trustee timely objects
to any such material modification or amendment to the Approved Budget or the DIP
Loan Documents, such modification or amendment shall only be permitted pursuant
to a further order of this Court.

 

33.              Objections to Prepetition Obligations. The Debtors’ admissions,
stipulations, acknowledgements, agreements, releases and waivers contained in
this Interim Order with respect to, among other things, the extent, legality,
validity, perfection, enforceability and other matters noted in this Interim
Order with respect to the Prepetition Financing Documents, Prepetition Treximet
Notes Financing Documents, Prepetition Liens and Prepetition Treximet Notes
Liens, shall be binding upon all other parties in interest, including a
Committee, any Chapter 7 trustee or Chapter 11 trustee or examiner appointed or
elected for any of the Debtors, for all purposes subject only to the rights of
any party in interest with requisite standing for a period of the earlier of (x)
for any Committee appointed by the date that is fifteen (15) days after the
Petition Date, sixty (60) days after the appointment of such Committee, or (y)
for any other party in interest, seventy-five (75) days from the Petition Date
(such period hereafter referred to as the “Challenge Period”), as such
applicable date may be extended in writing from time to time in the sole
discretion of the Prepetition Secured Parties, or by this Court for good cause
shown pursuant to an application filed by a party in interest prior to the
expiration of the Challenge

 

52

 

Period, to seek to (a) challenge in any manner the Prepetition Obligations,
and/or assert claims or causes of action of any nature in any way arising out
of, relating to, or in connection with, the Prepetition Obligations, Prepetition
Treximet Notes Obligations, Prepetition Financing Documents or the Prepetition
Treximet Notes Documents including, without limitation, any payments made in
respect thereof, or (b) assert or allege any other matters in any way arising
out of, relating to, or in connection with, the Prepetition Obligations,
Prepetition Treximet Notes Obligations, Prepetition Financing Documents or
Prepetition Treximet Notes Financing Documents or (c) challenge the extent,
legality, validity, perfection and/or enforceability of any Prepetition Liens or
Prepetition Treximet Notes Liens pursuant to the Bankruptcy Code (the actions
described in clause (a), (b) and/or (c) above, collectively referred to herein
as an “Objection”). If an Objection is not timely and properly filed within such
Challenge Period or the Court does not rule in favor of the plaintiff or moving
party in any such proceeding, (i) the Prepetition Obligations and Prepetition
Treximet Notes Obligations shall be deemed allowed in full, and the Prepetition
Liens and Prepetition Treximet Notes Liens shall be recognized and allowable as
legal, valid, binding, in full force and effect, non avoidable, perfected and
senior to all other liens (other than as provided herein) upon and claims
against the Prepetition Collateral and the Prepetition Treximet Notes
Collateral, as applicable, with respect to all parties in these Chapter 11 Cases
and not be subject to any counterclaims, setoff, recoupment, deduction, or claim
of any kind or any defenses, or any further objection or challenge by any party
at any time, and (ii) the Releasees shall be deemed released and discharged from
all claims and causes of action arising out of or in any way relating to the
Prepetition Obligations, Prepetition Financing Documents, Prepetition Treximet
Notes Obligations or Prepetition Treximet Notes Financing Documents prior to the
entry of this Interim Order. Nothing in this Interim Order shall be

 

53

 

deemed to confer standing to commence any action or proceeding, including any
Committee or party in interest. If an Objection is timely lodged, the
stipulations contained in this Interim Order shall be binding on the Debtors’
estates and all parties in interest except to the extent such stipulations are
specifically challenged in such Objection, as and when originally filed
(ignoring any relation back principles); provided, that if and to the extent an
Objection is withdrawn, denied or overruled, the stipulations specifically
challenged in such Objection shall be binding on the Debtors’ estates and all
parties in interest. For the avoidance of doubt, any chapter 7 or 11 trustee
appointed or elected in these cases during the investigation period shall, until
the expiration of the periods provided herein for asserting lender claims and
thereafter for the duration of any adversary proceeding or contested matter
commenced pursuant to the Challenge Period (whether commenced by such trustee or
commenced by any other party in interest on behalf of the Debtors’ estates) be
deemed to be a party other than the Debtors and shall not, for purposes of such
adversary proceeding or contested matter, be bound by the acknowledgements,
admissions, confirmations, stipulations, releases and waivers of the Debtors in
this Interim Order.

