EXHIBIT 10.1

THIRD AMENDMENT
TO CREDIT AGREEMENT

THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made and dated as
of September 26, 2008 and amends the Credit Agreement dated as of May 25, 2005
(as amended, supplemented or otherwise modified prior to the date hereof, the
"Credit Agreement") among MENTOR CORPORATION, a Minnesota corporation (the
"Borrower"), BANK OF THE WEST, a California banking corporation, as
Administrative Agent (in such capacity, the "Administrative Agent"), UNION BANK
OF CALIFORNIA, N. A., a national banking association, as Syndication Agent,
WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as
Documentation Agent, and the Lenders from time to time party thereto.

The Borrower, the Administrative Agent and the Lenders wish to amend the Credit
Agreement in certain respects and, therefore, for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:

1.             Amendments. 

1(a)         Additional Guarantors.  Paragraph 7(l) of the Credit Agreement is
amended to add at the end thereof a new subparagraph (6) to read as follows:

"(6)         No later than 15 Business Days after the consummation of the
Reorganization, cause the Parent to become a Guarantor by executing and
delivering a Guaranty to the Administrative Agent for the benefit of the Lenders
together with (i) the then effective Organization Documents of the Parent, (ii)
certificates of Governmental Authorities evidencing that the Parent is in good
standing and authorized to conduct its business in the jurisdiction of its
organization and in each other jurisdiction reasonably identified by the
Administrative Agent, (iii) resolutions or other authorizing approvals adopted
or given in accordance with such Organization Documents acceptable to the
Administrative Agent and authorizing or approving the execution, delivery and
performance of such Guaranty by the Parent, (iv) an incumbency certificate for
the Person(s) executing such Guaranty on behalf of the Parent evidencing that
such Person(s) holds the office(s) of a Person authorized to execute and deliver
the Guaranty on behalf of the Parent, and (v) such opinions of counsel as the
Administrative Agent may reasonably request."

1(b)         Use of Proceeds.  Paragraph 7(k) of the Credit Agreement is amended
to read as follows:

"7(k)       Use of Proceeds.  Use the proceeds of the Loans and the Letters of
Credit (i) for working capital purposes in the ordinary course of business, (ii)
to finance Permitted Acquisitions and stock repurchases, (iii) to prepay or
repay Subordinated Indebtedness under the Subordinated Notes and (iv) for
general corporate purposes."

1(c)         Financial Covenants.  Paragraph 8(k)(4) of the Credit Agreement is
amended and a new Paragraph 8(k)(5) is added immediately thereafter, each to
read as follows:

"(4)         As of the end of any fiscal quarter beginning with the fiscal
quarter ending September 26, 2008, permit the Adjusted Consolidated EBITDA for
the four fiscal quarters then ended to be less than $88,000,000"; or

"(5)         As of the end of any fiscal quarter, fail to maintain on a
consolidated basis cash and Cash Equivalents that, when added to the Unused
Amount, are not less than $50,000,000."

1(d)         In Paragraph 12 of the Credit Agreement, the definitions of
"Applicable Rate," "Guarantor," "Guaranty" and "Maturity Date" are amended and
new definitions of "Parent," "Reorganization," "Third Amendment" and "Third
Amendment Effectiveness Date" are added in correct alphabetical order, each to
read as follows:

"'Applicable Rate' shall mean , from time to time, the following percentages per
annum, based upon the Senior Consolidated Leverage Ratio as set forth in the
most recent Compliance Certificate delivered pursuant to Paragraph 7(b):

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Pricing Level

Senior Leverage Ratio

Adjusted Eurocurrency Rate +
___________
Letter of Credit Fees

Prime Rate +

Commitment Fee

1

>2.00:1.00

2.00%

0.00%

0.35%

2

>1.50:1.00 but <2.00 :1.00

1.75%

0.00%

0.30%

3

>1.00:1.00 but <1.50 :1.00

1.50%

0.00%

0.25%

4

<1.00 : 1.00

1.25%

0.00%

0.25%

Pricing Level 2 shall apply from the Third Amendment Effectiveness Date until a
Compliance Certificate is delivered pursuant to Paragraph 7(b) for the period
ending March 31, 2009.  As of the date of the delivery of such Compliance
Certificate for the period ending March 31, 2009 and thereafter, any increase or
decrease in the Applicable Rate resulting from a change in the Senior Leverage
Ratio shall become effective as of the first Business Day immediately following
the date a Compliance Certificate is delivered pursuant to Paragraph 7(b);
provided, however, that if a Compliance Certificate is not delivered when due,
then Pricing Level 1 shall apply as of the first Business Day after the date on
which such Compliance Certificate was required to have been delivered and shall
continue until such time as the next Compliance Certificate is delivered
pursuant to Paragraph 7(b)."

"'Guaranty' shall mean a guaranty of the Secured Obligations substantially in
the form of Exhibit E to this Agreement or, in the case of the Parent,
substantially in the form of Exhibit A to the Third Amendment to this Agreement
dated as of September 26, 2008."

