Exhibit 10.2

Execution Copy

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of August 4, 2009
(the “Effective Date”) between (i) SILICON VALLEY BANK, a California corporation
with a loan production office located at 100 Matsonford Road, Building 5, Suite
555, Radnor, Pennsylvania 19087 (“Bank”), and (ii) AUXILIUM PHARMACEUTICALS,
INC., a Delaware corporation (“Auxilium”) with offices located at 40 Valley
Stream Parkway, Malvern, Pennsylvania 19355, AUXILIUM INTERNATIONAL HOLDINGS,
INC., a Delaware corporation with offices at 1105 North Market Street, Suite
1300, P.O. Box 8985, Wilmington, Delaware 19899-8985, and AUXILIUM US HOLDINGS,
LLC, a Delaware limited liability company, with offices located at 1105 North
Market Street, Suite 1300, P.O. Box 8985, Wilmington, Delaware 19899-8985
(individually and collectively, jointly and severally, the “Borrower”), provides
the terms on which Bank shall lend to Borrower and Borrower shall repay Bank.
The parties agree as follows:

 

  1 ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall be construed following
GAAP. Calculations and determinations must be made following GAAP. Capitalized
terms not otherwise defined in this Agreement shall have the meanings set forth
in Section 13. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein.

 

  2 LOAN AND TERMS OF PAYMENT

2.1 Promise to Pay. Borrower hereby unconditionally, jointly and severally,
promises to pay Bank the outstanding principal amount of all Credit Extensions
and accrued and unpaid interest thereon as and when due in accordance with this
Agreement.

2.1.1 Revolving Advances.

(a) Availability. Subject to the terms and conditions of this Agreement and to
deduction of Reserves, after the Initial Audit, Bank shall make Advances not
exceeding the Availability Amount. Amounts borrowed under the Revolving Line may
be repaid, and prior to the Revolving Line Maturity Date, reborrowed, subject to
the applicable terms and conditions precedent herein.

(b) Termination; Repayment. The Revolving Line terminates on the Revolving Line
Maturity Date, when the outstanding principal amount of all Advances, the unpaid
interest thereon, and all other Obligations relating to the Revolving Line shall
be immediately due and payable.

2.1.2 Letters of Credit Sublimit.

As part of the Revolving Line and subject to deduction of Reserves, Bank shall
issue or have issued Letters of Credit denominated in Dollars or a Foreign
Currency for Borrower’s account. The aggregate Dollar Equivalent amount utilized
for the issuance of Letters of Credit shall at all times reduce the amount
otherwise available for Advances under the Revolving Line. The aggregate Dollar
Equivalent of the face amount of outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit and any Letter of Credit Reserve) (X) during
Stage 1, may not exceed the lesser of (A) $5,000,000, minus (i) the sum of all
amounts used for Cash Management Services, and minus (ii) the FX Reduction
Amount, or (B) the Revolving Line, minus (i) the sum of all outstanding
principal amounts of any Advances (including any amounts used for Cash
Management Services), and minus (ii) the FX Reduction Amount; and (Y) during
Stage 2, may not exceed the lesser of (A) $5,000,000, minus (i) the sum of all
amounts used for Cash Management Services, and minus (ii) the FX Reduction
Amount, or (B) the lesser of the Revolving Line or the Borrowing Base, minus
(i) the sum of all outstanding principal amounts of any Advances (including any
amounts used for Cash Management Services), and minus (ii) the FX Reduction
Amount

(a) If, on the Revolving Line Maturity Date (or the effective date of any
termination of this Agreement), there are any outstanding Letters of Credit,
then on such date Borrower shall provide to Bank cash collateral in an amount
equal to 105% of the Dollar Equivalent of the face amount of all such Letters of
Credit plus all interest, fees, and costs due or to become due in connection
therewith (as estimated by Bank in its good faith business judgment), to secure
all of the Obligations relating to such

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

Letters of Credit. All Letters of Credit shall be in form and substance
acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank’s standard Application and Letter of Credit Agreement (the
“Letter of Credit Application”). Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably
request. Borrower further agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guarantied by Bank and
opened for Borrower’s account or by Bank’s interpretations of any Letter of
Credit issued by Bank for Borrower’s account, and Borrower understands and
agrees that Bank shall not be liable for any error, negligence, or mistake,
whether of omission or commission, in following Borrower’s instructions or those
contained in the Letters of Credit or any modifications, amendments, or
supplements thereto, except to the extent arising from the gross negligence or
willful misconduct of the Bank.

(b) The obligation of Borrower to immediately reimburse Bank for drawings made
under Letters of Credit shall be absolute, unconditional, and irrevocable, and
shall be performed strictly in accordance with the terms of this Agreement, such
Letters of Credit, and the Letter of Credit Application.

(c) Borrower may request that Bank issue a Letter of Credit payable in a Foreign
Currency. If a demand for payment is made under any such Letter of Credit, Bank
shall treat such demand as an Advance to Borrower of the Dollar Equivalent of
the amount thereof (plus fees and charges in connection therewith such as wire,
cable, SWIFT or similar charges).

(d) To guard against fluctuations in currency exchange rates, upon the issuance
of any Letter of Credit payable in a Foreign Currency, Bank shall create a
reserve (the “Letter of Credit Reserve”) under the Revolving Line in an amount
equal to ten percent (10%) of the face amount of such Letter of Credit. The
amount of the Letter of Credit Reserve may be adjusted by Bank from time to time
to account for fluctuations in the exchange rate. The availability of funds
under the Revolving Line shall be reduced by the amount of such Letter of Credit
Reserve for as long as such Letter of Credit remains outstanding.

2.1.3 Foreign Exchange Sublimit. As part of the Revolving Line and subject to
the deduction of Reserves, Borrower may enter into foreign exchange contracts
with Bank under which Borrower commits to purchase from or sell to Bank a
specific amount of Foreign Currency (each, a “FX Forward Contract”) on a
specified date (the “Settlement Date”). FX Forward Contracts shall have a
Settlement Date of at least one (1) FX Business Day after the contract date. The
aggregate amount of FX Forward Contracts at any one time may not exceed
(X) during Stage 1, ten (10) times the lesser of (A) $5,000,000, minus (i) the
sum of all amounts used for Cash Management Services, and minus (ii) the Dollar
Equivalent of the face amount of any outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), or
(B) the Revolving Line minus (i) the sum of all outstanding principal amounts of
any Advances (including any amounts used for Cash Management Services), and
minus (ii) the Dollar Equivalent of the face amount of any outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve); and (Y) during Stage 2, ten (10) times the lesser of
(A) $5,000,000, minus (i) the sum of all amounts used for Cash Management
Services, and minus (ii) the Dollar Equivalent of the face amount of any
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve), or (B) the lesser of Revolving Line or
the Borrowing Base, minus (i) the sum of all outstanding principal amounts of
any Advances (including any amounts used for Cash Management Services), and
minus (ii) the Dollar Equivalent of the face amount of any outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve). The amount otherwise available for Credit Extensions under the
Revolving Line shall be reduced by an amount equal to ten percent (10%) of each
outstanding FX Forward Contract (the “FX Reduction Amount”). Any amounts needed
to fully reimburse Bank for any amounts not paid by Borrower in connection with
FX Forward Contracts will be treated as Advances under the Revolving Line and
will accrue interest at the interest rate applicable to Advances.

2.1.4 Cash Management Services Sublimit. Borrower may use the Revolving Line for
Bank’s cash management services, which may include merchant services, direct
deposit of payroll, business credit card, and check cashing services identified
in Bank’s various cash management services agreements (collectively, the “Cash
Management Services”), in an aggregate amount not to exceed (X) during Stage 1,
the lesser of (A) $5,000,000, minus (i) the Dollar Equivalent of the face amount
of any outstanding Letters of Credit (including drawn but unreimbursed Letters
of Credit and any Letter of Credit Reserve), and minus (ii) the FX Reduction
Amount, or (B) the Revolving Line, minus (i) the sum of all outstanding
principal amounts of any Advances, minus the Dollar Equivalent of the face
amount of any outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve), and minus (iii) the FX
Reduction Amount; and (Y) during Stage 2, the lesser of (A) $5,000,000, minus
(i) the Dollar Equivalent of the face amount of any outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve), and minus (ii) the FX Reduction Amount, or (B) the lesser of
Revolving Line or the Borrowing

 

-2-

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

Base, minus (i) the sum of all outstanding principal amounts of any Advances,
minus the Dollar Equivalent of the face amount of any outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve), and minus (iii) the FX Reduction Amount. Any amounts Bank pays
on behalf of Borrower for any Cash Management Services will be treated as
Advances under the Revolving Line and will accrue interest at the interest rate
applicable to Advances.

2.1.5 Increase in Revolving Line.

(a) Request for Increase. Provided no Default or Event of Default then exists or
would arise therefrom, upon ten (10) days prior written notice to Bank, which
notice shall be irrevocable, Borrower may request one increase in the Revolving
Line in an amount between $3,000,000 and $10,000,000 (the “Revolving Line
Commitment Increase”).

(b) Effective Date of Increase. If Bank, in its sole discretion, agrees to grant
a request by the Borrower for a Revolving Line Commitment Increase, Bank shall
determine the effective date (the “Increase Effective Date”) of such Revolving
Line Commitment Increase, and the Revolving Line shall thereafter be increased
by the amount of such Revolving Line Commitment Increase. Borrower covenants and
agrees that if, in Bank’s sole discretion, Bank agrees to permit the Revolving
Line Commitment Increase, such increase shall not constitute an obligation or
agreement on the part of the Bank to make any additional Revolving Line
Commitment Increase of any kind to Borrower at a later date.

(c) Conditions to Effectiveness of Increase. If agreed to by Bank in its sole
discretion, the Revolving Line Commitment Increase shall be subject to the
following conditions precedent:

(i) Borrower shall have delivered to the Bank a certificate, in form and
substance acceptable to Bank, in its sole discretion, dated as of the Increase
Effective Date, (A) certifying and attaching the resolutions adopted by the
Borrower’s board of directors approving or consenting to such Revolving Line
Commitment Increase; (B) certifying that, before and after giving effect to such
Revolving Line Commitment Increase, (1) the representations and warranties of
the Borrower in this Agreement and in each other Loan Document are true and
correct on and as of the applicable Increase Effective Date, except to the
extent that such representations and warranties specifically refer to an earlier
date, in which case, to the knowledge of the Borrower, they are true and correct
as of such earlier date, and except to the extent of changes resulting from
transactions contemplated and permitted by this Agreement and changes occurring
in the ordinary course of business (in each case to the extent not constituting
a Default or an Event of Default); (2) no Default or Event of Default exists or
would result from such Revolving Line Commitment Increase (including on a pro
forma basis relative to financial covenant compliance); and (3) the incurrence
of Indebtedness in an aggregate principal amount equal to the full Revolving
Line after giving effect to any Revolving Line Commitment Increase would not
result in a breach of, or a default under, any agreement to which Borrower is a
party.

(ii) Borrower shall have paid any fees required pursuant to Section 2.4 hereof
on any such Revolving Line Commitment Increase, together with any additional
Bank Expenses incurred as a result of such Revolving Line Commitment Increase
(including, without limitation, reasonable attorneys’ fees and expenses); and

(iii) Borrower shall have delivered to Bank an opinion or opinions of counsel to
the Borrower, in form and substance acceptable to Bank, in its reasonable
discretion.

2.2 Overadvances. If, at any time, the sum of (a) the outstanding principal
amount of any Advances (including any amounts used for Cash Management
Services); plus (b) the face amount of any outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve); plus (c) the FX Reduction Amount exceeds (X) during Stage 1, the
Revolving Line or (Y) during Stage 2, the lesser of either the Revolving Line or
the Borrowing Base (such excess amount in either Stage 1 or Stage 2 being an
“Overadvance”) Borrower shall immediately pay to Bank in cash such Overadvance.
Without limiting Borrower’s obligation to repay Bank any amount of the
Overadvance, Borrower agrees to pay Bank interest on the outstanding amount of
any Overadvance, on demand, at the Default Rate.

 

-3-

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

2.3 Payment of Interest on the Credit Extensions.

(a) Interest Rate; Advances. Subject to Section 2.3(b), the principal amount
outstanding under the Revolving Line shall accrue interest at a floating per
annum rate equal to the Prime Rate plus one-half of one percentage point
(0.50%), which interest shall be payable monthly, in arrears, in accordance with
Section 2.3(f) below; provided, however, that during a Performance Pricing
Period, subject to Section 2.3(b), the principal amount outstanding under the
Revolving Line shall accrue interest at a floating per annum rate equal to the
Prime Rate, which interest shall be payable monthly, in arrears, in accordance
with Section 2.3(f) below.

(b) Default Rate. Immediately upon the occurrence and during the continuance of
an Event of Default, Obligations shall bear interest at a rate per annum which
is two percentage points (2.00%) above the rate that is otherwise applicable
thereto (the “Default Rate”) unless Bank otherwise elects from time to time in
its sole discretion to impose a smaller increase. Fees and expenses which are
required to be paid by Borrower pursuant to the Loan Documents (including,
without limitation, Bank Expenses) but are not paid when due shall bear interest
until paid at a rate equal to the highest rate applicable to the Obligations.
Payment or acceptance of the increased interest rate provided in this
Section 2.3(b) is not a permitted alternative to timely payment and shall not
constitute a waiver of any Event of Default or otherwise prejudice or limit any
rights or remedies of Bank.