 

34.              Waiver of Requirement to File Proofs of Claim.

 

(a)               The DIP Agent and the DIP Lenders shall not be required to
file proofs of claim in the Chapter 11 Cases or any Successor Case in order to
maintain their claims for payment of principal, interest, fees, expenses and
other amounts owing in respect of the DIP Obligations under, and as provided in,
the DIP Loan Documents. The statements of claim in respect of the DIP
Obligations set forth in this Interim Order, together with the evidence
accompanying the Motion and presented at the Interim Hearing are deemed
sufficient to and do constitute proofs of claim in respect of such obligations
and such secured status.

 

54

 

(b)               The Prepetition Agents, the Prepetition Revolving Lenders, the
Prepetition Term Lenders, the Prepetition Treximet Notes Trustee and the
Prepetition Treximet Noteholders shall not be required to file proofs of claim
in the Chapter 11 Cases or any Successor Case in order to maintain their claims
for payment of principal, interest, fees, expenses and other amounts owing in
respect of the obligations under, and as provided in, the applicable Prepetition
Financing Documents or Prepetition Treximet Notes Financing Documents. The
statements of claim in respect of the Prepetition Obligations and Prepetition
Treximet Notes Obligations set forth in this Interim Order, together with the
evidence accompanying the Motion and presented at the Interim Hearing are deemed
sufficient to and do constitute proofs of claim in respect of such obligations
and such secured status.

 

35.              Final Hearing. The Final Hearing is scheduled for March 14,
2019, at 2:00 p.m. (prevailing Eastern Time) before this Court. Any objections
by creditors or other parties in interest to any provisions of this Interim
Order shall be deemed waived unless timely filed and served in accordance with
this paragraph. The Debtors shall promptly serve notice of entry of this Interim
Order and the Final Hearing on the appropriate parties in interest in accordance
with the Bankruptcy Rules and the Local Rules. Without limiting the foregoing,
the Debtors shall promptly serve a notice of entry of this Interim Order and the
Final Hearing, together with a copy of this Interim Order, by first class mail,
postage prepaid, facsimile, electronic mail or overnight mail upon the Notice
Parties. The notice of the entry of this Interim Order and the Final Hearing
shall state that objections to the entry of a Final Order shall be filed with
the United States Bankruptcy Court for the District of Delaware by no later than
4:00 p.m. (prevailing Eastern Time) March 7, 2019 (the “Objection Deadline”).

 

55

 

36.              DIP Agent and Prepetition Agents Authorization. Notwithstanding
any provision of the Prepetition Financing Documents or the DIP Loan Documents,
the DIP Agent and Prepetition Agents are hereby authorized to make any and all
account transfers requested by the Debtors in accordance with the Approved
Budget, and is further authorized to take any other action reasonably necessary
to implement the terms of this Interim Order.

 

37.              No Modification of Interim Order. The Debtors irrevocably waive
any right to seek any amendment, modification or extension of this Interim Order
without the prior written consent of the DIP Lenders and no such consent shall
be implied by any action, inaction or acquiescence of the DIP Lenders.