"'Guarantors' shall mean, upon consummation of the Reorganization, the Parent
and at all times each other Person that, from time to time, executes and
delivers a Guaranty in accordance with the terms of this Agreement."

"'Maturity Date' shall mean the earlier of:  (a) October 31, 2009 and (b) the
date the Lenders terminate their obligations to make Loans hereunder pursuant to
Paragraph 9 of this Agreement."

"'Parent' shall mean, after the consummation of the Reorganization, Mentor
International Holdings, Inc., a Delaware corporation."

"'Reorganization' shall mean the reorganization of the Borrower in accordance
with and as described in the Form 8-K filed by the borrower with the United
States Securities and Exchange Commission as of August 7, 2008."

"'Third Amendment' shall mean the Third Amendment to this Agreement dated as of
September 26, 2008."

"'Third Amendment Effectiveness Date' shall mean the date that the Third
Amendment becomes effective in accordance with its terms."

 

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2.             Conditions.  Unless otherwise agreed by the Required Lenders,
this Amendment shall not be effective unless all of the conditions precedent
described below shall have been satisfied:

2(a)         Deliveries.  There shall have delivered to the Administrative
Agent, in form and substance reasonably satisfactory to the Administrative Agent
and its counsel, each of the following (with sufficient copies for each of the
Lenders):

(1)           A copy of this Amendment duly executed by the Borrower and the
Required Lenders;

(2)           A certificate of an Authorized Officer of the Borrower certifying
(a) the names and true signatures of the officers of the Borrower authorized to
sign this Amendment; (b) that, except as are attached thereto, there have been
no amendments or modifications to the Organization Documents of the Borrower
delivered as of the Closing Date, (c) no event has occurred that could result in
a Material Adverse Effect, and (d) no event has occurred that would be a
Potential Default or Event of Default under the Credit Agreement;

2(b)         Amendment Fee.  The Borrower shall have paid to the Administrative
Agent for the pro rata benefit of the Lenders a non-refundable fully earned
amendment fee equal to 0.05% of the Aggregate Commitments.

2(c)         Other Actions.  All acts and conditions (including, without
limitation, the obtaining of any necessary regulatory approvals and the making
of any required filings, recordings or registrations) required to be done and
performed and to have happened precedent to the execution, delivery and
performance of the Loan Documents and to constitute the same legal, valid and
binding obligations, enforceable in accordance with their respective terms,
shall have been done and performed and shall have happened in due and strict
compliance with all applicable laws. 

2(d)         Satisfaction of Administrative Agent.  All documentation,
including, without limitation, documentation for corporate and legal proceedings
in connection with the transactions contemplated by the Loan Documents, shall be
reasonably satisfactory in form and substance to the Administrative Agent and
its counsel. 

3.             Representations and Warranties.  The Borrower represents and
warrants to the Administrative Agent and the Lenders that:

3(a)         Existence, Qualification and Power.  The Borrower (a) is duly
organized or formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, (b) has all requisite power
and authority and all requisite governmental licenses, authorizations, consents
and approvals to execute and deliver this Amendment and to perform its
obligations under this Amendment and the Credit Agreement, as amended hereby and
(c) is duly qualified and is licensed and in good standing under the
Requirements of Law of each jurisdiction where its ownership, lease or operation
of properties or the conduct of its business requires such qualification or
license except to the extent that the failure to have such qualification or
license could not reasonably be expected to have a Material Adverse Effect.

3(b)         Authorization; No Contravention.  The execution and delivery of
this Amendment and the performance by the Borrower of this Amendment and the
Credit Agreement as amended hereby have been duly authorized by all necessary
corporate or other organizational action, and do not and will not (a) contravene
the terms of any of the Borrower's Organization Documents; (b) conflict with or
result in any breach or contravention of, or the creation of any Lien under, or
require any payment to be made under (i) any Contractual Obligation (other than
under the Credit Agreement) of the Borrower or any of its Subsidiaries or
affecting the Borrower or any of its Subsidiaries or the properties of the
Borrower or any of its Subsidiaries or (ii) any order, injunction, writ or
decree of any Governmental Authority or any arbitral award to which such Person
or its property is subject; or (c) violate any Requirement of Law.  The Borrower
and each of its Subsidiaries is in compliance with all Contractual Obligations
referred to in clause (b)(i), except to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect.

 

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3(c)         Governmental Authorization; Other Consents.  No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with the execution and delivery of the this Amendment by the Borrower
or performance by or enforcement against the Borrower of this Amendment or the
Credit Agreement.

3(d)         Binding Effect.  This Amendment and the Credit Agreement have been,
duly executed and delivered by the Borrower.  This Amendment and the Credit
Agreement as amended hereby constitute a legal, valid and binding obligation of
the Borrower, enforceable against the Borrower in accordance with its terms,
except as enforceability may be limited by bankruptcy, insurance or similar laws
affecting the enforcement of creditors' rights generally.