(c) Adjustment to Interest Rate. Changes to the interest rate of any Credit
Extension based on changes to the Prime Rate shall be effective on the effective
date of any change to the Prime Rate and to the extent of any such change.

(d) Computation; 360-Day Year. In computing interest, the date of the making of
any Credit Extension shall be included and the date of payment shall be
excluded; provided, however, that if any Credit Extension is repaid on the same
day on which it is made, such day shall be included in computing interest on
such Credit Extension. Interest shall be computed on the basis of a 360-day year
for the actual number of days elapsed.

(e) Debit of Accounts. Bank may debit any of Borrower’s deposit accounts,
including the Designated Deposit Account, for principal and interest payments or
any other amounts Borrower owes Bank when due. These debits shall not constitute
a set-off.

(f) Interest Payment Date. Except as otherwise provided herein, interest is
payable monthly on the last calendar day of each month.

(g) Payment; Interest Computation; Float Charge. Interest is payable monthly on
the last calendar day of each month. In computing interest on the Obligations,
all Payments received after 12:00 noon Eastern time on any day shall be deemed
received on the next Business Day. In addition, during Stage 2, when Net
Liquidity is less than $7,500,000, Bank shall be entitled to charge Borrower a
“float” charge in an amount equal to two (2) Business Days interest, at the
interest rate applicable to the Advances, on all Payments received by Bank. The
float charge for each month shall be payable on the last day of the month. Bank
shall not, however, be required to credit Borrower’s account for the amount of
any item of payment which is unsatisfactory to Bank in its good faith business
judgment, and Bank may charge Borrower’s Designated Deposit Account for the
amount of any item of payment which is returned to Bank unpaid.

2.4 Fees. Borrower shall pay to Bank:

(a) Commitment Fee. A fully earned, non refundable commitment fee of $300,000
payable as follows: (i) $150,000 on the Effective Date; and (ii) $150,000 on the
earlier to occur of (A) the occurrence of an Event of Default and (B) the first
anniversary of the Effective Date, unless the Revolving Line commitment has
terminated prior to such date. In addition, on any Increase Effective Date,
Borrower shall pay to Bank a fully earned, non refundable pro-rata commitment
fee equal to one-half of one percent (0.50%) of the Revolving Line Commitment
Increase effective as of such Increase Effective Date.

(b) Letter of Credit Fee. Bank’s customary fees and expenses for the issuance or
renewal of Letters of Credit, upon the issuance of such Letter of Credit, each
anniversary of the issuance during the term of such Letter of Credit, and upon
the renewal of such Letter of Credit by Bank;

(c) Termination Fee. Subject to the terms of Section 12.1 hereof, a termination
fee;

 

-4-

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

(d) Unused Revolving Line Facility Fee. A fee (the “Unused Revolving Line
Facility Fee”), payable quarterly in arrears, on a calendar year basis, in an
amount equal to one-half of one percent (0.50%) per annum of the average unused
portion of the Revolving Line, as determined by Bank. The unused portion of the
Revolving Line, including, without limitation, any Revolving Line Commitment
Increase, for the purposes of this calculation, shall include any amounts
reserved for products provided in connection with Cash Management Services and
FX Forward Contracts (but any Letters of Credit outstanding will be treated as
usage for purposes of calculating such Unused Revolving Line Facility Fee).
Borrower shall not be entitled to any credit, rebate or repayment of any Unused
Revolving Line Facility Fee previously earned by Bank pursuant to this Section
notwithstanding any termination of the Agreement or the suspension or
termination of Bank’s obligation to make loans and advances hereunder;

(e) Collateral Monitoring Fee. When Net Liquidity is less than $7,500,000, a
monthly collateral monitoring fee equal to one-sixteenth of one percent
(0.0625%) of the average outstanding Credit Extensions for such month, payable
in arrears on the last day of each month (prorated for any partial month at the
beginning and upon termination of this Agreement); provided, however, such
collateral monitoring fee shall be waived during any full calendar month in
which Borrower has no outstanding Advances; and

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

2.5 Payments; Application of Payments.

(a) All payments (including prepayments) to be made by Borrower under any Loan
Document shall be made in immediately available funds in U.S. Dollars, without
setoff or counterclaim, before 12:00 noon Eastern time on the date when due.
Payments of principal and/or interest received after 12:00 noon Eastern time are
considered received at the opening of business on the next Business Day. When a
payment is due on a day that is not a Business Day, the payment shall be due the
next Business Day, and additional fees or interest, as applicable, shall
continue to accrue until paid.

(b) Bank shall apply the whole or any part of collected funds against the
Revolving Line or credit such collected funds to a depository account of
Borrower with Bank (or an account maintained by an Affiliate of Bank), on the
date received (but in any event subject to Section 2.3(g)), the order and method
of such application to be in the sole discretion of Bank. Borrower shall have no
right to specify the order or the accounts to which Bank shall allocate or apply
any payments required to be made by Borrower to Bank or otherwise received by
Bank under this Agreement when any such allocation or application is not
specified elsewhere in this Agreement.

 

  3 CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to make
the initial Credit Extension is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, such documents,
and completion of such other matters, as Bank may reasonably deem necessary or
appropriate, including, without limitation:

(a) duly executed original signatures to the Loan Documents;

(b) [Intentionally omitted];

(c) Borrower’s Operating Documents and a good standing certificate of Borrower
certified by the Secretary of State of the State(s) of Delaware as of a date no
earlier than thirty (30) days prior to the Effective Date;

(d) duly executed original signatures to the Secretary’s Certificate with
completed Borrowing Resolutions for Borrower;

(e) the Pledge Agreement, together with the duly executed original signatures
thereto and any certificates and stock powers required to be delivered in
connection therewith;

(f) evidence that (i) the Liens securing Indebtedness owed by Borrower to
Comerica Bank, N.A. (if any) will be terminated and (ii) the documents and/or
filings evidencing the perfection of such Liens, including without limitation
any financing statements and/or control agreements, have or will, concurrently
with the initial Credit Extension, be terminated;

 

-5-

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

(g) certified copies, dated as of a recent date, of financing statement
searches, as Bank shall request, accompanied by written evidence (including any
UCC termination statements) that the Liens indicated in any such financing
statements either constitute Permitted Liens or have been or, in connection with
the initial Credit Extension, will be terminated or released;

(h) the Perfection Certificates of Borrower, together with the duly executed
original signatures thereto;

(i) a legal opinion of Borrower’s counsel, in form and substance acceptable to
Bank, in its reasonable discretion, dated as of the Effective Date together with
the duly executed original signature thereto;

(j) evidence satisfactory to Bank that the insurance policies required by
Section 6.7 hereof are in full force and effect, together with appropriate
evidence showing lender loss payable and/or additional insured clauses or
endorsements in favor of Bank;

(k) the completion of the Initial Audit;

(l) evidence that Borrower has Net Liquidity at Bank, after giving effect to the
initial Credit Extension, in excess of $20,000,000; and

(m) payment of the fees and Bank Expenses then due as specified in Section 2.4
hereof.

3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make
each Credit Extension, including the initial Credit Extension, is subject to the
following conditions precedent:

(a) except as otherwise provided in Section 3.4(a), (i) when Net Liquidity is
greater than or equal to $7,500,000, timely receipt of a Payment/Advance Form;
and (ii) when Net Liquidity is less than Seven $7,500,000, timely receipt of an
executed Transaction Report;

(b) the representations and warranties in this Agreement, as supplemented on any
Compliance Certificate, Payment/Advance Form or Transaction Report delivered
after the Effective Date, shall be true, accurate, and complete in all material
respects on the date of the Payment/Advance Form or Transaction Report, as the
case may be, and on the Funding Date of each Credit Extension; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no
Default or Event of Default shall have occurred and be continuing or result from
the Credit Extension. Each Credit Extension is Borrower’s representation and
warranty on that date that the representations and warranties in this Agreement,
as supplemented on any Compliance Certificate, Payment/Advance Form or
Transaction Report delivered after the Effective Date, remain true, accurate,
and complete in all material respects; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date; and

(c) (i) in Bank’s sole discretion, there has not been a Material Adverse Change
or (ii) Bank determines, based upon information available to it and in its
reasonable judgment, after consultation with Borrower, that there is a
substantial likelihood that Borrower shall fail to comply with one or more of
the financial covenants in Section 6 during the next succeeding financial
reporting period.

3.3 Covenant to Deliver. Borrower agrees to deliver to Bank each item required
to be delivered to Bank under this Agreement as a condition precedent to any
Credit Extension. Borrower expressly agrees that a Credit Extension made prior
to the receipt by Bank of any such item shall not constitute a waiver by Bank of
Borrower’s obligation to deliver such item, and the making of any Credit
Extension in the absence of a required item shall be in Bank’s sole discretion.

 

-6-

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

3.4 Procedures for Borrowing.

(a) Advances. Subject to the prior satisfaction of all other applicable
conditions to the making of an Advance set forth in this Agreement, to obtain an
Advance other than Advances under Sections 2.1.2 or 2.1.4), Borrower shall
notify Bank (which notice shall be irrevocable) by electronic mail, facsimile,
or telephone by 12:00 noon Eastern time on the Funding Date of the Advance.
Together with any such electronic or facsimile notification, Borrower shall
deliver to Bank by electronic mail or facsimile a completed Payment/Advance Form
or Transaction Report, as the case may be, executed by a Responsible Officer or
his or her designee. Bank may rely on any telephone notice given by a person
whom Bank believes is a Responsible Officer or designee. Bank shall credit
Advances to the Designated Deposit Account. Bank may make Advances under this
Agreement based on instructions from a Responsible Officer or his or her
designee or without instructions if the Advances are necessary to meet
Obligations which have become due.

 

  4 CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations, a continuing security
interest in, and pledges to Bank, the Collateral, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and products thereof.

4.2 Priority of Security Interest. Borrower represents, warrants, and covenants
that the security interest granted herein is and shall at all times continue to
be a first priority perfected security interest in the Collateral (subject only
to Permitted Liens that may have superior priority to Bank’s Lien under this
Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall
promptly notify Bank in a writing signed by Borrower of the general details
thereof and grant to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance reasonably satisfactory to Bank.

If this Agreement is terminated, Bank’s Lien in the Collateral shall continue
until the Obligations arising under this Agreement (other than inchoate
indemnity obligations) are repaid in full in cash. Upon payment in full in cash
of the Obligations arising under this Agreement and at such time as Bank’s
obligation to make Credit Extensions has terminated, Bank shall, at Borrower’s
sole cost and expense, release its Liens in the Collateral and all rights
therein shall revert to Borrower.

4.3 Authorization to File Financing Statements. Borrower hereby authorizes Bank
to file financing statements, without notice to Borrower, with all appropriate
jurisdictions to perfect or protect Bank’s interest or rights hereunder,
including a notice that any disposition of the Collateral, by either Borrower or
any other Person, shall be deemed to violate the rights of Bank under the Code.
Such financing statements may indicate the Collateral as “all assets of the
Debtor” or words of similar effect, or as being of an equal or lesser scope, or
with greater detail, all in Bank’s discretion.

 

  5 REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows:

5.1 Due Organization; Authorization; Power and Authority. Each Borrower and each
of its Subsidiaries are duly existing and in good standing as a Registered
Organization in its jurisdiction of formation and each is qualified and licensed
to do business and each is in good standing in any jurisdiction in which the
conduct of each of its business or its ownership of property requires that it be
qualified except where the failure to do so could not reasonably be expected to
have a material adverse effect on Borrower’s business. In connection with this
Agreement, Borrower has delivered to Bank completed certificates signed by
Borrower, entitled “Perfection Certificate”. Each Borrower represents and
warrants to Bank that (a) each Borrower’s exact legal name is that indicated on
the Perfection Certificate and on the signature page hereof; (b) each Borrower
is an organization of the type and is organized in the jurisdiction set forth in
the Perfection Certificate; (c) the Perfection Certificate accurately sets forth
such Borrower’s respective organizational identification number or accurately
states that such Borrower has none; (d) the Perfection Certificate accurately
sets forth each Borrower’s place of business, or, if more than one, its chief
executive office as well as Borrower’s mailing address (if different than its
chief executive office); (e) each Borrower (and each of its respective
predecessors) has not, in the past five (5) years, changed its jurisdiction of
formation, organizational structure or type, or any organizational number
assigned by its jurisdiction; and (f) all other information set forth on the
Perfection Certificate pertaining to Borrower and each of its Subsidiaries is
accurate and complete (it being understood and agreed that Borrower may from
time to time update certain information in the Perfection Certificate after the
Effective Date to the extent permitted by one or more specific provisions in
this Agreement). If Borrower is not now a Registered Organization but later
becomes one, Borrower shall promptly notify Bank of such occurrence and provide
Bank with Borrower’s organizational identification number.