 

38.              Rights Preserved. Notwithstanding anything herein to the
contrary, the entry of this Interim Order is without prejudice to, and does not
constitute a waiver of, expressly or implicitly the DIP Agent’s, the DIP
Lenders’, the Prepetition Agents’, Prepetition Secured Parties’, Prepetition
Treximet Notes Trustee’s or Prepetition Treximet Noteholders’ right to seek any
other or supplemental relief in respect of the Debtors, including the right to
seek additional adequate protection (subject to the Intercreditor Agreement).
Nothing contained herein shall be deemed a finding by the Court or an
acknowledgement by the Prepetition Agents or the Prepetition Secured Parties
that the adequate protection granted herein does in fact adequately protect the
Prepetition Secured Parties against any diminution in value of the Prepetition
Collateral.

 

39.              Priority of Terms. To the extent of any conflict between or
among (a) the Motion, any other order of this Court (other than the Final
Order), or any other agreements, on the one hand, and (b) the terms and
provisions of this Interim Order, on the other hand, the terms and provisions of
this Interim Order shall govern.

 

56

 

40.              Entry of Interim Order; Effect. This Interim Order shall take
effect and be fully enforceable nunc pro tunc to the Petition Date immediately
upon entry hereof, notwithstanding the possible application of Fed. R. Bankr. P.
6004(h), 7062, 9014, or otherwise.

 

41.              Limitation of Liability. In determining to make any DIP Loans,
permitting the use of Cash Collateral, or in exercising any rights or remedies
as and when permitted pursuant to this Interim Order (or any Final Order), the
DIP Loan Documents, the Prepetition Treximet Notes Financing Documents or the
Prepetition Financing Documents, the DIP Agent, DIP Lenders, Prepetition Agents,
Prepetition Secured Parties, Prepetition Treximet Noteholders or Prepetition
Treximet Notes Trustee shall not be deemed to be in control of the operations of
the Debtors or any affiliate (as defined in section 101(2) of the Bankruptcy
Code) of the Debtors, or to be acting as a “responsible person” or “owner or
operator” with respect to the operation or management of the Debtors or any
affiliate of the Debtors (as such terms, or any similar terms, are used in the
United States Comprehensive Environmental Response, Compensation and Liability
Act, 29 U.S.C. §§ 9601 et seq., as amended, or any similar federal or state
statute). Furthermore, nothing in this Interim Order, DIP Loan Documents,
Prepetition Financing Documents or Prepetition Treximet Financing Documents
shall in any way be construed or interpreted to impose or allow the imposition
upon the DIP Agent, the DIP Lenders, the Prepetition Agents, Prepetition Secured
Parties, Prepetition Treximet Notes Trustee or Prepetition Treximet Noteholders
of any liability for any claims arising from the prepetition or postpetition
activities of the Debtors or any affiliate of the Debtors.

 

42.              Credit Bidding. (a) The DIP Agent, on behalf of the DIP
Lenders, shall have the unqualified right to credit bid up to the full amount of
the DIP Obligations in any sale of the DIP Collateral (or any part thereof), (b)
the Prepetition Agents, on behalf of the Prepetition Revolving

 

57

 

Lenders and Prepetition Term Lenders (as applicable), shall have the unqualified
right to credit bid up to the full amount of the Prepetition Revolving
Obligations and Prepetition Term Obligations, as applicable, in any sale of the
Prepetition Collateral and/or Prepetition Term Collateral (or in each case, any
part thereof), and (c) the Prepetition Treximet Notes Trustee, on behalf of the
Prepetition Treximet Noteholders, shall have the right to credit bid up to the
full amount of Prepetition Treximet Notes Obligations in any sale of the
Prepetition Treximet Notes Collateral (or any part thereof), in each case
pursuant to Bankruptcy Code section 363(k), without the need for further Court
order authorizing the same, and whether such credit bid is submitted in
connection with the “Sale” under the Sale Procedures Order (as defined in the
DIP Credit Agreement) or any other sale effectuated through sections 363 or 1129
of the Bankruptcy Code, by a Chapter 7 trustee under section 725 of the
Bankruptcy Code, or otherwise. A credit bid submitted by the DIP Agent, DIP
Lenders, Prepetition Revolving Lenders, Prepetition Term Lenders, Prepetition
Agents, Prepetition Treximet Notes Trustee and/or Prepetition Treximet
Noteholders shall be considered a “Qualified Bid” under the Sale Procedures
Order.