4.             Miscellaneous Provisions. 

4(a)         Reaffirmation and Ratification.  The Borrower, and by its signature
below, any Guarantor, hereby reaffirms all of its agreements under the Credit
Agreement, as amended hereby, and the Loan Documents to which it is a party, and
ratifies all action taken and not taken thereunder on or prior to the
effectiveness of this Amendment.

4(b)         Severability.  The illegality or unenforceability of any provision
of this Amendment or any instrument or agreement required hereunder or
thereunder shall not in any way affect or impair the legality or enforceability
of the remaining provisions hereof or thereof.

4(c)         Governing Law.  This Amendment shall be governed by and construed
in accordance with the internal laws of the State of California without giving
effect to its choice of law rules.

4(d)         Counterparts.  This Amendment may be executed in counterparts (and
by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract.  Delivery of an executed counterpart of a signature page of
this Amendment by telecopy shall be effective as delivery of a manually executed
counterpart of this Amendment.

 

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

MENTOR CORPORATION,
a Minnesota corporation

By:          /s/Michael O'Neill                                               
Michael O'Neill
Vice President and Chief Financial Officer

 

 

 

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BANK OF THE WEST, as Administrative Agent

By:          /s/John Hyche                                       
               
Name:     John Hyche
Title:       Senior Vice President

BANK OF THE WEST, as a Lender

By:          /s/John Hyche                                       
               
Name:     John Hyche
Title:       Senior Vice President

 

 

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UNION BANK OF CALIFORNIA, N.A., as Syndication Agent and a Lender

By:          /s/N. St. Clair                                        
               
Name:     Nick St. Clair
Title:       Credit Officer

 

 

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WELLS FARGO BANK, NATIONAL ASSOCIATION, as Documentation Agent and a Lender

By:          /s/J. Robillard                                     
               
Name:     Joseph Robillard
Title:       Relationship Manager

 

 

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THE GOVERNOR & COMPANY OF THE BANK OF IRELAND, as a Lender

By:          /s/Elaine Crowley                                       
               
Name:     Elaine Crowley
Title:       Authorized Signatory

 

By:          /s/Emer Dalton                                           
               
Name:     Emer Dalton
Title:       Authorized Signatory

 

 

 

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COMERICA BANK, as a Lender

By:          /s/Elise Moore                                        
               
Name:     Elise M. Moore
Title:       Vice President

 

 

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PACIFIC CAPITAL BANK, N.A., a national banking association doing business as
Santa Barbara Bank & Trust, as a Lender

By:          /s/Steve Mihalic                                           
               
Name:     Steve Mihalic
Title:       Senior Vice President

 

 

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U.S. BANK, NATIONAL ASSOCIATION, as a Lender

By:          /s/Richard J. Ameny, Jr.                              
               
Name:     Richard J. Ameny, Jr.
Title:       Vice President

 

 

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FIRST BANK, as a Lender

By:          /s/David C. Walker                                        
               
Name:     David C. Walker
Title:       Vice President

 

 

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REAFFIRMATIONS

AS OF THE DATE FIRST ABOVE WRITTEN, THE UNDERSIGNED GUARANTOR acknowledges
receipt of a copy of the foregoing Amendment, reaffirms each of the Loan
Documents to which it is a party (the "Guarantor Documents"), acknowledges that
the execution and delivery of the Amendment and the performance of the Credit
Agreement, as amended thereby, have no affect on such Guarantor's agreements and
obligations under the Guarantor Documents, all of which remain the legal, valid
and binding obligation of such Guarantor, enforceable against such Guarantor in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles relating to
enforceability.

MENTOR TEXAS L.P.,

By:            Mentor Texas GP LLC, its General Partner
By:            /s/Michael O'Neill                                               
Name:       Michael O'Neill, Secretary and Treasurer

 

 

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CERTIFICATE OF AUTHORIZED OFFICER

The undersigned hereby certifies to Agent and each Lender that (1) each Loan
Party has previously delivered to Agent a true, correct and  complete copy of
such Loan Party's organizational documents (collectively, the "Delivered
Organization Documents"), (2) since such delivery, there has been no change in
the Delivered Organization Documents except for those changes attached hereto,
and, except as disclosed on an attachment, no such document has been repealed,
revoked, rescinded or amended in any respect, and each remains in full force and
effect, (3) each Loan Party remains in good standing in the jurisdiction of its
organization, (4) except for those resolutions attached hereto (which were duly
adopted by the parties named therein), the resolutions (the "Delivered
Resolutions") previously delivered to Agent by the Loan Parties authorize the
execution, delivery and performance of the foregoing Amendment by the Loan
Parties, (5) the Delivered Resolutions authorize Person(s) holding the office(s)
indicated above or, if none, the office(s) held by the Person(s) executing the
foregoing (the "Authorized Executing Office") to execute the foregoing Amendment
on behalf of the applicable Loan Parties, (6) the Person executing the foregoing
Amendment on behalf of each Loan Party has been duly elected and now holds the
Authorized Executing Office set forth below his(her) name, and the signature set
forth above is his(her) true signature, (7) the undersigned is authorized to
deliver this Certificate on behalf of each Loan Party, and (8) the
Administrative Agent and each Lender may conclusively rely on this Certificate
unless and until superseding documents shall be delivered to Agent.