 

-7-

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

The execution, delivery and performance by Borrower of the Loan Documents to
which it is a party have been duly authorized, and do not (i) conflict with any
of Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law,
(iii) contravene, conflict or violate any applicable order, writ, judgment,
injunction, decree, determination or award of any Governmental Authority by
which Borrower or any of its Subsidiaries or any of their property or assets may
be bound or affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full force and effect or (v) constitute an event of default under any material
agreement by which Borrower is bound. Borrower is not in default under any
agreement to which it is a party or by which it is bound in which the default
could reasonably be expected to have a material adverse effect on Borrower’s
business.

5.2 Collateral. Borrower has good title to, has rights in, and the power to
transfer each item of the Collateral upon which it purports to grant a Lien
hereunder, free and clear of any and all Liens except Permitted Liens. Borrower
has no deposit accounts other than the deposit accounts with Bank, the deposit
accounts, if any described in the Perfection Certificate delivered to Bank in
connection herewith, or of which Borrower has given Bank notice and taken such
actions as are required by Bank to give Bank a perfected security interest
therein. The Accounts are bona fide, existing obligations of the Account
Debtors.

The Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate. None of
the components of the Collateral shall be maintained at locations other than as
provided in the Perfection Certificate or as permitted pursuant to Section 7.2.
In the event that Borrower, after the date hereof, intends to store or otherwise
deliver any portion of the Collateral to a landlord or bailee, then Borrower
will first receive the written consent of Bank and, at Bank’s request, shall use
commercially reasonable efforts to have such landlord or bailee execute and
deliver a landlord’s consent or bailee waiver, as applicable, in form and
substance satisfactory to Bank in its sole discretion.

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

Borrower is the sole owner of the Intellectual Property which it owns or
purports to own except for (a) licenses granted to its customers in the ordinary
course of business, (b) over-the-counter software that is commercially available
to the public, and (c) material Intellectual Property licensed to Borrower and
noted on the Perfection Certificate. To the best of Borrower’s knowledge,
(i) each Patent which it owns or purports to own and which is material to
Borrower’s business is valid and enforceable, (ii) there are no facts which
would render any Patent application within the Intellectual Property which it
owns or purports to own and which is material to Borrower’s business, if and
when issued, invalid or unenforceable, and (iii) no part of the Intellectual
Property which Borrower owns or purports to own and which is material to
Borrower’s business has been judged invalid or unenforceable, in whole or in
part. To the best of Borrower’s knowledge, no claim has been made that any part
of the Intellectual Property violates the rights of any third party, except to
the extent such claim would not reasonably be expected to have a material
adverse effect on Borrower’s business.

Except as noted on the Perfection Certificate, as of the Effective Date and as
and when required by Section 3.2 hereof, Borrower is not a party to, nor is it
bound by, any Restricted License.

5.3 Accounts Receivable; Inventory. For any Eligible Account in any Borrowing
Base Certificate, all statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing such Eligible Accounts are
and shall be true and correct and all such invoices, instruments and other
documents, and all of Borrower’s Books are genuine and in all respects what they
purport to be. During Stage 2, upon the occurrence and during the continuance of
an Event of Default, Bank may notify any Account Debtor owing Borrower money of
Bank’s security interest in such funds and verify the amount of such Eligible
Account. All sales and other transactions underlying or giving rise to each
Eligible Account shall comply in all material respects with all applicable laws
and governmental rules and regulations. Borrower has no knowledge of any actual
or imminent Insolvency Proceeding of any Account Debtor whose accounts are
Eligible Accounts in any Borrowing Base Certificate. To the best of Borrower’s
knowledge, all signatures and endorsements on all documents, instruments, and
agreements relating to all Eligible Accounts are genuine, and all such
documents, instruments and agreements are legally enforceable in accordance with
their terms.

 

-8-

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

5.4 Litigation. Except as noted on the Perfection Certificate, as of the
Effective Date and as and when required by Section 3.2 hereof, there are no
actions or proceedings pending or, to the knowledge of the Responsible Officers,
threatened in writing by or against Borrower or any of its Subsidiaries
involving more than, individually or in the aggregate, $1,000,000.

5.5 Financial Condition. All consolidated financial statements for Borrower and
any of its Subsidiaries delivered to Bank fairly present in all material
respects Borrower’s consolidated financial condition and Borrower’s consolidated
results of operations. As of the Effective Date and as and when required by
Section 3.2 hereof, there has not been any material deterioration in Borrower’s
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.

5.6 Solvency. The fair salable value of Borrower’s assets (including goodwill
minus disposition costs) exceeds the fair value of its liabilities; Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.

5.7 Regulatory Compliance. Borrower is not an “investment company” or a company
“controlled” by an “investment company” under the Investment Company Act of
1940, as amended. Borrower is not engaged as one of its important activities in
extending credit for margin stock (under Regulations X, T and U of the Federal
Reserve Board of Governors). Borrower has complied in all material respects with
the Federal Fair Labor Standards Act, the rules and regulations promulgated by
the U.S. Food and Drug Administration and the U.S. Food, Drug and Cosmetic Act.
Neither Borrower nor any of its Subsidiaries is a “holding company” or an
“affiliate” of a “holding company” or a “subsidiary company” of a “holding
company” as each term is defined and used in the Public Utility Holding Company
Act of 2005. Borrower has not violated any laws, ordinances or rules, the
violation of which could reasonably be expected to have a material adverse
effect on its business. None of Borrower’s or any of its Subsidiaries’
properties or assets has been used by Borrower or any Subsidiary or, to the best
of Borrower’s knowledge, by previous Persons, in disposing, producing, storing,
treating, or transporting any hazardous substance other than legally. Borrower
and each of its Subsidiaries have obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all Government Authorities the lack of which could reasonably be expected to
have a material adverse effect on Borrower’s business.

5.8 Subsidiaries; Investments. Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments.

5.9 Tax Returns and Payments; Pension Contributions. Borrower has timely filed
all required tax returns and reports (except such returns or reports related to
taxes as may be due or owing in an amount less than $100,000 in the aggregate),
and Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower (except such returns or
reports related to taxes as may be due or owing in an amount less than $100,000
in the aggregate). Borrower may defer payment of any contested taxes, provided
that Borrower (a) in good faith contests its obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted,
(b) notifies Bank in writing of the commencement of, and any material
development in, the proceedings, (c) posts bonds or takes any other steps
required to prevent the governmental authority levying such contested taxes from
obtaining a Lien upon any of the Collateral that is other than a “Permitted
Lien”. Borrower is unaware of any claims or adjustments proposed for any of
Borrower’s prior tax years which could result in additional taxes becoming due
and payable by Borrower. Borrower has paid all amounts necessary to fund all
present pension, profit sharing and deferred compensation plans in accordance
with their terms, and Borrower has not withdrawn from participation in, and has
not permitted partial or complete termination of, or permitted the occurrence of
any other event with respect to, any such plan which could reasonably be
expected to result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or its successors or any other governmental
agency.

5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions
solely as working capital and to fund its general business requirements and not
for personal, family, household or agricultural purposes.

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

 

-9-

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

5.12 Definition of “Knowledge.” For purposes of the Loan Documents, whenever a
representation or warranty is made to Borrower’s knowledge or awareness, to the
“best of” Borrower’s knowledge, or with a similar qualification, knowledge or
awareness means the actual knowledge, after reasonable investigation, of the
Responsible Officers.

 

  6 AFFIRMATIVE COVENANTS

Borrower shall do all of the following:

6.1 Government Compliance. Maintain its and all its Subsidiaries’ legal
existence and good standing in their respective jurisdictions of formation and
maintain qualification in each jurisdiction in which the failure to so qualify
would reasonably be expected to have a material adverse effect on Borrower’s
business or operations. Borrower shall comply, and have each Subsidiary comply,
with all laws, ordinances and regulations to which it is subject, including,
without limitation, regulations of the U.S. Food and Drug Administration and
regulations promulgated pursuant to the U.S. Food, Drug and Cosmetic Act, the
noncompliance with which could have a material adverse effect on Borrower’s
business.

6.2 Financial Statements, Reports, Certificates.

(a) Borrower shall provide Bank with the following:

(i) (A) monthly, within thirty (30) days after each month, a Borrowing Base
Certificate; provided, however, that during a Streamline Reporting Period, such
Borrowing Base Certificate shall not be required; and (B) when Net Liquidity is
less than $7,500,000, weekly, and upon each request for a Credit Extension, a
Transaction Report, together with all applicable schedules attached thereto;

(ii) within thirty (30) days after the end of each month, (A) monthly detailed
accounts receivable agings, aged by invoice date, (B) monthly detailed accounts
payable agings, aged by invoice date, and outstanding or held check registers,
if any, and (C) monthly reconciliations of accounts receivable agings (aged by
invoice date), transaction reports, deferred revenue report and general ledger;
provided, however, that during a Streamline Reporting Period, such detailed
account receivable agings, detailed accounts payable agings, and monthly
reconciliations, transaction reports deferred revenue reports and general ledger
shall not be required;

(iii) as soon as available, and in any event within thirty (30) days after the
end of each month, monthly consolidated and consolidating unaudited financial
statements; provided however, that during a Streamline Reporting Period, such
unaudited financial statements shall be due quarterly, within forty-five
(45) days after the end of each fiscal quarter;

(iv) within thirty (30) days after the end of each month a monthly Compliance
Certificate signed by a Responsible Officer, certifying that as of the end of
such month, Borrower was in full compliance with all of the terms and conditions
of this Agreement, and setting forth calculations showing compliance with the
financial covenants set forth in this Agreement and such other information as
Bank shall reasonably request, including, without limitation, a statement that
at the end of such month there were no held checks; provided however, that
during a Streamline Reporting Period, such Compliance Certificate shall be due
quarterly, within forty-five (45) days after the end of each fiscal quarter;

(v) when approved by the Borrower’s board of directors, but in any event not
later than the last day of the Borrower’s fiscal year, (A) annual operating
budgets (including income statements, balance sheets and cash flow statements,
by month) for the upcoming fiscal year of Borrower, and (B) annual financial
projections for the following fiscal year (on a quarterly basis) as approved by
Borrower’s board of directors, together with any related business forecasts used
in the preparation of such annual financial projections;

(vi) as soon as available, and in any event within one hundred fifty (150) days
following the end of Borrower’s fiscal year, (x) annual consolidating financial
statements and (y) annual consolidated financial statements certified by, and
with an unqualified opinion of, independent certified public accountants
acceptable to Bank;

 

-10-

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

(vii) within five (5) days of delivery, copies of all statements, reports and
notices made available to Borrower’s security holders or to any holders of
Subordinated Debt;

(viii) a prompt report of any legal actions pending or threatened in writing
against Borrower or any of its Subsidiaries that could reasonably be expected to
result in damages or costs to Borrower or any of its Subsidiaries of,
individually or in the aggregate, $1,000,000 or more; and

(ix) during Stage 2, within thirty (30) days after the end of each month, and as
requested by Bank, in its reasonable discretion, detailed sell-through reports
from Borrower’s wholesalers and Account Debtors.

(b) Within five (5) days after filing, all reports on Form 10-K, 10-Q and 8-K
filed with the SEC, or a link thereto on Borrower’s or another website on the
Internet.

(c) Prompt written notice of (i) the registration of any Copyright (including
any subsequent ownership right of Borrower in or to any Copyright), Patent or
Trademark not previously disclosed to Bank, or (ii) Borrower’s knowledge of an
event that materially adversely affects the value of the Intellectual Property.

6.3 Accounts Receivable.

(a) Schedules and Documents Relating to Accounts. Borrower shall deliver to Bank
transaction reports and schedules of collections, as provided in Section 6.2, on
Bank’s standard forms; provided, however, that Borrower’s failure to execute and
deliver the same shall not affect or limit Bank’s Lien and other rights in all
of Borrower’s Accounts, nor shall Bank’s failure to advance or lend against a
specific Account affect or limit Bank’s Lien and other rights therein. If
requested by Bank, Borrower shall furnish Bank with copies (or, at Bank’s
request after the occurrence of an Event of Default, originals) of all
contracts, orders, invoices, and other similar documents, and all shipping
instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Accounts. In addition, Borrower shall deliver to Bank, on its request, the
originals of all instruments, chattel paper, security agreements, guarantees and
other documents and property evidencing or securing any Accounts, in the same
form as received, with all necessary endorsements, and copies of all credit
memos.

(b) Disputes. Borrower shall promptly notify Bank of all disputes or claims
relating to Accounts in excess of $50,000. Borrower may forgive (completely or
partially), compromise, or settle any Account for less than payment in full, or
agree to do any of the foregoing so long as (i) Borrower does so in good faith,
in a commercially reasonable manner, in the ordinary course of business, in
arm’s-length transactions, and reports the same to Bank in the regular reports
provided to Bank; (ii) no Default or Event of Default has occurred and is
continuing; and (iii) after taking into account all such discounts, settlements
and forgiveness, the total outstanding Advances will not exceed the Availability
Amount.