 

43.              Disposition of Collateral. Other than pursuant to the Sale
Procedures Order or Sale Order (as defined in the DIP Credit Agreement), or as
provided in this Interim Order and in the DIP Loan Documents, the Debtors shall
not sell, transfer, lease, encumber, or otherwise dispose of any portion of the
DIP Collateral or any Prepetition Collateral other than in the ordinary course
of business (or enter into any binding agreement to do so) and shall not permit
any of their subsidiaries to sell, transfer, lease, encumber, or otherwise
dispose of any assets (other than in the ordinary course of business) without
the prior written consent of the DIP Lenders.

 

58

 

44.              Equities of the Case. Subject to and effective upon entry of a
Final Order, the Prepetition Secured Parties shall each be entitled to all of
the rights and benefits of section 552(b) of the Bankruptcy Code, and the
“equities of the case” exception under section 552(b) of the Bankruptcy Code
shall not apply to the Prepetition Secured Parties with respect to the proceeds,
product, offspring, or profits of any of the Prepetition Collateral.

 

45.              Reporting Requirements. Notwithstanding any procedures or
requirements under the Prepetition Financing Documents or the DIP Loan
Documents, the Debtors shall (a) prepare and furnish to counsel for the DIP
Lenders, in form and substance reasonably acceptable to the DIP Lenders, a
weekly report of receipts, disbursements, and a reconciliation of actual
receipts and disbursements with those set forth in the Approved Budget, on a
line-by-line basis, showing any percentage variance to the proposed
corresponding line item of the Approved Budget (i) for the immediately preceding
weekly period, (ii) on a cumulative basis for the period of the Approved Budget
or such other budget period, as applicable, and showing a calculation of the
covenants and Debtors’ compliance or noncompliance, and (iii) provide an
explanation for all variances, on a line-item and cumulative basis, between the
budgeted amounts and the actual amounts (the “Budget Reconciliation”). The
Budget Reconciliation shall (i) be certified as true and correct by an officer
of the Borrower and (ii) certify that no Termination Event, including any Event
of Default, has occurred or, if such Termination Event has occurred, specifying
the nature and extent thereof and any corrective action taken or proposed to be
taken with respect thereto. The Debtors shall also provide to DIP Agent’s
counsel (i) a list of any and all prepetition claims paid during such period,
each with a notation regarding which order authorized such payments, and (ii)
the cumulative total of all prepetition claims paid, each with a notation
regarding which order authorized such payments (the “Other Reporting
Obligations”). Such

 

59

 

Budget Reconciliation and Other Reporting Obligations shall be provided to
counsel to the DIP Lenders so as actually to be received within four (4)
business days following the end of each applicable period. The Debtors and their
professionals shall make themselves available to discuss the Budget
Reconciliation and any other reports provided pursuant to this Interim Order
with the professionals retained by the DIP Lenders on such basis as may be
reasonably requested by the DIP Lenders.

 

46.              No Third Party Rights. Except as explicitly provided for
herein, this Interim Order does not create any rights for the benefit of any
party, creditor, equity holder or other entity other than the DIP Agent, DIP
Lenders, Prepetition Agents, Prepetition Secured Parties, Prepetition Treximet
Notes Trustee, Prepetition Treximet Noteholders and the Debtors, and their
respective successors and assigns.

 

47.              Enforceability. This Interim Order shall constitute findings of
fact and conclusions of law pursuant to Bankruptcy Rule 7052 and shall take
effect and be fully enforceable nunc pro tunc to the Petition Date immediately
upon execution hereof. Any findings of fact shall constitute a finding of fact
even if it is stated as a conclusion of law, and any conclusion of law shall
constitute a conclusion of law even if it is stated as a finding of fact.