Executed this 26th day of September, 2008.

MENTOR CORPORATION,
a Minnesota corporation

By:          /s/Michael O'Neill                               
Michael O'Neill
Vice President and Chief Financial Officer

 

 

 

 

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CERTIFICATE OF AUTHORIZED OFFICER

The undersigned, an Authorized Officer of Mentor Corporation, a Minnesota
corporation (the "Borrower"), hereby certifies to the other parties to the
Credit Agreement dated as of May 25, 2005 (as amended, supplemented or otherwise
modified prior to the date hereof, the "Credit Agreement") among the Borrower,
Bank of the West, a California banking corporation, as Administrative Agent and
the Lenders from time to time party thereto that, as of the date hereof, (a) no
event has occurred that could result in a Material Adverse Effect, and (b) no
event has occurred that would be a Potential Default or Event of Default under
the Credit Agreement.  Terms used in this Certificate are used as defined in the
Credit Agreement.

Executed this 26th day of September, 2008.

MENTOR CORPORATION,
a Minnesota corporation

By:          /s/Joseph A. Newcomb                                      
Joseph A. Newcomb
Vice President General Counsel and Secretary

 

 

 

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Exhibit A

Form of Parent Guaranty

 

 

 

 

 

 

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GUARANTY

This Guaranty (this "Guaranty") is made as of __________, 2008, by and among the
undersigned (the "Guarantor"), in favor of BANK OF THE WEST, a California
banking corporation, as Administrative Agent (the "Administrative Agent"), and
the Guaranteed Parties, as such term and other capitalized terms used, but not
otherwise defined in this Guaranty, are defined in the Credit Agreement dated as
of May 25, 2005 (as the same may be modified, amended and restated from time to
time, herein called the "Credit Agreement") among MENTOR CORPORATION, a
Minnesota corporation (the "Borrower"), the Administrative Agent, UNION BANK OF
CALIFORNIA, N.A. as Syndication Agent, WELLS FARGO BANK, N.A., as Documentation
Agent and the Lenders party thereto (the "Lenders"). 

Pursuant to the Credit Agreement, the Lenders have agreed to extend credit to
the Borrower on the terms and subject to the conditions contained therein,
including the condition that the Guarantor execute and deliver this Guaranty for
the benefit of the Guaranteed Parties, and the Guarantor has determined that it
will derive direct and indirect economic benefits pursuant to the terms of the
Credit Agreement.

NOW, THEREFORE, in consideration of the  above recitals and for other good and
valuable consideration, receipt of which is hereby acknowledged, the Guarantor
hereby agrees for the benefit of the Guaranteed Parties as follows:

ARTICLE I

RULES OF INTERPRETATION
AND DEFINITIONS

SECTION 1.01. Rules of Interpretation.

(a)           Unless the context otherwise requires, all capitalized terms used
but not defined herein shall have the meanings set forth in the Credit
Agreement.

(b)           The rules of interpretation specified in Paragraph 11(s) of the
Credit Agreement shall be applicable to this Guaranty.

(c)           The word "include(s)" means "include(s), without limitation." and
the word "including" means "including, but not limited to."  When the context
and construction so require, all words used in the singular shall be deemed to
have been used in the plural and vice versa.  No listing of specific instances,
items or matters in any way limits the scope or generality of any language of
this Guaranty.  All headings appearing in this Guaranty are for convenience only
and shall be disregarded in construing this Guaranty.

(d)           If this Guaranty is executed by more than one Person, all
references to the "Guarantor" herein shall be construed as referring to each
such Person, all of whom shall be jointly and severally liable hereunder.

SECTION 1.02. Definition of Certain Terms Used Herein. As used herein, the
following term shall have the following meanings:

"Guaranteed Obligations" shall mean the Secured Obligations, the obligation of
the Borrower to repay any and all other indebtedness, obligations and
liabilities of every kind and character of the Borrower to the Administrative
Agent and the Lenders, or any one or more of them, whether now existing or
hereafter arising, whether due and owing or to become due and owing, whether
joint or several, or joint and several, whether absolute or contingent, as
created by, evidenced by, arising in connection with and/or owing at any time
under the Credit Agreement.

"Guaranteed Parties" shall mean (a) the Lenders, (b) the Administrative Agent,
(c) the Collateral Agent, (d) the Issuing Bank, (e) the Swing Line Lender, (f)
each counterparty to a Permitted Hedge entered into with the Borrower or a
Subsidiary of the Borrower if such counterparty was a Lender (or an Affiliate of
a Lender) at the time the Permitted Hedge was entered into, (g) the
beneficiaries of each indemnification obligation undertaken by the Borrower or
the Guarantor under any Loan Document and (h) the successors and assigns of each
of the foregoing.

