CREDIT AND SECURITY AGREEMENT

 

dated as of April 23, 2012

 

by and among

 

BACTERIN INTERNATIONAL HOLDINGS, INC., and

 

BACTERIN INTERNATIONAL, INC.,

 

each individually, as a Borrower and collectively, as the Borrowers,

 

and

 

MIDCAP FINANCIAL, LLC,

 

as Administrative Agent and as a Lender,

 

and

 

SILICON VALLEY BANK,

 

as a Lender,

 

and

 

THE ADDITIONAL LENDERS

 

FROM TIME TO TIME PARTY HERETO

 

 

 

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CREDIT AND SECURITY AGREEMENT

 

THIS CREDIT AND SECURITY AGREEMENT (as the same may be amended, supplemented,
restated or otherwise modified from time to time, the “Agreement”) is dated as
of April 23, 2012, by and among BACTERIN INTERNATIONAL HOLDINGS, INC., a
Delaware corporation, and BACTERIN INTERNATIONAL, INC., a Nevada corporation,
and any additional borrower that may hereafter be added to this Agreement (each
individually as a “Borrower”, and collectively as “Borrowers”), MIDCAP
FINANCIAL, LLC, a Delaware limited liability company, individually as a Lender,
and as Agent, and the financial institutions or other entities from time to time
parties hereto, each as a Lender.

 

RECITALS

 

Borrowers have requested that Lenders make available to Borrowers the financing
facilities as described herein. Lenders are willing to extend such credit to
Borrowers under the terms and conditions herein set forth.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, Borrowers, Lenders and Agent agree as follows:

 

Article 1 - DEFINITIONS

 

Section 1.1             Certain Defined Terms. The following terms have the
following meanings:

 

“Acceleration Event” means the occurrence of an Event of Default (a) in respect
of which Agent has declared all or any portion of the Obligations to be
immediately due and payable pursuant to Section 10.2, (b) pursuant to
Section 10.1(a), and in respect of which Agent has suspended or terminated the
Revolving Loan Commitment pursuant to Section 10.2, and/or (c) pursuant to
either Section 10.1(e) and/or Section 10.1(f).

 

“Account Debtor” means “account debtor”, as defined in Article 9 of the UCC, and
any other obligor in respect of an Account.

 

“Accounts” means, collectively, (a) any right to payment of a monetary
obligation, whether or not earned by performance, (b) without duplication, any
“account” (as defined in the UCC), any accounts receivable (whether in the form
of payments for services rendered or goods sold, rents, license fees or
otherwise), any “health-care-insurance receivables” (as defined in the UCC), any
“payment intangibles” (as defined in the UCC) and all other rights to payment
and/or reimbursement of every kind and description, whether or not earned by
performance, (c) all accounts, “general intangibles” (as defined in the UCC),
Intellectual Property, rights, remedies, Guarantees, “supporting obligations”
(as defined in the UCC), “letter-of-credit rights” (as defined in the UCC) and
security interests in respect of the foregoing, all rights of enforcement and
collection, all books and records evidencing or related to the foregoing, and
all rights under the Financing Documents in respect of the foregoing, (d) all
information and data compiled or derived by any Borrower or to which any
Borrower is entitled in respect of or related to the foregoing, and (e) all
proceeds of any of the foregoing.

 

“Agent” means MCF, in its capacity as administrative agent for itself and for
Lenders hereunder, as such capacity is established in, and subject to the
provisions of, Article 11, and the successors of MCF in such capacity.

 

 

 

 

“Affiliate” means, with respect to any Person, (a) any Person that directly or
indirectly controls such Person, (b) any Person which is controlled by or is
under common control with such controlling Person, and (c) each of such Person’s
(other than, with respect to any Lender, any Lender’s) officers or directors (or
Persons functioning in substantially similar roles) and the spouses, parents,
descendants and siblings of such officers, directors or other Persons. As used
in this definition, the term “control” of a Person means the possession,
directly or indirectly, of the power to vote five percent (5%) or more of any
class of voting securities of such Person or to direct or cause the direction of
the management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.

 

“Affiliated Financing Documents” means any credit, loan, letter of credit or
related documents which are, by their terms and by the terms of this Agreement,
cross-defaulted with the Financing Documents, and for which a Credit Party
hereunder is liable or contingently liable for payment or as security for which
a Credit Party hereunder has pledged, assigned or subjected any assets. The term
“Affiliated Financing Documents” shall include, without limitation, that certain
Loan and Security Agreement dated as of July 28, 2011 by and among Borrowers,
MidCap Funding III, LLC (an Affiliate of Agent), and Silicon Valley Bank, and
the other “Loan Documents”, as defined therein.