(c) Collection of Accounts. Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing. All payments on, and proceeds of, Accounts shall be deposited
directly by the applicable Account Debtor into a lockbox account, or such other
“blocked account” as Bank may specify, pursuant to a blocked account agreement
in form and substance satisfactory to Bank in its sole discretion. Whether or
not an Event of Default has occurred and is continuing, Borrower shall hold all
payments on, and proceeds of, Accounts in trust for Bank, and Borrower shall
promptly deliver all such payments and proceeds to Bank in their original form,
duly endorsed, to be applied to the Obligations pursuant to the terms of
Section 9.4 hereof; provided, however, that at any time Net Liquidity is greater
than $7,500,000, provided no Event of Default has occurred, such payments and
proceeds shall be transferred by Bank to an account of Borrower maintained at
Bank.

(d) Returns. Provided no Event of Default has occurred and is continuing, if in
any fiscal quarter of the Borrower, Inventory returns by Account Debtors to
Borrower exceed [***] percent ([***]%) of the current fiscal quarter’s
cumulative gross sales for all Accounts Debtors in such current fiscal quarter,
Borrower shall promptly (i) determine the reason for such return, (ii) issue a
credit memorandum to the Account Debtor in the appropriate amount, and
(iii) provide a copy of such credit memorandum to Bank, upon request from Bank.
In the event any attempted return occurs after the occurrence and during the
continuance of any Event of Default, Borrower shall hold the returned Inventory
in trust for Bank, and immediately notify Bank of the return of the Inventory.

 

** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

-11-

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

(e) Verification. Bank may, from time to time while in Stage 2, verify directly
with the respective Account Debtors the validity, amount and other matters
relating to the Accounts, either in the name of Borrower or Bank or such other
name as Bank may choose.

(f) No Liability. Bank shall not be responsible or liable for any shortage or
discrepancy in, damage to, or loss or destruction of, any goods, the sale or
other disposition of which gives rise to an Account, or for any error, act,
omission, or delay of any kind occurring in the settlement, failure to settle,
collection or failure to collect any Account, or for settling any Account in
good faith for less than the full amount thereof, nor shall Bank be deemed to be
responsible for any of Borrower’s obligations under any contract or agreement
giving rise to an Account. Nothing herein shall, however, relieve Bank from
liability for its own gross negligence or willful misconduct.

6.4 Remittance of Proceeds. Except as otherwise provided in Section 6.3(c),
deliver, in kind, all proceeds arising from the disposition of any Collateral to
Bank in the original form in which received by Borrower not later than the
following Business Day after receipt by Borrower, to be applied to the
Obligations pursuant to the terms of Section 9.4 hereof; provided that, if no
Default or Event of Default has occurred and is continuing, Borrower shall not
be obligated to remit to Bank the proceeds of the sale of worn out or obsolete
Equipment disposed of by Borrower in good faith in an arm’s length transaction
for an aggregate purchase price of $1,000,000 or less (for all such transactions
in any fiscal year). Borrower agrees that, until such proceeds are delivered to
Bank, if required hereunder, it will not commingle such proceeds of Collateral
with any of Borrower’s other funds or property, but will hold such proceeds
separate and apart from such other funds and property and in an express trust
for Bank until delivered to Bank. Nothing in this Section limits the
restrictions on disposition of Collateral set forth elsewhere in this Agreement.

6.5 Taxes; Pensions; Withholding. Subject to Section 5.9, timely file, and
require each of its Subsidiaries to timely file, all required tax returns and
reports and timely pay, and require each of its Subsidiaries to timely pay, all
foreign, federal, state and local taxes, assessments, deposits and contributions
owed by Borrower and each of its Subsidiaries, except for deferred payment of
any taxes contested pursuant to the terms of Section 5.9 hereof, and shall
deliver to Bank, on demand, appropriate certificates attesting to such payments,
and pay all amounts necessary to fund all present pension, profit sharing and
deferred compensation plans in accordance with their terms.

6.6 Access to Collateral; Books and Records. At reasonable times, on one
(1) Business Day’s notice (provided no notice is required if an Event of Default
has occurred and is continuing), Bank, or its agents, shall have the right, on a
semi-annual basis (or more frequently as conditions warrant, in Bank’s sole
discretion), to inspect the Collateral and the right to audit and copy
Borrower’s Books. So long as no Event of Default has occurred and is continuing,
up to two of the foregoing inspections and audits in any fiscal year shall be at
Borrower’s expense, and the charge therefor shall be $850 per person per day (or
such higher amount as shall represent Bank’s then-current standard charge for
the same), plus reasonable out-of-pocket expenses. In the event Borrower and
Bank schedule an audit more than ten (10) days in advance, and Borrower cancels
or seeks to reschedules the audit with less than ten (10) days written notice to
Bank, then (without limiting any of Bank’s rights or remedies), Borrower shall
pay Bank a fee of $1,000 plus any out-of-pocket expenses incurred by Bank to
compensate Bank for the anticipated costs and expenses of the cancellation or
rescheduling.

6.7 Insurance. Keep its business and the Collateral insured for risks and in
amounts standard for companies in Borrower’s industry and location and as Bank
may reasonably request. Insurance policies shall be in a form, with companies,
and in amounts that are reasonably satisfactory to Bank. All property policies
shall have a lender’s loss payable endorsement showing Bank as the an additional
insured and lender loss payee and waive subrogation against Bank and shall
provide that the insurer must give Bank at least twenty (20) days notice before
canceling, amending, or declining to renew its policy. All liability policies
shall show, or have endorsements showing, Bank as an additional insured, and all
such policies (or the loss payable and additional insured endorsements) shall
provide that the insurer shall give Bank at least twenty (20) days notice before
canceling, amending, or declining to renew its policy. At Bank’s request,
Borrower shall deliver certified copies of policies and evidence of all premium
payments. Proceeds payable under any policy shall, at Bank’s option, be payable
to Bank on account of the Obligations. Notwithstanding the foregoing, (a) so
long as no Event of Default has occurred and is continuing, Borrower shall have
the option of applying the proceeds of any casualty policy up to $1,000,000 with
respect to any loss toward the replacement or repair of destroyed or damaged
property; provided that any such replaced or repaired property (i) shall be of
equal or like value as the replaced or repaired Collateral and (ii) shall be
deemed Collateral in which Bank has been granted a first priority security
interest, and (b) after the occurrence and

 

-12-

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

during the continuance of an Event of Default, all proceeds payable under such
casualty policy shall, at the option of Bank, be payable to Bank on account of
the Obligations. If Borrower fails to obtain insurance as required under this
Section 6.7 or to pay any amount or furnish any required proof of payment to
third persons and Bank, Bank may make all or part of such payment or obtain such
insurance policies required in this Section 6.7, and take any action under the
policies Bank deems prudent.

6.8 Operating Accounts.

(a) Within sixty (60) days after the Effective Date, maintain its and its
Subsidiaries’, if any, primary depository, operating accounts and securities
accounts with Bank and Bank’s affiliates with all excess funds maintained at or
invested through Bank or an affiliate of Bank, which accounts shall represent at
least fifty percent (50%) of the dollar value of Borrower’s and such
Subsidiaries accounts at all financial institutions.

(b) Provide Bank five (5) days prior-written notice before establishing any
Collateral Account at or with any bank or financial institution other than Bank
or Bank’s Affiliates. For each Collateral Account that Borrower at any time
maintains, Borrower shall cause the applicable bank or financial institution
(other than Bank) at or with which any Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Bank’s Lien in such Collateral
Account in accordance with the terms hereunder which Control Agreement may not
be terminated without the prior written consent of Bank, including, without
limitation, Borrower’s existing Collateral Accounts maintained with (i) PNC
Bank, National Association; and (ii) Deutsche Bank Investment. The provisions of
the previous sentence shall not apply to (x) deposit accounts exclusively used
for payroll, payroll taxes and other employee wage and benefit payments to or
for the benefit of Borrower’s employees and identified to Bank by Borrower as
such any (y) all expenses incurred in the ordinary course of business by
Auxilium UK, Ltd. (“Auxilium UK”), a wholly owned Subsidiary of Auxilium and
paid by Borrower, or the transfer of funds by Borrower to Auxilium UK for the
payment of such expenses incurred in the ordinary course of business.

(c) Within five (5) Business Days, and in any event prior to the initial Credit
Extension as described in Section 3.1 hereof, establish operating accounts at
Bank in a minimum amount of not less than an aggregate of $20,000,000,
including, without limitation, the Designated Deposit Account and such other
Collateral Accounts as Bank shall require, in its sole discretion.

6.9 Financial Covenants.

Maintain the following, with all calculations computed on a consolidated basis
with respect to Borrower and its Subsidiaries

(a) Adjusted Quick Ratio. A minimum Adjusted Quick Ratio tested monthly as of
the last day of each fiscal month; provided, however, that during a Streamline
Reporting Period, tested quarterly, as of the last day of each fiscal quarter,
of not less than the following:

 

Testing Period Ended

   Minimum Adjusted
Quick Ratio

July 31, 2009

   [***]

August 31, 2009

   [***]

September 30, 2009

   [***]

October 31, 2009

   [***]

November 30, 2009

   [***]

December 31, 2009

   [***]

January 31, 2010

   [***]

February 28, 2010

   [***]

March 31, 2010

   [***]

April 30, 2010

   [***]

May 31, 2010

   [***]

June 30, 2010

   [***]

July 31, 2010

   [***]

August 31, 2010

   [***]

September 30, 2010

   [***]

October 31, 2010, and as of the last day of each testing period thereafter

   [***]

 

** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

-13-

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

(b) Profitability; Maximum Losses. Maintain (i) [***],

(ii) [***],

(iii) [***],

(iv) [***],

(v) [***]; and

(vi) [***].

6.10 Protection and Registration of Intellectual Property Rights.

(a) (i) Use commercially reasonable efforts to protect, defend and maintain the
validity and enforceability of its Intellectual Property; (ii) promptly advise
Bank in writing of material infringements of its Intellectual Property; and
(iii) not allow any Intellectual Property material to Borrower’s business to be
abandoned, forfeited or dedicated to the public without Bank’s written consent.

(b) If Borrower (i) obtains any Patent, registered Trademark, registered
Copyright, registered mask work, or any pending application for any of the
foregoing, whether as owner, licensee or otherwise, or (ii) applies for any
Patent or the registration of any Trademark, then Borrower shall promptly
provide written notice thereof to Bank and shall execute such intellectual
property security agreements and other documents and take such other actions as
Bank shall request in its good faith business judgment to perfect and maintain a
first priority perfected security interest in favor of Bank in such property. If
Borrower decides to register any Copyrights or mask works in the United States
Copyright Office, Borrower shall: (x) provide Bank with at least fifteen
(15) days prior written notice of Borrower’s intent to register such Copyrights
or mask works together with a copy of the application it intends to file with
the United States Copyright Office (excluding exhibits thereto); (y) execute an
intellectual property security agreement and such other documents and take such
other actions as Bank may request in its good faith business judgment to perfect
and maintain a first priority perfected security interest in favor of Bank in
the Copyrights or mask works intended to be registered with the United States
Copyright Office; and (z) record such intellectual property security agreement
with the United States Copyright Office contemporaneously with filing the
Copyright or mask work application(s) with the United States Copyright Office.
Borrower shall promptly provide to Bank copies of all applications that it files
for Patents or for the registration of Trademarks, Copyrights or mask works,
together with evidence of the recording of the intellectual property security
agreement necessary for Bank to perfect and maintain a first priority security
interest in such property.

(c) Provide written notice to Bank within thirty (30) days of entering or
becoming bound by any Restricted License (other than over-the-counter software
that is commercially available to the public). Borrower shall take such steps as
Bank requests to obtain the consent of, or waiver by, any person whose consent
or waiver is necessary for (i) any Restricted License to be deemed

 

** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

-14-

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

“Collateral” and for Bank to have a security interest in it that might otherwise
be restricted or prohibited by law or by the terms of any such Restricted
License, whether now existing or entered into in the future, and (ii) Bank to
have the ability in the event of a liquidation of any Collateral to dispose of
such Collateral in accordance with Bank’s rights and remedies under this
Agreement and the other Loan Documents.

6.11 Litigation Cooperation. From the date hereof and continuing through the
termination of this Agreement, make available to Bank, without expense to Bank,
Borrower and its officers, employees and agents and Borrower’s Books, to the
extent that Bank may deem them reasonably necessary to prosecute or defend any
third-party suit or proceeding instituted by or against Bank with respect to any
Collateral or relating to Borrower.

6.12 Creation/Acquisition of Subsidiaries. Notwithstanding and without limiting
the negative covenant contained in Section 7.3 hereof, in the event Borrower or
any Subsidiary creates or acquires any Subsidiary, Borrower and such Subsidiary
shall promptly notify Bank of the creation or acquisition of such new Subsidiary
and, at Bank’s request, in its sole discretion, take all such action as may be
reasonably required by Bank to cause each such Subsidiary to, in Bank’s sole
discretion, become a co-Borrower or guarantor under the Loan Documents and grant
a continuing pledge and security interest in and to the assets of such
Subsidiary (substantially as described on Exhibit A hereto); and Borrower shall
grant and pledge to Bank a perfected security interest in the stock, units or
other evidence of ownership of each Subsidiary.

6.13 Further Assurances. Execute any further instruments and take further action
as Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral
or to effect the purposes of this Agreement. Deliver to Bank, within five
(5) days after the same are sent or received, copies of all material
correspondence, reports, documents and other material filings with any
Governmental Authority regarding material compliance with or maintenance of
Governmental Approvals or Requirements of Law that could reasonably be expected
to have a material adverse effect on any of the Governmental Approvals or
otherwise on the operations of Borrower or any of its Subsidiaries.