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ARTICLE II

GUARANTY

SECTION 2.01.  Guaranty.  Each Guarantor hereby absolutely and unconditionally
guarantees to the Guaranteed Parties the prompt payment and performance when due
(whether at its maturity, by lapse of time, by acceleration or otherwise) of the
Guaranteed Obligations.  This is a guaranty of payment, not of collection.  If
the Borrower defaults in the payment when due of the Guaranteed Obligations or
any part thereof, the Guarantor shall in lawful money of the United States pay
on demand, all sums due and owing on such Guaranteed Obligations, including all
interest, charges, fees and other sums, costs and expenses.

SECTION 2.02.  Guaranty to be Absolute.  Each Guarantor expressly agrees that
until the Guaranteed Obligations are paid and performed in full and each and
every term, covenant and condition of this Guaranty is fully performed, the
Guarantor shall not be released by or because of: (a) any act or event which
might otherwise discharge, reduce, limit or modify the Guarantor's obligations
under this Guaranty; (b) any waiver, extension, modification, forbearance, delay
or other act or omission of the Administrative Agent or any Lender or their
failure to proceed promptly or otherwise as against the Borrower, the Guarantor
or any security; (c) any action, omission or circumstance which might increase
the likelihood that the Guarantor may be called upon to perform under this
Guaranty or which might affect the rights or remedies of the Guarantor as
against the Borrower; or (d) any dealings occurring at any time between the
Borrower and any Lender, whether relating to the Guaranteed Obligations or
otherwise.  Each Guarantor hereby expressly waives and surrenders any defense to
its liability under this Guaranty based upon any of the foregoing acts,
omissions, agreements, waivers or matters.  It is the purpose and intent of this
Guaranty that the obligations of each Guarantor under it shall be absolute and
unconditional under any and all circumstances.

ARTICLE III

RIGHTS OF GUARANTEED PARTIES

SECTION 3.01.  Authorized Action.  Each Guarantor authorizes the Guaranteed
Parties to perform any or all of the following acts at any time in their sole
discretion, all without notice to the Guarantor and without affecting the
Guarantor's obligations under this Guaranty:  (a) alter any terms of the
Guaranteed Obligations or any part of them, including renewing, compromising,
extending or accelerating, or otherwise changing the time for payment of, or
increasing or decreasing the rate of interest on, the Guaranteed Obligations or
any part of them; (b) take and hold security for the Guaranteed Obligations or
this Guaranty, accept additional or substituted security for either, and
subordinate, exchange, enforce, waive, release, compromise, fail to perfect and
sell or otherwise dispose of any such security; (c) direct the order and manner
of any sale of all or any part of any security now or later to be held for the
Guaranteed Obligations or this Guaranty, and also bid at any such sale; (d)
apply any payments or recoveries from the Borrower, any other Guarantor or any
other source, and any proceeds of any security, to the Borrower's obligations
under the Credit Agreement in such manner, order and priority as the
Administrative Agent and the Lenders may elect, whether or not those obligations
are guaranteed by this Guaranty or secured at the time of the application; (e)
release the Borrower of its liability for any obligations comprising the
Guaranteed Obligations or any part thereof; (f) substitute, add or release any
one or more guarantors or endorsers; (g) in addition to the extensions of credit
accommodations under the Credit Agreement, any Lender may extend other credit to
the Borrower, and may take and hold security for the credit so extended, all
without affecting the Guarantor's liability under this Guaranty.

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ARTICLE IV

WAIVERS

SECTION 4.01.  Guarantor's Waivers.  The Guarantor waives, to the fullest extent
permitted by law: (a) all statutes of limitations as a defense to any action or
proceeding brought against the Guarantor by the Guaranteed Parties; (b) any
right it may have to require the Guaranteed Parties to proceed against the
Borrower or the Guarantor, proceed against or exhaust any security held from the
Borrower or the Guarantor, or pursue any other remedy in the Guaranteed Parties'
power to pursue; (c) any defense based on any claim that the Guarantor's
obligations exceed or are more burdensome than those of the Borrower or any
other guarantor; (d) any defense based on:  (i) any legal disability of the
Borrower or the Guarantor, (ii) any release, discharge, modification, impairment
or limitation of the liability of the Borrower or the Guarantor to the
Guaranteed Parties from any cause, whether consented to by the Guaranteed
Parties or arising by operation of law or from any bankruptcy or other voluntary
or involuntary proceeding, in or out of court, for the adjustment of
debtor-creditor relationships ("Insolvency Proceeding") and (iii) any rejection
or disaffirmance of the Guaranteed Obligations, or any part thereof, or any
security held therefor, in any such Insolvency Proceeding; (e) any defense based
on any action taken or omitted by the Guaranteed Parties in any Insolvency
Proceeding involving the Borrower or the Guarantor, including any election to
have the claims of the Guaranteed Parties allowed as being secured, partially
secured or unsecured, any extension of credit by the Guaranteed Parties to the
Borrower or the Guarantor in any Insolvency Proceeding, and the taking and
holding by the Administrative Agent or any Lender of any security for any such
extension of credit; (f) all presentments, demands for performance, notice of
intention to accelerate, notice of acceleration, notices of nonperformance,
protests, notices of protest, notices of dishonor, notices of acceptance of this
Guaranty and of the existence, creation, or incurring of new or additional
indebtedness, and demands and notices of every kind; and (g) any defense based
on or arising out of any defense that the Borrower or the Guarantor may have to
the payment or performance of the Guaranteed Obligations or any part of them.