 

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

 

“Applicable Margin” means four percent (4.0%).

 

“Asset Disposition” means any sale, lease, license, transfer, assignment or
other consensual disposition by Borrower of any asset.

 

“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy”, as the same may be amended, modified or supplemented from time to
time, and any successor statute thereto.

 

“Base LIBOR Rate” means the rate per annum, determined by Agent in accordance
with its customary procedures, and utilizing such electronic or other quotation
sources as it considers appropriate (rounded upwards, if necessary, to the next
1/100%), to be the rate at which Dollar deposits (for delivery on the first day
of such Interest Period or, if such day is not a Business Day on the preceding
Business Day) in the amount of $1,000,000 are offered to major banks in the
London interbank market on or about 11:00 a.m. (Eastern time) two (2) Business
Days prior to the commencement of such Interest Period, for a term comparable to
such Interest Period, which determination shall be conclusive in the absence of
manifest error.

 

“Base Rate” means the rate of interest announced means a per annum rate of
interest equal to the rate of interest announced, from time to time, within
Wells Fargo at its principal office in San Francisco as its “prime rate,” with
the understanding that the “prime rate” is one of Wells Fargo’s base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publications as Wells Fargo may designate; provided, however, that
Agent may, upon prior written notice to Borrower, choose a reasonably comparable
index or source to use as the basis for the Base Rate.

 

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

 

2

 

 

“Borrower” and “Borrowers” mean the entities described in the first paragraph of
this Agreement and each of their successors and permitted assigns.

 

“Borrower Representative” means Bacterin International, Inc., in its capacity as
Borrower Representative pursuant to the provisions of Section 2.9.

 

“Borrowing Base” means:

 

(a)                the product of (i) eighty percent (80%) multiplied by
(ii) the aggregate net amount at such time of the Eligible Accounts; minus

 

(b)               the amount of any reserves and/or adjustments provided for in
this Agreement.

 

“Borrowing Base Certificate” means a certificate, duly executed by a Responsible
Officer of Borrower Representative, in form and substance acceptable to Lenders.

 

“Business Day” means any day except a Saturday, Sunday or other day on which
either the New York Stock Exchange is closed, or on which commercial banks in
Washington, DC and New York City are authorized by law to close.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C.A. § 9601 et seq., as the same may be amended
from time to time.

 

“Change in Control” means any event, transaction, or occurrence as a result of
which (a) any “person” (as such term is defined in Sections 3(a)(9) and 13(d)(3)
of the Exchange Act), other than a trustee or other fiduciary holding securities
under an employee benefit plan of Borrower, is or becomes a beneficial owner
(within the meaning Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of Borrower, representing twenty-five percent (25%) or
more of the combined voting power of Borrower’s then outstanding securities; or
(b) during any period of twelve consecutive calendar months, individuals who at
the beginning of such period constituted the board of directors of Borrower
(together with any new directors whose election by the board of directors of
Borrower was approved by a vote of not less than two-thirds of the directors
then still in office who either were directions at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason other than death or disability to constitute a majority of the
directors then in office.

 

“Closing Date” means the date of this Agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

“Collateral” means all property, now existing or hereafter acquired, mortgaged
or pledged to, or purported to be subjected to a Lien in favor of, Agent, for
the benefit of Agent and Lenders, pursuant to this Agreement and the Security
Documents, including, without limitation, all of the property described in
Schedule 9.1 hereto.

 

“Commitment Annex” means Annex A to this Agreement.

 

3

 

 

“Commitment Expiry Date” means January 1, 2015.

 

“Compliance Certificate” means a certificate, duly executed by a Responsible
Officer of Borrower Representative, appropriately completed and substantially in
the form of Exhibit A hereto.

 

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

 

“Controlled Group” means all members of any group of corporations and all
members of a group of trades or businesses (whether or not incorporated) under
common control which, together with any Borrower, are treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of
ERISA.

 

“Credit Exposure” means, at any time, any portion of the Revolving Loan
Commitment that remains outstanding; provided, however, that no Credit Exposure
shall be deemed to exist solely due to the existence of contingent
indemnification liability, absent the assertion of a claim, or the known
existence of a claim reasonably likely to be asserted, with respect thereto.