6.14 Post-Closing Requirements. Use commercially reasonable efforts to provide
Bank, within thirty (30) days after the Effective Date (or such later date as
Bank may determine, in its reasonable discretion), with:

(a) a landlord’s consent in favor of Bank for the following leased locations by
the respective landlord thereof, together with the duly executed original
signatures thereto:

 

  (I) 40 Valley Stream Parkway, Malvern, Pennsylvania 19355;

 

  (II) 50 Valley Stream Parkway, Malvern, Pennsylvania 19355;

 

  (III) 102 Witmer Road, Horsham, Pennsylvania 19044; and

 

  (IV) 201 Witmer Road, Horsham, Pennsylvania 19044.

(b) a bailee’s/warehouseman’s waiver executed by each bailee of Borrower as
required by Bank, in favor of Bank, including, without limitation:

 

  (I) DPT Laboratories, Ltd., 307 East Josephine Street, San Antonio, Texas
78215;

 

  (II) Hollister-Stier Laboratories, LLC, 3525 North Regal Street, Spokane,
Washington 99207-5788; and

 

  (III) Integrated Commercialization Solutions, Inc., 3101 Gaylord Parkway,
Frisco, Texas 75034.

(c) duly executed original signatures to the Control Agreements from PNC Bank,
Deutsche Bank Investment and such other financial institutions as Bank may
require, in its sole discretion.

6.15 Changes in Senior Management. Upon the departure of any member of Senior
Management from Auxilium, (i) give the Bank prompt notice of such departure,
(ii) provide the Bank with prompt notice as to the officer or employee who will
be acting in the capacity of such office for purposes of taking actions under
the Loan Documents, and (iii) keep the Bank reasonably informed, and in any
event no less than monthly, as to the Borrower’s efforts to fill such position
or its determination as to the officers or employees who will fulfill the duties
otherwise associated with such office.

 

-15-

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

  7 NEGATIVE COVENANTS

Borrower shall not do any of the following without Bank’s prior written consent:

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

7.2 Changes in Business, Business Locations or Dissolutions. (a) Engage in or
permit any of its Subsidiaries, if any, to engage in any business other than the
businesses currently engaged in by Borrower and such Subsidiary, as applicable,
or reasonably related thereto; or (b) liquidate or dissolve.

Borrower shall not, without at least thirty (30) days prior written notice to
Bank: (1) add any new offices or business locations, including warehouses
(unless such new offices or business locations contain less than $250,000 in
Borrower’s assets or property) or deliver any portion of the Collateral valued,
individually or in the aggregate, in excess of $250,000 to a landlord or bailee
at a location other than to a landlord or bailee and at a location already
disclosed in the Perfection Certificate and subject to the requirement that
Borrower use commercially reasonable efforts to obtain a landlord’s consent or
bailee waiver, as applicable, in form and substance acceptable to Bank, in its
sole discretion, (2) change its jurisdiction of organization, (3) change its
organizational structure or type, (4) change its legal name, or (5) change any
organizational number (if any) assigned by its jurisdiction of organization. If
Borrower intends to deliver any portion of the Collateral valued, individually
or in the aggregate, in excess of $250,000 to a landlord or bailee at a location
other than as provided in the Perfection Certificate, Borrower will first
receive the written consent of Bank, and such landlord or bailee shall execute
and deliver a landlord’s consent or bailee waiver, as applicable, in form and
substance satisfactory to Bank in its sole discretion.

7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person. A Subsidiary may merge or
consolidate into another Subsidiary or into Borrower.

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

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

7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except
pursuant to the terms of Section 6.8(b) hereof.

7.7 Distributions; Investments. (a) Pay any dividends or make any distribution
or payment or redeem, retire or purchase any capital stock per fiscal year,
except (i) in accordance with the Borrower’s board – approved 2004 Equity
Compensation Plan, as amended and (ii) dividends or distributions made by any
Subsidiary to Borrower; or (b) directly or indirectly make any Investment
(including, without limitation, any additional Investment in any Subsidiary)
other than Permitted Investments, or permit any of its Subsidiaries to do so.

 

-16-

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

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower, except for
(i) transactions that are in the ordinary course of Borrower’s business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated Person and
(ii) payment by the Borrower of expenses of Auxilium UK incurred in the ordinary
course of business, or the transfer of funds by Borrower to Auxilium UK for the
payment of such expenses incurred in the ordinary course of business.

7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt,
except under the terms of the subordination, intercreditor, or other similar
agreement to which such Subordinated Debt is subject, or (b) amend any provision
in any document relating to the Subordinated Debt which would increase the
amount thereof or adversely affect the subordination thereof to Obligations owed
to Bank.

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

 

  8 EVENTS OF DEFAULT

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

8.1 Payment Default. Borrower fails to (a) make any payment of principal or
interest on any Credit Extension on its due date, or (b) pay any other
Obligations within three (3) Business Days after such Obligations are due and
payable (which three (3) Business Day cure period shall not apply to payments
due on the Revolving Line Maturity Date). During the cure period, the failure to
make or pay any payment specified under clause (a) or (b) hereunder is not an
Event of Default (but no Credit Extension will be made during the cure period);

8.2 Covenant Default.

(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.4,
6.5, 6.6, 6.7, 6.8, 6.9, 6.10, or 6.11, or violates any covenant in Section 7;
or

(b) Borrower fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant or agreement contained in this Agreement or any
Loan Documents, and as to any default (other than those specified in this
Section 8) under such other term, provision, condition, covenant or agreement
that can be cured, has failed to cure the default within thirty (30) days after
the occurrence thereof; provided, however, that if the default cannot by its
nature be cured within the thirty (30) day period or cannot after diligent
attempts by Borrower be cured within such thirty (30) day period, and such
default is likely to be cured within a reasonable time, then Borrower shall have
an additional period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the failure
to cure the default shall not be deemed an Event of Default (but no Credit
Extensions shall be made during such cure period). Cure periods provided under
this section shall not apply, among other things, to financial covenants or any
other covenants set forth in clause (a) above;

8.3 Material Adverse Change. A Material Adverse Change occurs;

8.4 Attachment; Levy; Restraint on Business.

(a) (i) The service of process seeking to attach, by trustee or similar process,
any funds of Borrower or of any entity under the control of Borrower (including
a Subsidiary) on deposit or otherwise maintained with Bank or any Bank
Affiliate, or (ii) a notice of lien or levy is filed against any of Borrower’s
assets by any government agency, and the same under subclauses (i) and
(ii) hereof are not, within ten (10) days after the occurrence thereof,
discharged or stayed (whether through the posting of a bond or otherwise);
provided, however, no Credit Extensions shall be made during any ten (10) day
cure period; or

 

-17-

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

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

8.5 Insolvency. (a) Borrower is unable to pay its debts (including trade debts)
as they become due or otherwise becomes insolvent; (b) Borrower begins an
Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower
and not dismissed or stayed within forty-five (45) days (but no Credit
Extensions shall be made while of any of the conditions described in clause
(a) exist and/or until any Insolvency Proceeding is dismissed);

8.6 Other Agreements. There is, under any agreement to which Borrower is a party
with a third party or parties, (a) any default resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount individually or in the aggregate in excess of
$1,000,000; or (b) any default by Borrower, the result of which could have a
material adverse effect on Borrower’s business;

8.7 Judgments. One or more final judgments, orders, or decrees for the payment
of money in an amount, individually or in the aggregate, of at least $1,000,000
(not covered by independent third-party insurance as to which liability has been
accepted by such insurance carrier) shall be rendered against Borrower and the
same are not, within ten (10) days after the entry thereof, discharged or
execution thereof stayed or bonded pending appeal, or such judgments are not
discharged prior to the expiration of any such stay (provided that no Credit
Extensions will be made prior to the discharge, stay, or bonding of such
judgment, order, or decree);

8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any
representation, warranty, or other statement now or later in this Agreement, any
Loan Document or in any writing delivered to Bank, and such representation,
warranty, or other statement is incorrect in any material respect when made;

8.9 Subordinated Debt. Any document, instrument, or agreement evidencing any
Subordinated Debt shall for any reason be revoked or invalidated or otherwise
cease to be in full force and effect, any Person shall be in breach thereof or
contest in any manner the validity or enforceability thereof or deny that it has
any further liability or obligation thereunder, or the Obligations shall for any
reason be subordinated or shall not have the priority contemplated by this
Agreement; or

8.10 Governmental Approvals. Any Governmental Approval shall have been
(a) revoked, rescinded, suspended, modified in an adverse manner or not renewed
in the ordinary course for a full term or (b) subject to any decision by a
Governmental Authority that designates a hearing with respect to any
applications for renewal of any of such Governmental Approval or that could
result in the Governmental Authority taking any of the actions described in
clause (a) above, and such decision or such revocation, rescission, suspension,
modification or non-renewal (i) has, or could reasonably be expected to have, a
Material Adverse Change, or (ii) could reasonably be expected to cause a
Material Adverse Change on the legal qualifications of Borrower or any of its
Subsidiaries to hold such Governmental Approval in any applicable jurisdiction
and such revocation, rescission, suspension, modification or non-renewal could
reasonably be expected cause a Material Adverse Change in the status of or legal
qualifications of Borrower or any of its Subsidiaries to hold any Governmental
Approval in any other jurisdiction.

 

  9 BANK’S RIGHTS AND REMEDIES

9.1 Rights and Remedies. While an Event of Default occurs and continues Bank
may, without notice or demand, do any or all of the following:

(a) declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);

(b) stop advancing money or extending credit for Borrower’s benefit under this
Agreement or under any other agreement between Borrower and Bank;

 

-18-

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

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

(d) terminate any FX Forward Contracts;

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

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

(g) apply to the Obligations any (i) balances and deposits of Borrower it holds,
or (ii) any amount held by Bank owing to or for the credit or the account of
Borrower;

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

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

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

(k) exercise all rights and remedies available to Bank under the Loan Documents
or at law or equity, including all remedies provided under the Code (including
disposal of the Collateral pursuant to the terms thereof).

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

9.3 Protective Payments. If Borrower fails to obtain the insurance called for by
Section 6.7 or fails to pay any premium thereon or fails to pay any other amount
which Borrower is obligated to pay under this Agreement or any other Loan
Document, Bank may obtain such insurance or make such payment, and all amounts
so paid by Bank are Bank Expenses and immediately due and payable, bearing
interest at the then highest rate applicable to the Obligations, and secured by
the Collateral. Bank will make reasonable efforts to provide Borrower with
notice of Bank obtaining such insurance at the time it is obtained or within a
reasonable time thereafter. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank’s waiver of any Event of Default.

 

-19-

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

9.4 Application of Payments and Proceeds. Unless an Event of Default has
occurred and is continuing, Bank may apply any funds in its possession, whether
from Borrower account balances, payments, or proceeds realized as the result of
any collection of Accounts or other disposition of the Collateral, first, to
Bank Expenses, including without limitation, the reasonable costs, expenses,
liabilities, obligations and attorneys’ fees incurred by Bank in the exercise of
its rights under this Agreement; second, to the interest due upon any of the
Obligations; and third, to the principal of the Obligations and any applicable
fees and other charges, in such order as Bank shall determine in its sole
discretion. Any surplus shall be paid to Borrower or other Persons legally
entitled thereto; Borrower shall remain liable to Bank for any deficiency. If an
Event of Default has occurred and is continuing, Bank may apply any funds in its
possession, whether from Borrower account balances, payments, proceeds realized
as the result of any collection of Accounts or other disposition of the
Collateral, or otherwise, to the Obligations in such order as Bank shall
determine in its sole discretion. Any surplus shall be paid to Borrower or to
other Persons legally entitled thereto; Borrower shall remain liable to Bank for
any deficiency. If Bank, in its good faith business judgment, directly or
indirectly enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Bank shall have the option, exercisable at
any time, of either reducing the Obligations by the principal amount of the
purchase price or deferring the reduction of the Obligations until the actual
receipt by Bank of cash therefor.

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

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

9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice
of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.

 

  10 NOTICES

All notices, consents, requests, approvals, demands, or other communication
(collectively, “Communication”), other than Advance requests made pursuant to
Section 3.4, by any party to this Agreement or any other Loan Document must be
in writing and be delivered or sent by facsimile at the addresses or facsimile
numbers listed below. Bank or Borrower may change its notice address by giving
the other party written notice thereof. Each such Communication shall be deemed
to have been validly served, given, or delivered: (a) upon the earlier of actual
receipt and three (3) Business Days after deposit in the U.S. mail, registered
or certified mail, return receipt requested, with proper postage prepaid; (b)
upon transmission, when sent by facsimile transmission (with such facsimile
promptly confirmed by delivery of a copy by personal delivery or United States
mail as otherwise provided in this Section 10); (c) one (1) Business Day after
deposit with a reputable overnight courier with all charges prepaid; or (d) when
delivered, if hand-delivered by messenger, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number indicated
below. Advance requests made pursuant to Section 3.4 must be in writing and may
be in the form of electronic mail, delivered to Bank by Borrower at the e-mail
address of Bank provided below and shall be deemed to have been validly served,
given, or delivered when sent (with such electronic mail promptly confirmed by
delivery of a copy by personal delivery or United States mail as otherwise
provided in this Section 10). Bank or Borrower may change its address, facsimile
number, or electronic mail address by giving the other party written notice
thereof in accordance with the terms of this Section 10.