SECTION 4.02.  Waivers of Subrogation and Other Rights.

(a)           Upon a default by the Borrower, the Guaranteed Parties, in their
sole discretion, without prior notice to or consent of the Guarantor, may elect
to: (i) foreclose either judicially or nonjudicially against any real or
personal property security it may hold for the Guaranteed Obligations,
(ii) accept a transfer of any such security in lien of foreclosure,
(iii) compromise or adjust the Guaranteed Obligations or any part thereof or
make any other accommodation with the Borrower or the Guarantor, or
(iv) exercise any other remedy against the Borrower, the Guarantor or any
security.  No such action by the Guaranteed Parties shall release or limit the
liability of the Guarantor, who shall remain liable under this Guaranty after
the action, even if the effect of the action is to deprive the Guarantor of any
subrogation rights, rights of indemnity, or other rights to collect
reimbursement from the Borrower or the Guarantor for any sums paid to the
Guaranteed Parties, whether contractual or arising by operation of law or
otherwise.  Each Guarantor expressly agrees that under no circumstances shall it
be deemed to have any right, title, interest or claim in or to any real or
personal property to be held by the Guaranteed Parties or any third party after
any foreclosure or transfer in lieu of foreclosure of any security for the
Guaranteed Obligations.

(b)           Regardless of whether the Guarantor may have made any payments to
the Guaranteed Parties, each Guarantor forever waives:  (i) all rights of
subrogation, all rights of indemnity, and any other rights to collect
reimbursement from the Borrower and any other Guarantor for any sums paid to the
Guaranteed Parties, whether contractual or arising by operation of law
(including the United States Bankruptcy Code or any successor or similar
statute) or otherwise, (ii) all rights to enforce any remedy that the
Administrative Agent or any Lender may have against the Borrower or any other
Guarantor, and (iii) all rights to participate in any security now or later to
be held by the Guaranteed Parties for the Guaranteed Obligations.

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SECTION 4.03.  Right to Non-judicially Foreclose.  The Guaranteed Parties may,
at their election, foreclose on any security held for the Guaranteed Obligations
by one or more judicial or nonjudicial sales, or exercise any other right or
remedy the Guaranteed Parties may have against the Borrower, or any security,
without affecting or impairing in any way the liability of the Guarantor
hereunder except to the extent the Guaranteed Obligations have been paid.  Each
Guarantor unconditionally and irrevocably waives all rights and defenses that
the Guarantor may have because the Guaranteed Obligations are or become secured
by real property.  This means, among other things:  (a) the Guaranteed Parties
may collect from the Guarantor without first foreclosing on any real or personal
property collateral pledged by the Borrower; (b) if the Guaranteed Parties
foreclose on any real property collateral pledged by the Borrower:  (i) the
amount of the Guaranteed Obligations may be reduced only by the price for which
that collateral is sold at the foreclosure sale, even if the collateral is worth
more than the sale price, and (ii) the Guaranteed Parties may collect from the
Guarantor even if such foreclosure operates, pursuant to applicable law, to
impair or extinguish any right of the Guarantor against the Borrower.  Each
Guarantor understands and acknowledges that if the Guaranteed Parties foreclose
judicially or nonjudicially against any real property security for the
Borrower's obligations, such foreclosure could impair or destroy any right or
ability that the Guarantor may have to seek reimbursement, contribution, or
indemnification for any amounts paid by the Guarantor under this Guaranty.  Each
Guarantor further understands and acknowledges that in the absence of this
waiver such potential impairment or destruction of the Guarantor's rights, if
any, may entitle the Guarantor to assert a defense to this Guaranty based on
California Code of Civil Procedure §580d as interpreted in Union Bank v.
Gradsky, 265 Cal. App. 2d 40, 71 Cal. Rptr. 64 (1968), on the grounds, among
others, that the Guaranteed Parties should be estopped from pursuing the
Guarantor because the Guaranteed Parties' election to foreclose may have
impaired or destroyed such subrogation, reimbursement, contribution, or
indemnification rights of the Guarantor.  By execution of this Guaranty, each
Guarantor intentionally, freely, irrevocably, and unconditionally:  (i) waives
and relinquishes that defense and agrees that the Guarantor will be liable, on a
joint and several basis, under this Guaranty even though the Guaranteed Parties
had foreclosed judicially or nonjudicially against any real or personal property
collateral for the Borrower's obligations; (ii) agrees that the Guarantor will
not assert that defense in any action or proceeding which the Guaranteed Parties
may begin to enforce this Guaranty; and (iii) acknowledges and agrees that the
rights and defenses waived by the Guarantor in this Guaranty include any right
or defense that the Guarantor may have or be entitled to assert based on or
arising out of any one or more of California Code of Civil Procedure §§580a,
580b, 580d, or 726, or California Civil Code §2848.  Without limiting the
foregoing, each Guarantor waives all rights and defenses arising out of an
election of remedies by the Guaranteed Parties, even though that election of
remedies, such as nonjudicial foreclosure with respect to security for the
Guaranteed Obligations, has destroyed the Guarantor's rights of subrogation and
reimbursement against the principal by the operation of Section 580d of the
California Code of Civil Procedure.  Each Guarantor intentionally, freely,
irrevocably and unconditionally waives and relinquishes all rights which may be
available to it under any provision of California law or under any California
judicial decision, including, without limitation, Section 580a and 726(b) of the
California Code of Civil Procedure, to limit the amount of any deficiency
judgment or other judgment which may be obtained against the Guarantor under
this Guaranty to not more than the amount by which the unpaid Guaranteed
Obligations plus all other indebtedness due from the Borrower under the Credit
Agreement and the Loan Documents exceeds the fair market value or fair value of
any real or personal property securing said Guaranteed Obligations and any other
indebtedness due from the Borrower under the Credit Agreement, Security
Agreement and the other Security Documents, including, without limitation, all
rights to an appraisement of, judicial or other hearing on, or other
determination of the value of said property.  Each Guarantor acknowledges and
agrees that, as a result of the foregoing waiver, the Guaranteed Parties may be
entitled to recover from the Guarantor an amount which, when combined with the
value of any real or personal property foreclosed upon by the Guaranteed Parties
(or the proceeds of the sale of which have been received by the Guaranteed
Parties) and any sums collected by the Guaranteed Parties from the Borrower or
other persons, might exceed the amount of the Guaranteed Obligations plus all
other indebtedness due from the Borrower under the Credit Agreement and the Loan
Documents.