 

“Credit Party” means any Guarantor under a Guarantee of the Obligations or any
part thereof, Borrower and any other Person (other than Agent, a Lender or a
participant of a Lender), whether now existing or hereafter acquired or formed,
that becomes obligated as a borrower, guarantor, surety, indemnitor, pledgor,
assignor or other obligor under any Financing Document. As of the Closing Date,
Borrowers are the only Credit Parties.

 

“DEA” means the Drug Enforcement Administration of the United States of America,
and any successor agency thereof.

 

“Debt” of a Person means at any date, without duplication, (a) all obligations
of such Person for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (c) all obligations of
such Person to pay the deferred purchase price of property or services, except
trade accounts payable arising and paid on a timely basis and in the Ordinary
Course of Business, (d) all capital leases of such Person, (e) all
non-contingent obligations of such Person to reimburse any bank or other Person
in respect of amounts paid under a letter of credit, banker’s acceptance or
similar instrument, (f) [reserved], (g) all obligations secured by a Lien on any
asset of such Person, whether or not such obligation is otherwise an obligation
of such Person, (h) “earnouts”, purchase price adjustments, profit sharing
arrangements, deferred purchase money amounts and similar payment obligations or
continuing obligations of any nature of such Person arising out of purchase and
sale contracts, (i) all Debt of others Guaranteed by such Person,
(j) off-balance sheet liabilities and/or Pension Plan or Multiemployer Plan
liabilities of such Person, (k) [reserved] , and (l) obligations arising under
bonus, deferred compensation, incentive compensation or similar arrangements,
other than those arising in the Ordinary Course of Business.

 

4

 

 

“Default” means any condition or event which with the giving of notice or lapse
of time or both would, unless cured or waived, become an Event of Default.

 

“Deposit Account” means a “deposit account” (as defined in Article 9 of the
UCC), an investment account, or other account in which funds are held or
invested for credit to or for the benefit of any Borrower.

 

“Deposit Account Control Agreement” means an agreement, in form and substance
satisfactory to Agent, among Agent, Borrower and each financial institution in
which such Borrower maintains a Deposit Account.

 

“Distribution” means as to any Person (a) any dividend or other distribution
(whether in cash, securities or other property) on any equity interest in such
Person (except those payable solely in its equity interests of the same class),
(b) any payment by such Person on account of (i) the purchase, redemption,
retirement, defeasance, surrender, cancellation, termination or acquisition of
any equity interests in such Person or any claim respecting the purchase or sale
of any equity interest in such Person (except in connection with any Warrants
issued to any Lender in connection with the Affiliated Financing Documents), or
(ii) any option, warrant or other right to acquire any equity interests in such
Person (excluding, however those certain Warrants issued to one or more Lenders
in connection with the Affiliated Financing Documents), (c) any management fees,
salaries or other fees or compensation to any Person holding an equity interest
in a Borrower or a Subsidiary of a Borrower (other than (i) payments of salaries
to individuals, and (ii) advances and reimbursements to employees or directors,
all in the Ordinary Course of Business), an Affiliate of a Borrower, (d) any
lease or rental payments to an Affiliate of a Borrower, or (e) repayments of or
debt service on loans or other indebtedness held by any Person holding an equity
interest in a Borrower, an Affiliate of a Borrower unless permitted under and
made pursuant to a Subordination Agreement applicable to such loans or other
indebtedness.

 

“Dollars” or “$” means the lawful currency of the United States of America.

 

“Drug Application” means a new drug application, an abbreviated drug
application, or a product license application for any Product, as appropriate,
as those terms are defined in the FDCA.

 

“EBITDA” has the meaning provided in the Compliance Certificate.

 

“Eligible Account” means, subject to the criteria below, an account receivable
of a Borrower, which was generated in the Ordinary Course of Business, which was
generated originally in the name of a Borrower and not acquired via assignment
or otherwise, and which Agent, in its good faith credit judgment and discretion,
deems to be an Eligible Account. The net amount of an Eligible Account at any
time shall be (a) the face amount of such Eligible Account as originally billed
minus all cash collections and other proceeds of such Account received from or
on behalf of the Account Debtor thereunder as of such date and any and all
returns, rebates, discounts (which may, at Agent’s option, be calculated on
shortest terms), credits, allowances or excise taxes of any nature at any time
issued, owing, claimed by Account Debtors, granted, outstanding or payable in
connection with such Accounts at such time, and (b) adjusted by applying
percentages (known as “liquidity factors”) by payor and/or payor class based
upon the applicable Borrower’s actual recent collection history for each such
payor and/or payor class in a manner consistent with Agent’s underwriting
practices and procedures. Such liquidity factors may be adjusted by Agent from
time to time as warranted by Agent’s underwriting practices and procedures and
using Agent’s good faith credit judgment. Without limiting the generality of the
foregoing, no Account shall be an Eligible Account if:

 

5

 

 

(a)                the Account remains unpaid more than one hundred and one
hundred ninety (90) days past the claim or invoice date (but in no event more
than one hundred twenty (120) days after the applicable goods or services have
been rendered or delivered);

 

(b)               the Account is subject to any defense, set-off, recoupment,
counterclaim, deduction, discount, credit, chargeback, freight claim, allowance,
or adjustment of any kind (but only to the extent of such defense, set-off,
recoupment, counterclaim, deduction, discount, credit, chargeback, freight
claim, allowance, or adjustment), or the applicable Borrower is not able to
bring suit or otherwise enforce its remedies against the Account Debtor through
judicial process;

 

(c)                if the Account arises from the sale of goods, any part of any
goods the sale of which has given rise to the Account has been returned,
rejected, lost, or damaged (but only to the extent that such goods have been so
returned, rejected, lost or damaged);

 

(d)               if the Account arises from the sale of goods, the sale was not
an absolute, bona fide sale, or the sale was made on consignment or on approval
or on a sale-or-return or bill-and-hold or progress billing basis, or the sale
was made subject to any other repurchase or return agreement, or the goods have
not been shipped to the Account Debtor or its designee or the sale was not made
in compliance with applicable Laws;

 

(e)                if the Account arises from the performance of services, the
services have not actually been performed or the services were undertaken in
violation of any law or the Account represents a progress billing for which
services have not been fully and completely rendered;

 

(f)                the Account is subject to a Lien other than a Permitted Lien,
or Agent does not have a Lien on such Account;

 

(g)                the Account is evidenced by Chattel Paper or an Instrument of
any kind, or has been reduced to judgment, unless such Chattel Paper or
Instrument has been delivered to Agent;

 

(h)               the Account Debtor is an Affiliate or Subsidiary of a Credit
Party, or if the Account Debtor holds any Debt of a Credit Party;

 

(i)                 more than fifty percent (50%) of the aggregate balance of
all Accounts owing from the Account Debtor obligated on the Account are
ineligible under subclause (a) above (in which case all Accounts from such
Account Debtor shall be ineligible);

 

(j)                 without limiting the provisions of clause (i) above, fifty
percent (50%) or more of the aggregate unpaid Accounts from the Account Debtor
obligated on the Account are not deemed Eligible Accounts under this Agreement
for any reason;

 

(k)               the total unpaid Accounts of the Account Debtor obligated on
the Account exceed twenty percent (20%) of the net amount of all Eligible
Accounts owing from all Account Debtors (but only the amount of the Accounts of
such Account Debtor exceeding such twenty percent (20%) limitation shall be
considered ineligible);

 

6

 

 

(l)                 any covenant, representation or warranty contained in the
Financing Documents with respect to such Account has been breached in any
respect;

 

(m)             the Account is unbilled or has not been invoiced to the Account
Debtor in accordance with the procedures and requirements of the applicable
Account Debtor;

 

(n)               the Account is an obligation of an Account Debtor that is the
federal, state or local government or any political subdivision thereof, unless
Agent has agreed to the contrary in writing and Agent has received from the
Account Debtor the acknowledgement of Agent’s notice of assignment of such
obligation pursuant to this Agreement;

 

(o)               the Account is an obligation of an Account Debtor that has
suspended business, made a general assignment for the benefit of creditors, is
unable to pay its debts as they become due or as to which a petition has been
filed (voluntary or involuntary) under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or the Account is an Account as
to which any facts, events or occurrences exist which could reasonably be
expected to impair the validity, enforceability or collectability of such
Account or reduce the amount payable or delay payment thereunder;

 

(p)               the Account Debtor has its principal place of business or
executive office outside the United States;

 

(q)               the Account is payable in a currency other than United States
dollars;

 

(r)                 the Account Debtor is an individual;

 

(s)                the Borrower owning such Account has not signed and delivered
to Agent notices, in the form requested by Agent, directing the Account Debtors
to make payment to the applicable Lockbox Account;

 

(t)                 the Account includes late charges or finance charges (but
only such portion of the Account shall be ineligible);

 

(u)               the Account arises out of the sale of any Inventory upon which
any other Person holds, claims or asserts a Lien; or

 

(v)               the Account or Account Debtor fails to meet such other
specifications and requirements which may from time to time be established by
Agent in its good faith credit judgment and discretion.