 

-20-

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

If to Borrower:   

Auxilium Pharmaceuticals, Inc.

Auxilium International Holdings, Inc.

Auxilium US Holdings, LLC

c/o Auxilium Pharmaceuticals, Inc.

40 Valley Stream Parkway

Malvern, Pennsylvania 19355

Attn: Jennifer Evans Stacey, Esquire

Telephone: (484) 321-5903

Facsimile: (484) 321-5996

Email: jstacey@auxilium.com

with a copy to:   

Auxilium Pharmaceuticals, Inc.

Auxilium International Holdings, Inc.

Auxilium US Holdings, LLC

c/o Auxilium Pharmaceuticals, Inc.

40 Valley Stream Parkway

Malvern, Pennsylvania 19355

Attn: James Fickenscher

Telephone: (484) 321-5902

Facsimile: (484) 321-2202

Email: jfickenscher@auxilium.com

and a copy to:   

Morgan, Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103

Attn: Michael J. Pedrick, Esquire

Telephone: (215) 963-4808

Fax: (215) 963-5001

Email: mpedrick@morganlewis.com

If to Bank:   

Silicon Valley Bank

100 Matsonford Road, Building 5, Suite 555

Radnor, Pennsylvania 19087

Attn: Mr. Denny Boyle

Fax: (610) 971-2063

Email: dboyle@svb.com

with a copy to:   

Silicon Valley Bank

One Newton Executive Park, Suite 200

2221 Washington Street, Newton, MA 02462

Attn: Mr. Jay T. Tracy

Fax: (617) 527-0177

Email: jtracy@svb.com

with a copy to:   

Riemer & Braunstein LLP

Three Center Plaza

Boston, Massachusetts 02108

Attn: Charles W. Stavros, Esquire

Fax: (617) 880-3456

Email: cstavros@riemerlaw.com

 

-21-

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

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

Massachusetts law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Massachusetts; provided, however, that nothing
in this Agreement shall be deemed to operate to preclude Bank from bringing suit
or taking other legal action in any other jurisdiction to realize on the
Collateral or any other security for the Obligations, or to enforce a judgment
or other court order in favor of Bank. Borrower expressly submits and consents
in advance to such jurisdiction in any action or suit commenced in any such
court, and Borrower hereby waives any objection that it may have based upon lack
of personal jurisdiction, improper venue, or forum non conveniens and hereby
consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in
Section 10 of this Agreement and that service so made shall be deemed completed
upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days
after deposit in the U.S. mails, proper postage prepaid. NOTWITHSTANDING
ANYTHING TO THE CONTRARY SET FORTH HEREINABOVE, BANK SHALL SPECIFICALLY HAVE THE
RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS NECESSARY OR APPROPRIATE IN
ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE BANK’S RIGHTS AGAINST
BORROWER OR ITS PROPERTY.

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

 

  12 GENERAL PROVISIONS

12.1 Termination Prior to Maturity Date. This Agreement may be terminated prior
to the Revolving Line Maturity Date by Borrower, effective three (3) Business
Days after written notice of termination is given to Bank or if Bank’s
obligation to fund Credit Extensions terminates pursuant to the terms of
Section 2.1.1(b). Notwithstanding any such termination, Bank’s lien and security
interest in the Collateral shall continue until Borrower fully satisfies its
Obligations. If such termination is at Borrower’s election (regardless of the
existence of any Event of Default), Borrower shall pay to Bank, in addition to
the payment of any other expenses or fees then-owing, a termination fee in an
amount equal to (i) if terminated at any time prior to the first anniversary of
the Effective Date, an amount equal to two percent (2.00%) of the total
Revolving Line amount (as increased by any Revolving Line Commitment Increase);
and (ii) if terminated on or at any time after the first anniversary of the
Effective Date, an amount equal to one percent (1.00%) of the total Revolving
Line amount (as increased by any Revolving Line Commitment Increase); provided
that no termination fee shall be charged if the credit facility hereunder is
replaced with a new facility from another division of Silicon Valley Bank. Upon
payment in full of the Obligations under the terms of this Agreement and at such
time as Bank’s obligation to make Credit Extensions has terminated, Bank shall
release its liens and security interests in the Collateral and all rights
therein shall revert to Borrower.

12.2 Successors and Assigns. This Agreement binds and is for the benefit of the
successors and permitted assigns of each party. Borrower may not assign this
Agreement or any rights or obligations under it without Bank’s prior written
consent (which may be granted or withheld in Bank’s discretion). Bank has the
right, (i) with the consent of or notice to Borrower, to sell, transfer, assign,
negotiate, or (ii) without the consent of the Borrower, grant participation in
all or any part of, or any interest in, Bank’s obligations, rights, and benefits
under this Agreement and the other Loan Documents.

12.3 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its
directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank (each, an “Indemnified Person”) harmless
against: (a) all obligations, demands, claims, and liabilities (collectively,
“Claims”) claimed or asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (b) all losses or expenses
(including Bank Expenses) in any way suffered, incurred, or paid by such
Indemnified Person as a result of, following from, consequential to, or arising
from transactions between Bank and Borrower (including reasonable attorneys’
fees and expenses), except for Claims and/or losses directly caused by such
Indemnified Person’s gross negligence or willful misconduct.

 

-22-

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

12.4 Borrower Liability. Any Borrower may, acting singly, request Advances
and/or other Credit Extensions hereunder. Each Borrower hereby appoints the
other as agent for the other for all purposes hereunder, including with respect
to requesting Advances/Credit Extensions hereunder. Each Borrower hereunder
shall be jointly and severally obligated to repay all Advances/Credit Extensions
made hereunder, regardless of which Borrower actually receives said
Advance/Credit Extension, as if each Borrower hereunder directly received all
Advances/Credit Extensions. Each Borrower waives (a) any suretyship defenses
available to it under the Code or any other applicable law, and (b) any right to
require Bank to: (i) proceed against any Borrower or any other person;
(ii) proceed against or exhaust any security; or (iii) pursue any other remedy.
Bank may exercise or not exercise any right or remedy it has against any
Borrower or any security it holds (including the right to foreclose by judicial
or non-judicial sale) without affecting any Borrower’s liability.
Notwithstanding any other provision of this Agreement or other related document,
each Borrower irrevocably waives all rights that it may have at law or in equity
(including, without limitation, any law subrogating Borrower to the rights of
Bank under this Agreement) to seek contribution, indemnification or any other
form of reimbursement from any other Borrower, or any other Person now or
hereafter primarily or secondarily liable for any of the Obligations, for any
payment made by Borrower with respect to the Obligations in connection with this
Agreement or otherwise and all rights that it might have to benefit from, or to
participate in, any security for the Obligations as a result of any payment made
by Borrower with respect to the Obligations in connection with this Agreement or
otherwise. Any agreement providing for indemnification, reimbursement or any
other arrangement prohibited under this Section shall be null and void. If any
payment is made to a Borrower in contravention of this Section, such Borrower
shall hold such payment in trust for Bank and such payment shall be promptly
delivered to Bank for application to the Obligations, whether matured or
unmatured.

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

12.6 Correction of Loan Documents. Bank may correct patent errors and fill in
any blanks in the Loan Documents consistent with the agreement of the parties.

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

12.8 Amendments in Writing; Waiver; Integration. No purported amendment or
modification of any Loan Document, or waiver, discharge or termination of any
obligation under any Loan Document, shall be enforceable or admissible unless,
and only to the extent, expressly set forth in a writing signed by the party
against which enforcement or admission is sought. Without limiting the
generality of the foregoing, no oral promise or statement, nor any action,
inaction, delay, failure to require performance or course of conduct shall
operate as, or evidence, an amendment, supplement or waiver or have any other
effect on any Loan Document. Any waiver granted shall be limited to the specific
circumstance expressly described in it, and shall not apply to any subsequent or
other circumstance, whether similar or dissimilar, or give rise to, or evidence,
any obligation or commitment to grant any further waiver. The Loan Documents
represent the entire agreement about this subject matter and supersede prior
negotiations or agreements. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of the Loan Documents merge into the Loan Documents.

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

12.10 Survival. All covenants, representations and warranties made in this
Agreement continue in full force until this Agreement has terminated pursuant to
its terms and all Obligations (other than inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the termination of this
Agreement) have been paid in full and satisfied. The obligation of Borrower in
Section 12.3 to indemnify Bank shall survive until the statute of limitations
with respect to such claim or cause of action shall have run.

12.11 Confidentiality. In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank’s
Subsidiaries or Affiliates (provided that such Subsidiaries or Affiliates agree
to exercise the same degree of care required by Bank under the terms of this
provision); (b) to prospective transferees or purchasers of any interest in the
Credit Extensions (provided, however, Bank shall use commercially reasonable
efforts to obtain any prospective transferee’s or purchaser’s agreement to the
terms of this provision); (c) as required by law, regulation, subpoena, or other
order; (d) to Bank’s regulators or as otherwise required in connection with
Bank’s examination or

 

-23-

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

audit; (e) as Bank considers appropriate in exercising remedies under the Loan
Documents; and (f) to third-party service providers of Bank so long as such
service providers have executed a confidentiality agreement with Bank with terms
no less restrictive than those contained herein. Confidential information does
not include information that is either: (i) is in the public domain or in Bank’s
possession when disclosed to Bank, or becomes part of the public domain after
disclosure to Bank; or (ii) is disclosed to Bank by a third party, if Bank does
not know that the third party is prohibited from disclosing the information.

Bank may use confidential information for the development of databases,
reporting purposes, and market analysis so long as such confidential information
is aggregated and anonymized prior to distribution unless otherwise expressly
permitted by Borrower. The provisions of the immediately preceding sentence
shall survive the termination of this Agreement.

12.12 Attorneys’ Fees, Costs and Expenses. In any action or proceeding between
Borrower and Bank arising out of or relating to the Loan Documents, Bank shall
be entitled to recover its reasonable attorneys’ fees and other costs and
expenses incurred, in addition to any other relief to which it may be entitled.

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

12.14 Electronic Execution of Documents. The words “execution,” “signed,”
“signature” and words of like import in any Loan Document shall be deemed to
include electronic signatures or the keeping of records in electronic form, each
of which shall be of the same legal effect, validity and enforceability as a
manually executed signature or the use of a paper-based recordkeeping systems,
as the case may be, to the extent and as provided for in any applicable law,
including, without limitation, any state law based on the Uniform Electronic
Transactions Act.

12.15 Captions. The headings used in this Agreement are for convenience only and
shall not affect the interpretation of this Agreement.

12.16 Construction of Agreement. The parties mutually acknowledge that they and
their attorneys have participated in the preparation and negotiation of this
Agreement. In cases of uncertainty this Agreement shall be construed without
regard to which of the parties caused the uncertainty to exist.

12.17 Relationship. The relationship of the parties to this Agreement is
determined solely by the provisions of this Agreement. The parties do not intend
to create any agency, partnership, joint venture, trust, fiduciary or other
relationship with duties or incidents different from those of parties to an
arm’s-length contract.

12.18 Third Parties. Nothing in this Agreement, whether express or implied, is
intended to: (a) confer any benefits, rights or remedies under or by reason of
this Agreement on any persons other than the express parties to it and their
respective permitted successors and assigns; (b) relieve or discharge the
obligation or liability of any person not an express party to this Agreement; or
(c) give any person not an express party to this Agreement any right of
subrogation or action against any party to this Agreement.

 

  13 DEFINITIONS

13.1 Definitions. As used in the Loan Documents, the word “shall” is mandatory,
the word “may” is permissive, the word “or” is not exclusive, the words
“includes” and “including” are not limiting, the singular includes the plural,
and numbers denoting amounts that are set off in brackets are negative. As used
in this Agreement, the following capitalized terms have the following meanings:

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

 

-24-

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

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

“Adjusted Quick Ratio” is, as of any date of measurement, the ratio of
(i) unrestricted cash and unrestricted Cash Equivalents (excluding any and all
“auction-rate” securities), plus net accounts receivable to (ii) Current
Liabilities plus, without duplication, all outstanding Credit Extensions owed to
Bank, but excluding Deferred Revenue and deferred rent.

“Advance” or “Advances” means an advance (or advances) under the Revolving Line.

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

“Agreement” is defined in the preamble hereof.

“Availability Amount” is (X) during Stage 1, (a) the Revolving Line minus
(b) the Dollar Equivalent amount of all outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit plus an amount equal to the Letter of
Credit Reserve), minus (c) the FX Reduction Amount, minus (d) any amounts used
for Cash Management Services, and minus (e) the outstanding principal balance of
any Advances; and

(Y) during Stage 2, (a) the lesser of (i) the Revolving Line or (ii) the amount
available under the Borrowing Base minus (b) the Dollar Equivalent amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit plus an amount equal to the Letter of Credit Reserve), minus (c) the FX
Reduction Amount, minus (d) any amounts used for Cash Management Services, and
minus (e) the outstanding principal balance of any Advances.