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ARTICLE V

MISCELLANEOUS

SECTION 5.01.  Revival and Reinstatement.  If the Guaranteed Parties are
required to pay, return or restore to the Borrower or any other Person any
amounts previously paid on the Guaranteed Obligations because of any Insolvency
Proceeding of the Borrower or any other Person, any stop notice or any other
reason, the obligations of the Guarantor shall be reinstated and revived, and
the rights of the Guaranteed Parties shall continue with regard to such amounts,
all as though they had never been paid.

SECTION 5.02.  Information Regarding the Borrower.  Before signing this
Guaranty, each Guarantor investigated the financial condition and business
operations of the Borrower and such other matters as the Guarantor deemed
appropriate to assure itself of the Borrower's ability to discharge its
obligations under the Credit Agreement and other Loan Documents.  Each Guarantor
assumes full responsibility for that due diligence, as well as for keeping
informed of all matters which may affect the Borrower's ability to pay and
perform its obligations hereunder.  The Guaranteed Parties do not have any duty
to disclose to the Guarantor any information which they may have or receive
about the Borrower's financial condition, business operations, or any other
circumstances bearing on its ability to perform.

SECTION 5.03.  Subordination.  Any rights of the Guarantor, whether now existing
or later arising, to receive payment on account of any indebtedness (including
interest) owed to it by the Borrower or any subsequent owner of any real
property collateral for the Guaranteed Obligations, or to withdraw capital
invested by it in the Borrower, or to receive distributions from the Borrower,
shall at all times be subordinate as to Lien and time of payment and in all
other respects to the full and prior repayment to the Guaranteed Parties of the
Guaranteed Obligations.  Each Guarantor shall not be entitled to enforce or
receive payment of any sums hereby subordinated until the Guaranteed Obligations
have been paid and performed in full and any such sums received in violation of
this Guaranty shall be received by the Guarantor in trust for the Guaranteed
Parties.

SECTION 5.04.  Authorization; No Violation.  Each Guarantor is authorized to
execute, deliver and perform under this Guaranty, which is a valid and binding
obligation of the Guarantor except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.  No provision or obligation of the Guarantor contained in this
Guaranty violates any applicable law, regulation or ordinance, or any order or
ruling of any court or governmental agency.  No such provision or obligation
conflicts with, or constitutes a breach or default under, any agreement to which
a Guarantor is a party.

SECTION 5.05.  Additional and Independent Obligations.  Each Guarantor's
obligations under this Guaranty are in addition to its obligations under any
other existing or future guaranties, each of which shall remain in full force
and effect until it is expressly modified or released in a writing signed by the
beneficiary of such other guaranty or guaranties.  Each Guarantor's obligations
under this Guaranty are independent of those of the Borrower on the Guaranteed
Obligations.  The Guaranteed Parties may bring a separate action, or commence a
separate reference or arbitration proceeding against a Guarantor without first
proceeding against the Borrower, any other Person or any security that the
Administrative Agent or any Lender may hold, and without pursuing any other
remedy.  The Guaranteed Parties rights under this Guaranty shall not be
exhausted by any action by the Guaranteed Parties until the Guaranteed
Obligations have been paid and performed in full.