 

48.              Retention of Jurisdiction. Notwithstanding any provision in the
DIP Loan Documents or the Prepetition Financing Documents, this Court shall
retain jurisdiction over all matters pertaining to the implementation,
interpretation and enforcement of this Interim Order, DIP Facility, and DIP Loan
Documents.

 

      Dated: February 21, 2019   /s/ Christopher S. Sontchi Wilmington, Delaware
 

The Honorable Christopher S. Sontchi

Chief United States Bankruptcy Judge  

 

60

 

 

EXHIBIT L-1

 

[FORM OF] LIBOR NOTICE

 

Cantor Fitzgerald Securities, as Agent
under the below referenced Credit Agreement
[•]
[•]
[•]

 

Ladies and Gentlemen:

 

Reference hereby is made to that certain Senior Secured Superpriority
Debtor-in-Possession Credit Agreement dated as of February 22, 2019 (as amended,
restated, supplemented, or otherwise modified from time to time, the “Credit
Agreement”) by and among Pernix Therapeutics Holdings, Inc., a Maryland
corporation and a debtor and a debtor-in-possession (the “Borrower”), the
lenders party thereto as “Lenders”, and Cantor Fitzgerald Securities, as
administrative agent for each member of the Lender Group (in such capacity,
together with its successors and assigns in such capacity, the “Agent”).
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to them in the Credit Agreement.

 

This LIBOR Notice represents the Borrower’s request to elect the LIBOR Option
with respect to outstanding Loans in the amount of $________ (the “LIBOR Rate
Advance”)[, and is a written confirmation of the telephonic notice of such
election given to Agent].

 

The LIBOR Rate Advance will have an Interest Period of [1, 2, 3 or 6] month(s)
commencing on ______________________.

 

This LIBOR Notice further confirms the Borrower’s acceptance, for purposes of
determining the rate of interest based on the LIBOR Rate under the Credit
Agreement, of the LIBOR Rate as determined pursuant to the Credit Agreement.

 

The Borrower represents and warrants that (i) each of the covenants and
agreements contained in any Loan Document have been performed (to the extent
required to be performed on or before the date hereof or each such effective
date), and (ii) no Default or Event of Default has occurred and is continuing on
the date hereof, nor will any thereof occur after giving effect to the request
above.

 

[Signature Page Follows]

 

Exhibit L-1

  PERNIX THERAPEUTICS HOLDINGS, INC.           By:       Name:     Title:

 

 

 

Signature Page to LIBOR Notice (Pernix DIP)]

EXHIBIT N-1

 

[FORM OF] PROMISSORY NOTE

 

THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO
BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE AGENT PURSUANT TO THE TERMS OF SUCH
CREDIT AGREEMENT.

 

$[●] New York, New York

[●], 2019

 

FOR VALUE RECEIVED, the undersigned, Pernix Therapeutics Holdings, Inc., a
Maryland corporation and a debtor and a debtor-in-possession (the “Borrower”),
hereby unconditionally promises to pay to [●] (together with its successors and
permitted assigns, the “Lender”) in lawful money of the United States and in
immediately available funds, on the Maturity Date the principal amount of (a)
[●] DOLLARS ($[●]), or, if less, (b) the aggregate unpaid principal amount of
all Loans of the Lender outstanding under the Credit Agreement. The Borrower
further agrees to pay interest in like money on the unpaid principal amount
hereof from time to time outstanding at the applicable rates and on the dates
specified in Section 2.6 of the Credit Agreement.

 

The holder of this Note is authorized to endorse on the schedule annexed hereto
and made a part hereof or on a continuation thereof which shall be attached
hereto and made a part hereof the date, and amount of each Loan made pursuant to
the Credit Agreement and the date and amount of each payment or prepayment of
principal thereof, and each continuation thereof. Each such endorsement shall
constitute rebuttably presumptive evidence of the accuracy of the information
endorsed. The failure to make any such endorsement or any error in any such
endorsement shall not affect the obligations of the Borrower under the Credit
Agreement and other Loan Documents in respect of any Loan.