“Bank” is defined in the preamble hereof.

“Bank Expenses” are all audit fees and expenses, costs, and expenses (including
reasonable attorneys’ fees and expenses) for preparing, amending, negotiating,
administering, defending and enforcing the Loan Documents (including, without
limitation, those incurred in connection with appeals or Insolvency Proceedings)
or otherwise incurred with respect to Borrower.

“Borrower” is defined in the preamble hereof.

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

“Borrowing Base” is eighty percent (80%) of Eligible Accounts, as determined by
Bank from Borrower’s most recent Borrowing Base Certificate; provided, however,
that Bank may decrease the foregoing percentage in its good faith business
judgment based on events, conditions, contingencies, or risks which, as
determined by Bank, may adversely affect the Collateral.

“Borrowing Base Certificate” is that certain certificate included within each
Transaction Report.

“Borrowing Resolutions” are, with respect to any Person, those resolutions
adopted by such Person’s Board of Directors or other appropriate body and
delivered by such Person to Bank approving the Loan Documents to which such
Person is a party and the transactions contemplated thereby, together with a
certificate executed by its secretary on behalf of such Person certifying that
(a) such Person has the authority to execute, deliver, and perform its
obligations under each of the Loan Documents to which it is a party, (b) that
attached as Exhibit A to such certificate is a true, correct, and complete copy
of the resolutions then in full force and effect authorizing and ratifying the
execution, delivery, and performance by such Person of the Loan Documents to
which it is a party, (c) the name(s) of the Person(s) authorized to execute the
Loan Documents on behalf of such Person, together with a sample of the true
signature(s) of such Person(s), and (d) that Bank may conclusively rely on such
certificate unless and until such Person shall have delivered to Bank a further
certificate canceling or amending such prior certificate.

 

-25-

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

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

“Cash Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having (i) the rating of A-1 or higher from Standard & Poor’s
Ratings Group or (ii) the rating of P-1 or higher from Moody’s Investors
Service, Inc., (c) Bank’s certificates of deposit issued maturing no more than
one (1) year after issue; (d) short term securities having the rating of AA or
higher from Standard & Poor’s Ratings Group or Aa2 from Moody’s Investors
Service, Inc., and (e) money market funds at least ninety-five percent (95%) of
the assets of which constitute Cash Equivalents of the kinds described in
clauses (a) through (d) of this definition. Notwithstanding anything herein to
the contrary, nothing in the foregoing definition shall be construed to include
“auction-rate” securities as Cash Equivalents herein.

“Cash Management Services” is defined in Section 2.1.4.

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

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

“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account.

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

“Communication” is defined in Section 10.

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

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

“Control Agreement” is any control agreement entered into among the depository
institution at which Borrower maintains a Deposit Account or the securities
intermediary or commodity intermediary at which Borrower maintains a Securities
Account or a Commodity Account, Borrower, and Bank pursuant to which Bank
obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.

 

-26-

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

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

“Credit Extension” is any Advance, Letter of Credit, FX Forward Contract, amount
utilized for Cash Management Services, or any other extension of credit by Bank
for Borrower’s benefit.

“Current Liabilities” are all obligations and liabilities of Borrower to Bank,
plus, without duplication, the aggregate amount of Borrower’s Total Liabilities
that mature within one (1) year.

“Default” means any event which with notice or passage of time or both, would
constitute an Event of Default.

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

“Deferred Revenue” is all amounts received or invoiced in advance of performance
under contracts and not yet recognized as revenue.

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

“Designated Deposit Account” is Borrower’s deposit account maintained with Bank.

“Dollars,” “dollars” or use of the sign “$” means only lawful money of the
United States and not any other currency, regardless of whether that currency
uses the “$” sign to denote its currency or may be readily converted into lawful
money of the United States.

“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated
in Dollars, such amount, and (b) with respect to any amount denominated in a
Foreign Currency, the equivalent amount therefor in Dollars as determined by
Bank at such time on the basis of the then-prevailing rate of exchange in San
Francisco, California, for sales of the Foreign Currency for transfer to the
country issuing such Foreign Currency.

“Effective Date” is the date Bank executes this Agreement and as indicated on
the signature page hereof.

“Eligible Accounts” are Accounts which arise in the ordinary course of
Borrower’s business that meet all Borrower’s representations and warranties in
Section 5.3. Bank reserves the right at any time and from time to time after the
Effective Date upon notice to Borrower, to adjust any of the criteria set forth
below and to establish new criteria in its good faith business judgment. Without
limiting the fact that the determination of which Accounts are eligible for
borrowing is a matter of Bank’s good faith judgment, the following (“Minimum
Eligibility Requirements”) are the minimum requirements for an Account to be an
Eligible Account. Unless Bank agrees otherwise in writing, Eligible Accounts
shall not include:

(a) Accounts for which the Account Debtor has not been invoiced or where goods
or services have not yet been rendered to the Account Debtor (sometimes called
memo billings or pre-billings);

(b) Accounts that the Account Debtor has not paid within ninety (90) days of
invoice date, regardless of invoice payment period terms;

(c) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose
Accounts have not been paid within ninety (90) days of invoice date;

(d) Accounts billed and/or payable outside the United States;

(e) Accounts with credit balances over ninety (90) days from invoice date;

(f) Accounts owing from an Account Debtor, including Affiliates, whose total
obligations to Borrower (A) for the Borrower’s then-current largest Major
Wholesaler, Accounts that exceed forty percent (40%) of all Accounts, for the
amounts that exceed that percentage, unless Bank approves in writing; (B) for
the Borrower’s then-current second largest Major

 

-27-

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

Wholesaler, Accounts that exceed thirty-five percent (35%) of all Accounts, for
the amounts that exceed that percentage, unless Bank approves in writing;
(C) for the Borrower’s then-current third largest Major Wholesaler, Accounts
that exceed thirty percent (30%) of all Accounts, for the amounts that exceed
that percentage, unless Bank approves in writing; and (D) for all other Account
Debtors, Accounts that exceed twenty-five percent (25%) of all Accounts, for the
amounts that exceed that percentage, unless Bank approves in writing;

(g) Accounts subject to contractual arrangements between Borrower and an Account
Debtor where payments shall be scheduled or due according to completion or
fulfillment requirements where the Account Debtor has a right of offset for
damages suffered as a result of Borrower’s failure to perform in accordance with
the contract (sometimes called contracts accounts receivable, progress billings,
milestone billings, or fulfillment contracts);

(h) Accounts owing from an Account Debtor the amount of which may be subject to
withholding based on the Account Debtor’s satisfaction of Borrower’s complete
performance (but only to the extent of the amount withheld; sometimes called
retainage billings);

(i) Accounts owing from an Account Debtor which does not have its principal
place of business in the United States, except for Eligible Foreign Accounts;

(j) Accounts owing from the United States or any department, agency, or
instrumentality thereof except for Accounts of the United States if Borrower has
assigned its payment rights to Bank and the assignment has been acknowledged
under the Federal Assignment of Claims Act of 1940, as amended;

(k) Accounts owing from an Account Debtor to the extent that Borrower is
indebted or obligated in any manner to the Account Debtor (as creditor, lessor,
supplier or otherwise – sometimes called “contra” accounts, accounts payable,
customer deposits or credit accounts), with the exception of customary credits,
adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;

(l) Accounts for demonstration or promotional equipment, or in which goods are
consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on approval”,
“bill and hold”, or other terms if Account Debtor’s payment may be conditional,
other than to the extent subject to Borrower’s return policy;

(m) Accounts that represent non-trade receivables or that are derived by means
other than in the ordinary course of Borrower’s business;

(n) Accounts for which the Account Debtor is Borrower’s Affiliate, officer,
employee, or agent;

(o) Accounts in which the Account Debtor disputes liability or makes any claim
(but only up to the disputed or claimed amount), or if the Account Debtor is
subject to an Insolvency Proceeding, or becomes insolvent, or goes out of
business;

(p) Accounts owing from an Account Debtor with respect to which Borrower has
received Deferred Revenue (but only to the extent of such Deferred Revenue);

(q) Accounts subject to chargebacks or other payment deductions taken by an
Account Debtor, other than to the extent of Borrower’s standard policy on
chargebacks or other payment deductions;

(r) Accounts for which Bank in its good faith business judgment determines
collection to be doubtful; and

(s) other Accounts Bank deems ineligible in the exercise of its good faith
business judgment.

“Eligible Foreign Accounts” are Accounts for which the Account Debtor is a
foreign Subsidiary of Pfizer Inc., a Delaware corporation, which does not have
its principal place of business in the United States but are otherwise Eligible
Accounts that are acceptable to Bank, in its sole discretion, and that Bank
approves in writing.

 

-28-

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

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

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

“Event of Default” is defined in Section 8.

“Exchange Act” is the Securities Exchange Act of 1934, as amended.

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

“Funding Date” is any date on which a Credit Extension is made to or for the
account of Borrower which shall be a Business Day.

“FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is
conducting its normal business and (b) the Foreign Currency being purchased or
sold by Borrower is available to Bank from the entity from which Bank shall buy
or sell such Foreign Currency.

“FX Forward Contract” is defined in Section 2.1.3.

“FX Reduction Amount” is defined in Section 2.1.3.

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

“General Intangibles” is all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all Intellectual Property, claims, income
and other tax refunds, security and other deposits, payment intangibles,
contract rights, options to purchase or sell real or personal property, rights
in all litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including without limitation key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.

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

“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.

“Increase Effective Date” is defined in Section 2.1.5.

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

“Indemnified Person” is defined in Section 12.2.

“Initial Audit” is Bank’s inspection of Borrower’s Accounts, the Collateral, and
Borrower’s Books, with results satisfactory to Bank, in its sole and absolute
discretion.

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

 

-29-

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

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

(a) its Copyrights, Trademarks and Patents;

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

(c) any and all source code;

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

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

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

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

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

“IP Agreement” is that certain Intellectual Property Security Agreement executed
and delivered by Borrower to Bank dated as of the date hereof.

“Letter of Credit” means a standby letter of credit issued by Bank or another
institution based upon an application, guarantee, indemnity or similar agreement
on the part of Bank as set forth in Section 2.1.2.

“Letter of Credit Application” is defined in Section 2.1.2(a).

“Letter of Credit Reserve” has the meaning set forth in Section 2.1.2(d).

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

“Loan Documents” are, collectively, this Agreement, the Perfection Certificate,
the IP Agreement, the Pledge Agreement, any note, or notes or guaranties
executed by Borrower, and any other present or future agreement between Borrower
and/or for the benefit of Bank in connection with this Agreement, all as
amended, restated, or otherwise modified.

“Major Wholesaler” is any of (i) [***], [***] corporation and any of its
Affiliates; (ii) [***], [***] corporation and any of its Affiliates; and
(iii) [***], [***] corporation and any of its Affiliates.

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

“Minimum Eligibility Requirements” is defined in the defined term “Eligible
Accounts”.

 

** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

-30-

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

“Net Income” means, as calculated on a consolidated basis for Borrower and its
Subsidiaries, if any, for any period as at any date of determination, the net
profit (or loss), after provision for taxes, of Borrower and its Subsidiaries
for such period taken as a single accounting period.

“Net Liquidity” means, as of any date of measurement, Borrower’s unrestricted
cash at Bank plus unrestricted Cash Equivalents at Bank minus all outstanding
Credit Extensions owed to Bank.

“Obligations” are Borrower’s obligation to pay when due any debts, principal,
interest, Bank Expenses and other amounts Borrower owes Bank now or later,
whether under this Agreement, the Loan Documents, or otherwise, including,
without limitation, all obligations relating to letters of credit (including
reimbursement obligations for drawn and undrawn letters of credit), cash
management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and to perform Borrower’s duties under
the Loan Documents.

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

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

“Payment” means all checks, wire transfers and other items of payment received
by Bank (including proceeds of Accounts and payment of all the Obligations in
full) for credit to Borrower’s outstanding Credit Extensions or, if the balance
of the Credit Extensions has been reduced to zero, for credit to its Deposit
Accounts.

“Payment/Advance Form” is that certain form attached hereto as Exhibit C.

“Perfection Certificate” is defined in Section 5.1.

“Permitted Indebtedness” is:

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

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

(c) Subordinated Debt, if any;

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

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

(f) intercompany loans among the Borrower;

(g) Borrower’s indebtedness to any landlord under leases existing on the
Effective Date, as contemplated by such agreements; and

(h) capital leases in an aggregate amount not to exceed $2,500,000 at any time.

“Permitted Investments” are:

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

 

-31-

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

(b) Cash Equivalents;

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

(d) Investments consisting of (i) travel advances and employee relocation loans
and other employee loans and advances in the ordinary course of business, and
(ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s Board of Directors;

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

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

(g) Investments in Subsidiaries; provided such Subsidiaries become a co-Borrower
or guarantor hereunder, as Bank shall determine in accordance with Section 6.12
hereof.