SECTION 5.06.  No Waiver; Consents; Cumulative Remedies.  Each waiver by the
Guaranteed Parties must be in writing, and no waiver shall be construed as a
continuing waiver.  No waiver shall be implied from delay by the Guaranteed
Parties in exercising or failure to exercise any right or remedy against the
Borrower, the Guarantor or any security.  Consent by the Guaranteed Parties to
any act or omission by the Borrower or the Guarantor shall not be construed as a
consent to any other or subsequent act or omission, or as a waiver of the
requirement for consent of the Lender to be obtained in any future or other
instance.  All remedies of the Guaranteed Parties against the Borrower and the
Guarantor are cumulative.

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SECTION 5.07.  No Release.  The Guarantor shall not be released from its
obligations under this Guaranty except by a writing signed by the Administrative
Agent.

SECTION 5.08. Notices. All communications and notices hereunder shall (except as
otherwise expressly permitted herein) be in writing and given as provided in
Section 11(e) of the Credit Agreement. All communications and notices hereunder
to the Guarantor shall be addressed to the Guarantor care of the Borrower at the
address indicated in the Credit Agreement.

SECTION 5.09. Binding Effect; Several Agreement. This Agreement shall become
effective as to the Guarantor when a counterpart hereof executed on behalf of
the Guarantor shall have been delivered to the Administrative Agent and
thereafter shall be binding upon the Guarantor and the Guaranteed Parties and
their respective successors and assigns, and shall inure to the benefit of the
Guarantor and the Guaranteed Parties and their respective successors and
assigns, except that no Guarantor shall have the right to assign or transfer its
rights or obligations hereunder or any interest herein (and any such assignment
or transfer shall be void) except as expressly contemplated by this Guaranty or
the Credit Agreement. This Guaranty shall be construed as a separate agreement
with respect to each Guarantor and may be amended, modified, supplemented,
waived or released with respect to the Guarantor without the approval of any
other Guarantor and without affecting the obligations of any other Guarantor
hereunder.

SECTION 5.10. Costs and Expenses; Indemnification.

(a) Each Guarantor jointly and severally agrees to pay upon demand to the
Administrative Agent the amount of any and all reasonable expenses, including
the reasonable fees and expenses of its counsel, which the Guaranteed Parties
may incur in connection with (i) the administration of this Guaranty, (ii)  the
collection or enforcement of the Guaranteed Obligations, and (iii) the failure
of the Guarantor to perform or observe any of the provisions hereof.

(b) Without limitation of its indemnification obligations under the other Loan
Documents, each Guarantor jointly and severally agrees to indemnify the
Guaranteed Parties and the other Indemnitees against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable fees, disbursements and other charges of counsel,
incurred by or asserted against any of them arising out of, in any way connected
with, or as a result of, any claim, litigation, investigation or proceeding
(whether or not any Indemnitee is a party thereto) relating to the execution,
delivery or performance of this Guaranty; provided that such indemnity shall
not, as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent
jurisdiction by final judgment to have resulted from the gross negligence or
willful misconduct of such Indemnitee.

(c)  Any such amounts payable as provided hereunder shall be additional
Guaranteed Obligations.  The provisions of this Section 5.10 shall remain
operative and in full force and effect regardless of the termination of this
Guaranty or any other Loan Document, the consummation of the transactions
contemplated hereby, the repayment of any of the Loans, the invalidity or
unenforceability of any term or provision of this Guaranty or any other Loan
Document, or any investigation made by or on behalf of the Guaranteed Parties.
All amounts due under this Section 5.10 shall be payable on written demand
therefor.

SECTION 5.11. GOVERNING LAW. THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.

SECTION 5.12. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS. EACH P
ARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5.12.

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SECTION 5.13. Severability. In the event anyone or more of the provisions
contained in this Guaranty should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby
(it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.

SECTION 5.14 Counterparts. This Guaranty maybe executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract (subject to Section 5.09), and
shall become effective as provided in Section 5.09. Delivery of an executed
signature page to this Guaranty by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.

SECTION 5.15. Headings. Article and Section headings used herein are for the
purpose of reference only, are not part of this Guaranty and are not to affect
the construction of, or to be taken into consideration in interpreting, this
Guaranty.

SECTION 5.16. Jurisdiction; Consent to Service of Process.

(a) Each Guarantor hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of any California state court
or Federal court of the United States of America sitting in the Central District
of California, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Guaranty or the other Loan
Documents, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
California or, to the extent permitted by law, in such Federal court. Each of
the parties hereto agrees that, to the extent permitted by law, a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Guaranty shall affect any right that the Administrative
Agent or any other Guaranteed Party may otherwise have to bring any action or
proceeding relating to this Guaranty or the other Loan Documents against the
Guarantor or its properties in the courts of any jurisdiction.

(b) Each Guarantor hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Guaranty or the other Loan Documents in any
California State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

(c) Each party to this Guaranty irrevocably consents to service of process in
the manner provided for notices in Section 5.08. Nothing in this Guaranty will
affect the right of any party to this Guaranty to serve process in any other
manner permitted by law.

 

MENTOR INTERNATIONAL HOLDINGS, INC.

   

By:

                                                                           
Michael O'Neill
Vice President and Chief Financial Officer

 

 

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