 

This Note (a) is one of the Notes evidencing the Commitments or the Loans under
that certain Senior Secured Superpriority Debtor-in-Possession Credit Agreement
dated as of February 22, 2019 (as amended, restated, supplemented, or otherwise
modified from time to time, the “Credit Agreement”) by and among Pernix
Therapeutics Holdings, Inc., a Maryland corporation and a debtor and a
debtor-in-possession (the “Borrower”), the Lenders from time to time party
thereto, and Cantor Fitzgerald Securities, as administrative agent for each
member of the Lender Group (in such capacity, together with its successors and
assigns in such capacity, the “Agent”), (b) is subject to the provisions of the
Credit Agreement and (c) is subject to optional and mandatory prepayment in
whole or in part as provided in the Credit Agreement. This Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to the
Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Note in respect
thereof.

 

Upon the occurrence of any one or more of the Events of Default, all principal
and all accrued interest then remaining unpaid on this Note shall become, or may
be declared to be, immediately due and payable, all as provided in the Credit
Agreement.

 

All parties now and hereafter liable with respect to this Note, whether maker,
principal, surety, guarantor, endorser or otherwise, hereby waive presentment,
demand, protest and all other notices

 

Exhibit N-1

of any kind under this Note to the fullest extent permitted under applicable
law.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE CREDIT
AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 13 OF THE CREDIT AGREEMENT.

 

[The remainder of this page intentionally left blank.]

 

Exhibit N-2

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK AND, TO THE EXTENT APPLICABLE, THE
BANKRUPTCY CODE.

 

  PERNIX THERAPEUTICS HOLDINGS, INC.           By:       Name:     Title:      

 

 

Schedule A
to Promissory Note

 

LOANS AND REPAYMENTS

 

Date Amount of Loans Amount of Principal of Loans Repaid Unpaid Principal
Balance of Loans Notation Made By                                              
                                                                               
                                           

EXHIBIT P-1

 

[FORM OF] PERFECTION CERTIFICATE

 

February 22, 2019

 

With reference to (a) the Senior Secured Superpriority Debtor-in-Possession
Credit Agreement (as amended, restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”), dated as of February 22, 2019, among
Pernix Therapeutics Holdings, Inc., a Maryland corporation and a debtor and a
debtor-in-possession (the “Borrower”), the lenders party thereto from time to
time and Cantor Fitzgerald Securities, as Agent (capitalized terms defined
therein being used herein and not defined have the meaning assigned to such
terms therein (whether defined expressly therein or by reference to another
document)) and (b) the Guaranty and Security Agreement and any other Loan
Document that purports to create a Lien on any Collateral from the Borrower or
any of its subsidiaries (the Borrower, together with any such subsidiary that
grants a security interest in such Collateral to secure the Obligations,
collectively, the “Grantors” and each, individually, a “Grantor”), the
undersigned, solely in the capacity of a duly authorized officer of the
Borrower, certifies to the Agent as of the date hereof as follows:

 

Section 1. Legal Names, Organizations and Jurisdictions of Organization or
Incorporation. (a) The exact legal name of each Grantor, as such name appears in
its respective certificate of incorporation or any other organizational
document, is set forth in Schedule 1(a). Each Grantor is (i) the type of entity
disclosed next to its name in Schedule 1(a), (ii) is incorporated or formed in
its jurisdiction of organization or formation, as applicable, listed in Schedule
1(a) and (iii) a registered organization except to the extent disclosed in
Schedule 1(a).

 

(b) Except as set forth on Schedule 1(b), no Grantor has, within the past five
years preceding the date hereof, changed its legal name, jurisdiction of
organization or incorporation or its corporate structure (e.g., by merger or
consolidation with any other Person or acquisition of all equity interests of a
Person or all or substantially all of the assets of (or all or substantially all
the assets constituting a business unit, division, product line or line of
business of) another Person (other than any other Loan Party)).