“Permitted Liens” are:

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

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

(c) purchase money Liens (i) on Equipment acquired or held by Borrower incurred
for financing the acquisition of the Equipment securing no more than $250,000 in
the aggregate amount outstanding, or (ii) existing on Equipment when acquired,
if the Lien is confined to the property and improvements and the proceeds of the
Equipment;

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

(e) leases or subleases of real property granted in the ordinary course of
business, and leases, subleases, non-exclusive licenses or sublicenses of
property (other than real property or Intellectual Property) granted in the
ordinary course of Borrower’s business, if the leases, subleases, licenses and
sublicenses do not prohibit granting Bank a security interest;

(f) license of Intellectual Property granted to third parties in the ordinary
course of business;

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

(h) Liens on assets subject to capital leases permitted pursuant to clause
(h) of the definition of “Permitted Indebtedness”.

“Performance Pricing Period” is the period (i) beginning on the first day of the
month immediately following the date Borrower reports (A) [***] for the two
previous consecutive fiscal quarters and (B) maintained an Adjusted Quick Ratio
for the two previous consecutive fiscal quarters of [***]; and (ii) ending on
the earlier to occur of (A) the occurrence of an Event of Default;
(B) Borrower’s Adjusted Quick Ratio as of the end of any fiscal quarter is [***]
or (C) Borrower’s Net Income for any fiscal quarter is [***], in each case as
determined by Bank, in its sole discretion.

 

** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

-32-

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

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

“Pledge Agreement” is any Stock Pledge Agreement, executed by any Borrower and
Bank, pledging to Bank (i) one hundred percent (100%) of such Borrower’s equity
interest in any domestic Subsidiaries of such Borrower, and (ii) up to
sixty-five percent (65%) of such Borrower’s equity interest in any foreign
Subsidiaries, in each case in form and substance acceptable to Bank, in its sole
discretion.

“Prime Rate” is the greater of (i) four percent (4.00%) per annum and
(ii) Bank’s most recently announced “prime rate,” even if it is not Bank’s
lowest rate.

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

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

“Reserves” means, as of any date of determination, such amounts as Bank may from
time to time establish and revise in good faith reducing the amount of Advances,
Letters of Credit and other financial accommodations which would otherwise be
available to Borrower under the Stage 2 lending formula: (a) to reflect events,
conditions, contingencies or risks which, as determined by Bank in good faith,
do or may affect (i) the Collateral or any other property which is security for
the Obligations or its value (including without limitation any increase in
delinquencies of Accounts), (ii) the assets or business of Borrower or any
guarantor, or (iii) the security interests and other rights of Bank in the
Collateral (including the enforceability, perfection and priority thereof); or
(b) to reflect Bank’s good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower or any guarantor to Bank is or
may have been incomplete, inaccurate or misleading in any material respect; or
(c) in respect of any state of facts which Bank determines in good faith
constitutes an Event of Default or may, with notice or passage of time or both,
constitute an Event of Default.

“Responsible Officer” is any of the Chief Executive Officer, President, Chief
Financial Officer and Controller of Borrower.

“Restricted License” is any material license or other agreement with respect to
which Borrower is the licensee that prohibits or otherwise restricts Borrower
from granting a security interest in Borrower’s interest in such license or
agreement or any other property.

“Revolving Line” is an Advance or Advances in an amount up to $30,000,000 plus
the amount of any Revolving Line Commitment Increase requested by Borrower and
permitted by Bank, in its sole discretion.

“Revolving Line Commitment Increase” is defined in Section 2.1.5.

“Revolving Line Maturity Date” is August 3, 2011.

“SEC” shall mean the Securities and Exchange Commission, any successor thereto,
and any analogous Governmental Authority

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

“Senior Management” shall mean any of the chief executive officer of Auxilium,
the chief financial officer of Auxilium and the controller of Auxilium.

“Stage 1” is the period (i) commencing on the Effective Date and (ii) continuing
at such times that Net Liquidity is not less than $15,000,000, as determined by
Bank, in its sole discretion.

 

-33-

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

“Stage 2” is any period when Stage 1 is not in effect; provided, however, that
in the event Borrower subsequently achieves Net Liquidity equal to or greater
than $15,000,000, Borrower may exit Stage 2 and return to Stage 1 no more than
one time in any fiscal quarter.

“Streamline Reporting Period” is, on and after the Effective Date, the period
(i) beginning on the last day of any fiscal quarter of the Borrower, in which
Borrower has, for each consecutive day in such fiscal quarter, maintained Net
Liquidity greater than or equal to $20,000,000, as determined by Bank, in its
sole discretion (the “Streamline Balance”); and (ii) ending on the earlier to
occur of (A) the occurrence of a Default or an Event of Default; and (B) the
first month-end thereafter in which Borrower fails to maintain the Streamline
Balance, as determined by Bank, in its sole discretion. Upon the termination of
a Streamline Reporting Period, Borrower must maintain the Streamline Balance
each consecutive day for one complete fiscal quarter, as determined by Bank, in
its sole discretion, prior to entering into a subsequent Streamline Reporting
Period. Borrower shall give Bank prior written notice of Borrower’s intention to
enter into any such Streamline Reporting Period.

“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of
Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance satisfactory to
Bank entered into between Bank and the other creditor), on terms acceptable to
Bank.

“Subsidiary” is, as to any Person, a corporation, partnership, limited liability
company or other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries,
or both, by such Person. Unless the context otherwise requires, each reference
to a Subsidiary herein shall be a reference to a Subsidiary of Borrower.

“Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower’s consolidated balance sheet, including
all Indebtedness.

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

“Transaction Report” is the Bank’s standard reporting package for reporting
sales, collections, credit memos and other collateral adjustments, in the form
provided by Bank to Borrower.

“Transfer” is defined in Section 7.1.

“Unused Revolving Line Facility Fee” is defined in Section 2.4(d).

[Signature page follows.]

 

-34-

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

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as a sealed instrument under the laws of the Commonwealth of Massachusetts, as
of the Effective Date.

 

BORROWER: AUXILIUM PHARMACEUTICALS, INC. By   /s/ James E. Fickenscher Name:  
James E. Fickenscher Title:   Chief Financial Officer AUXILIUM INTERNATIONAL
HOLDINGS, INC. By   /s/ James Englund Name:   James Englund Title:   President
AUXILIUM US HOLDINGS, LLC By   /s/ James Englund Name:   James Englund Title:  
President BANK: SILICON VALLEY BANK By   /s/ Jay T. Tracy Name:   Jay T. Tracy
Title:   Vice President

Effective Date: August 4, 2009

[Signature page to Loan and Security Agreement]

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

EXHIBIT A – COLLATERAL DESCRIPTION

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

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

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

 

1

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

EXHIBIT B

COMPLIANCE CERTIFICATE

 

TO:    SILICON VALLEY BANK    Date:                             FROM:   
AUXILIUM PHARMACEUTICALS, INC.       AUXILIUM INTERNATIONAL HOLDINGS, INC.      
AUXILIUM US HOLDINGS, LLC   

The undersigned authorized officer of Auxilium Pharmaceuticals, Inc., Auxilium
International Holdings, Inc. and Auxilium US Holdings, LLC (individually and
collectively, jointly and severally, the “Borrower”) certifies that under the
terms and conditions of the Loan and Security Agreement between Borrower and
Bank (the “Agreement”), (1) Borrower is in complete compliance for the period
ending                      with all required covenants except as noted below,
(2) there are no Events of Default, (3) all representations and warranties in
the Agreement are true and correct in all material respects on this date except
as noted below; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date,
(4) Borrower, and each of its Subsidiaries, has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state
and local taxes, assessments, deposits and contributions owed by Borrower except
as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement,
and (5) no Liens have been levied or claims made against Borrower or any of its
Subsidiaries, if any, relating to unpaid employee payroll or benefits of which
Borrower has not previously provided written notification to Bank. Attached are
the required documents supporting the certification. The undersigned certifies
that these are prepared in accordance with GAAP consistently applied from one
period to the next except as explained in an accompanying letter or footnotes.
The undersigned acknowledges that no borrowings may be requested at any time or
date of determination that Borrower is not in compliance with any of the terms
of the Agreement, and that compliance is determined not just at the date this
certificate is delivered. Capitalized terms used but not otherwise defined
herein shall have the meanings given them in the Agreement.

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

  

Required

  

Complies

Monthly financial statements with Compliance Certificate   

Monthly within 30 days/ quarterly

within 45 days during Streamline Reporting Period

   Yes    No Annual financial statement (CPA Audited) + CC    FYE within 150
days    Yes    No 10-Q, 10-K and 8-K    Within 5 days after filing with SEC   
Yes    No A/R & A/P Agings; deferred revenue reports and general ledger   
Monthly within 30 days/ waived during Streamline Reporting Period    Yes    No
Borrowing Base Certificate   

Monthly within 30 days when Net Liquidity

is < $20,000,000

   Yes    No Transaction Reports   

Weekly when Net Liquidity is

< $7,500,000

   Yes    No Projections    30 days prior to FYE, and as amended    Yes    No
Sell-through reports    Monthly within 30 days during Stage 2 and as requested
by Bank    Yes    No

The following Intellectual Property was registered after the Effective Date (if
no registrations, state “None”)

  

 

Financial Covenant

   Required    Actual   

Complies

Maintain as indicated:

        

Minimum Adjusted Quick Ratio (tested monthly/quarterly when on Streamline
Reporting Period)*

     [***]      [***]    Yes    No

Minimum Profitability/Maximum Losses (tested quarterly and on a cumulative
basis)**

   $ —      $ —      Yes    No

 

* See Section 6.9(a)

 

** See Section 6.9(b)

 

** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

1

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

Performance Pricing

  

Applies

Adjusted Quick Ratio for the two previous consecutive fiscal quarters of at
least [***]

and Net Profit of [***]

   Prime    Yes    No

Adjusted Quick Ratio for the two previous consecutive fiscal quarters of less
than [***]

or Net Profit [***]

   Prime + 0.50%    Yes    No

The following financial covenant analyses and information set forth in Schedule
1 attached hereto are true and accurate as of the date of this Certificate.

The following are the exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions to note.”)

 

 

 

 

 

 

 

Auxilium Pharmaceuticals, Inc.

Auxilium International Holdings, Inc.

Auxilium US Holdings, LLC

    BANK USE ONLY     Received by:                       AUTHORIZED SIGNER By:  
      Date:     Name:         Verified:                         AUTHORIZED
SIGNER Title:         Date:           Compliance Status:  
                        Yes     No

** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

 

2

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

Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

Dated:                         

 

I. Adjusted Quick Ratio (Section 6.9(a))

Required:     See Section 6.9(a)

Actual:

 

A.    Aggregate value of the unrestricted cash of Borrower and its Subsidiaries
at Bank    $         B.    Aggregate value of the net billed accounts receivable
of Borrower and its Subsidiaries    $         D.    Quick Assets (the sum of
line A plus line B)    $         E.    Aggregate value of Obligations owed to
Bank    $         F.    Current Liabilities    $         G.    Deferred Revenue
and deferred rent    $         H.    Adjusted Liabilities (line E plus line F
minus line G)    $         I    ADJUSTED QUICK RATIO (line D divided by line H),
expressed as a ratio    ____:[***]

Is line I equal to or greater than         :[***]?

 

             No, not in compliance                 Yes, in compliance

** CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND WILL BE FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST.

 

3

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

II. Profitability; Maximum Losses (Section 6.9(b))

Required:     See Section 6.9(b)

Actual:

 

A.    Quarterly Net Income (net loss)    $          B.    Quarterly cumulative
Net Income (net loss)    $         

Is line A equal to or greater (not less than) than $                     ?

 

             No, not in compliance                 Yes, in compliance

Is line B equal to or greater than (not less than) $                     ?

 

             No, not in compliance                 Yes, in compliance

 

1

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

EXHIBIT C – LOAN PAYMENT/ADVANCE REQUEST FORM

DEADLINE FOR SAME DAY PROCESSING IS NOON EASTERN TIME

 

Fax To:   Date:                                

LOAN PAYMENT:

Auxilium Pharmaceuticals, Inc.

 

From Account #                                                                
To Account

# __________________________________________________

 

(Deposit Account #)

 

(Loan Account #)

Principal $ _________________________________________   and/or Interest

$ _________________________________________________

  Authorized Signature: ___________________________   Phone Number:
___________________________

Print Name/Title: _______________________________

 

LOAN ADVANCE:

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

From Account #                                         
                                            To Account
                                                                 

(Loan Account #)                                         
                                          (Deposit Account #)

Amount of Advance $                                                             

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

Authorized Signature:                                       
                                      Phone
Number:                                                         

Print Name/Title:                                                 

OUTGOING WIRE REQUEST:

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

Deadline for same day processing is noon, Pacific Time

Beneficiary Name:                                          
                                   Amount of Wire:
$________________________________

Beneficiary Bank:                                          
                                    Account Number:
_________________________________

City and State:                                                              

Beneficiary Bank Transit (ABA) #:                                        
    Beneficiary Bank Code (Swift, Sort, Chip, etc.): ________________

                                       
                                         
                                    (For International Wire Only)

Intermediary Bank:                                        
                               Transit (ABA)
#:                                                             

For Further Credit to:
______________________________________________________________________________

Special Instruction:
________________________________________________________________________________

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

Authorized Signature:                                          
                                2nd Signature (if
required):                                                     

Print Name/Title:                                          
                                       Print
Name/Title:                                                                    

Telephone #:                                          
                                               Telephone #:
                                                                          

 

1