 

Section 2. Organizational and Federal Taxpayer Identification Numbers. Set forth
on Schedule 2 is (i) the organizational identification number, if any, assigned
by the jurisdiction of organization, formation or incorporation, as applicable,
of each Grantor, (ii) the address (including street address, city, county and
state) of the chief executive office of each Grantor or the registered office of
each Grantor, if applicable, at any time in the past five years and (iii) the
U.S. federal taxpayer identification number of each Grantor.

 

Section 3. UCC Filings.  (a) Set forth on Schedule 3(a) is a true copy of a file
search report from the central UCC filing office in each jurisdiction identified
in Schedule 1(a) above (searches in local filing offices, if any, are not
required).

 

(b) Financing statements have been prepared for filing by counsel to the Agent
in the proper Uniform Commercial Code filing office in the jurisdiction in which
each Grantor is located. Set forth on Schedule 3(b) is a true and correct list
of each such filing office in which such filing is to be made.

 

Section 4. Intellectual Property. (a) Set forth on Schedule 4(a) is a complete
and correct list of all registered Copyrights applicable to any of the Products
or otherwise owned by any Grantor, all applications for registration of
Copyrights owned by any Grantor, and all other Copyrights owned by any Grantor
and material to the conduct of the business of such Grantor.

 

Exhibit P-1

(b) Set forth on Schedule 4(b) is a complete and correct list of all licenses of
Intellectual Property (including Patent Licenses) entered into by any Grantor
pursuant to which (x) such Grantor has provided any license or other rights in
Intellectual Property owned or controlled by such Grantor to any other Person
(other than licenses granted pursuant to clause (d) of the definition of
“Permitted Dispositions” in the Credit Agreement related to software) or (y) any
Person has granted to such Grantor any license or other rights in Intellectual
Property owned or controlled by such Person that is material to the business of
such Grantor, including any Intellectual Property that is incorporated in any
Inventory, software, or other product marketed, sold, licensed, or distributed
by such Grantor.

 

(c) Set forth on Schedule 4(c) is a complete and correct list of all Patents
applicable to any of the Products or otherwise owned by each Grantor and all
applications for Patents owned by such Grantor.

 

(d) Set forth on Schedule 4(d) is a complete and correct list of all registered
Trademarks applicable to any of the Products or otherwise owned by each Grantor,
all applications for registration of Trademarks owned by such Grantor, and all
other Trademarks owned by such Grantor and material to the conduct of the
business of such Grantor.

 

Section 5. Deposit Accounts and Securities Accounts. Set forth on Schedule 5 is
a complete and correct list of each Grantor’s Deposit Accounts and Securities
Accounts, including, with respect to each bank or securities intermediary (a)
the name and address of such Person, (b) the account numbers of the Deposit
Accounts or Securities Accounts maintained with such Person and (c) all Excluded
Accounts.

 

Section 6. Real Property. Set forth on Schedule 6 is a true and correct list of
(i) all material real property owned, leased or otherwise held by any Grantor
(including fixtures) and (ii) the county or other jurisdiction in which a
mortgage (if any) and, if applicable, a fixture filing on each mortgage is to be
recorded and/or filed.

 

Section 7. Investment-Related Property. Set forth on Schedule 7 is a true and
correct list, for each Grantor, of all the issued and outstanding stock,
partnership interests, limited liability company membership interests or other
Equity Interests of the Borrower or any Subsidiary or (to the extent such Equity
Interests are certificated) of any other Person owned, beneficially or of
record, by such Grantor, specifying the issuer and certificate number (if any)
of, and the number and percentage of ownership represented by, such Equity
Interests.

 

Section 8. Commercial Tort Claims. Set forth on Schedule 8 is a true and correct
list of Commercial Tort Claims (as defined in the Code) held by any Grantor
having an aggregate value or face amount of $250,000 or more, including a brief
description thereof.

 

Section 9. Letter of Credit Rights. Set forth on Schedule 9 is a true and
correct list of all letters of credit issued in favor of any Grantor, as
beneficiary thereunder, to the extent having a face amount or value of $250,000
or more in the aggregate.

 

Section 10. Negotiable Collateral, Investment Property, or Chattel Paper. Set
forth on Schedule 10 is a true and correct list of all Negotiable Collateral,
Investment Property, or Chattel Paper of each Grantor evidencing Proceeds of
Collateral having an aggregate value or face amount of $250,000 or more.

 

Section 11. Government Contracts. Set forth on Schedule 11 is a true and correct
list of each Account, the aggregate value of which is equal to or greater than
$250,000 as of the date hereof, of the Grantors arising out of a contract or
contracts with the United States of America or any department, agency, or
instrumentality thereof.

 

Exhibit P-2

 

 

[signature page follows]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit P-3

IN WITNESS WHEREOF, the undersigned parties hereto have caused this Perfection
Certificate to be executed and delivered as of the day and year first above
written.

 

 

  PERNIX THERAPEUTICS HOLDINGS, INC.           By:            Name:   Title:    
 

 

 

Exhibit P-4

Schedule 1(a)

 

Legal Names, Organizations and Jurisdictions of Organization or Incorporation

 

Grantors Legal Name Jurisdiction of Organization / Formation / Incorporation
Type of Organization      

 

 

 

Exhibit P-5

Schedule 1(b)

 

Changes to Legal Name, Jurisdiction or Organization

 

Grantor Corporate Name of Predecessor Entity Description of Change
(and date)      

 

 

 

Exhibit P-6

Schedule 2

 

Organizational and Federal Taxpayer Identification Numbers

 

Grantor Organizational Identification Number Address of Chief Executive Office /
Registered Office Federal Taxpayer Identification Number        

 

 

Exhibit P-7

Schedule 3(a)

 

UCC File Search Report

 

(see attached)

 

Exhibit P-8

Schedule 3(b)

 

Organizational and Federal Taxpayer Identification Numbers

 

Grantor UCC Filing Office / County Recorder’s Office    

 

 

Exhibit P-9

Schedule 4(a)

 

Registered Copyrights

 

Grantor Copyright  

 

 

Exhibit P-10

Schedule 4(b)

 

Intellectual Property Licenses

 

Grantor IP Licenses    

 

 

Exhibit P-11

Schedule 4(c)

 

Patents

 

Grantor Patents    

 

 

Exhibit P-12

Schedule 4(d)

 

Registered Trademarks

 

Grantor Registered Trademarks    

 

 

 

Exhibit P-13

Schedule 5

 

Deposit Accounts and Securities Accounts

 

Grantor Name of Financial Institution Where Account Maintained Account Number
Description of Account        

 

 

 

Exhibit P-14

Schedule 6

 

Real Property

 

Grantor Location Estimated Value    

 

 

Exhibit P-15

 

 

Schedule 7

 

Investment-Related Property

 

Grantor Issuer Stock Certificate No. If Certificated, Number of Shares and Class
of Stock Percentage Ownership Represented by Pledged Equity Interests Total
Percentage of the Issuer Owned by the Grantor            

 

 

 

Exhibit P-16

Schedule 8

 

Commercial Tort Claims

 

Grantor Commercial Tort Claim    

 

 

 

Exhibit P-17

Schedule 9

 

Letter of Credit Rights

 

Grantor Letter of Credit    

 

 

Exhibit P-18

Schedule 10

 

Negotiable Collateral, Investment Property, or Chattel Paper

 

Grantor Negotiable Instrument, Investment Property or Chattel Paper    

 

 

 

Exhibit P-19

Schedule 11

 

Government Contracts

 

Exhibit P-20