 

“Environmental Laws” means any present and future federal, state and local laws,
statutes, ordinances, rules, regulations, standards, policies and other
governmental directives or requirements, as well as common law, pertaining to
the environment, natural resources, pollution, health (including any
environmental clean-up statutes and all regulations adopted by any local, state,
federal or other Governmental Authority, and any statute, ordinance, code,
order, decree, law rule or regulation all of which pertain to or impose
liability or standards of conduct concerning medical waste or medical products,
equipment or supplies), safety or clean-up that apply to any Borrower and relate
to Hazardous Materials, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601
et seq.), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901
et seq.), the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.),
the Hazardous Materials Transportation Act (49 U.S.C. § 5101 et seq.), the Clean
Air Act (42 U.S.C. § 7401 et seq.), the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. § 136 et seq.), the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. § 11001 et seq.), the Occupational Safety and
Health Act (29 U.S.C. § 651 et seq.), the Residential Lead-Based Paint Hazard
Reduction Act (42 U.S.C. § 4851 et seq.), any analogous state or local laws, any
amendments thereto, and the regulations promulgated pursuant to said laws,
together with all amendments from time to time to any of the foregoing and
judicial interpretations thereof.

 

7

 

 

“Environmental Liens” means all Liens and other encumbrances imposed pursuant to
any Environmental Law, whether due to any act or omission of any Borrower or any
other Person.

 

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

 

“ERISA Plan” means any “employee benefit plan”, as such term is defined in
Section 3(3) of ERISA (other than a Multiemployer Plan), which any Borrower
maintains, sponsors or contributes to, or, in the case of an employee benefit
plan which is subject to Section 412 of the Code or Title IV of ERISA, to which
any Borrower or any member of the Controlled Group may have any liability,
including any liability by reason of having been a substantial employer within
the meaning of Section 4063 of ERISA at any time during the preceding five
(5) years, or by reason of being deemed to be a contributing sponsor under
Section 4069 of ERISA.

 

“Event of Default” has the meaning set forth in Section 10.1.

 

“FDA” means the Food and Drug Administration of the United States of America, or
any successor entity thereto.

 

“FDCA” means the Federal Food, Drug and Cosmetic Act, as amended, 21 U.S.C.
Section 301 et seq., and all regulations promulgated thereunder.

 

“Financing Documents” means this Agreement, any Notes, the Security Documents,
the Term Loan Documents, any subordination or intercreditor agreement pursuant
to which any Debt and/or any Liens securing such Debt is subordinated to all or
any portion of the Obligations and all other documents, instruments and
agreements related to the Obligations and heretofore executed, executed
concurrently herewith or executed at any time and from time to time hereafter,
as any or all of the same may be amended, supplemented, restated or otherwise
modified from time to time.

 

“GAAP” means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the United States
accounting profession), which are applicable to the circumstances as of the date
of determination.

 

“General Intangible” means any “general intangible” as defined in Article 9 of
the UCC, and any personal property, including things in action, other than
accounts, chattel paper, commercial tort claims, deposit accounts, documents,
goods, instruments, investment property, letter-of-credit rights, letters of
credit, money, and oil, gas or other minerals before extraction, but including
payment intangibles and software.

 

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, and any agency, department or Person exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any corporation or other Person owned or controlled
(through stock or capital ownership or otherwise) by any of the foregoing,
whether domestic or foreign.

 

8

 

 

“Guarantee” by any Person means any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise), or
(b) entered into for the purpose of assuring in any other manner the obligee of
such Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), provided, however, that
the term Guarantee shall not include endorsements for collection or deposit in
the Ordinary Course of Business. The term “Guarantee” used as a verb has a
corresponding meaning. As of the Closing Date, there are no Guarantees.

 

“Guarantor” means any Credit Party that has executed or delivered, or shall in
the future execute or deliver, any Guarantee of any portion of the Obligations.
As of the Closing Date, there are no Guarantors.

 

“Hazardous Materials” means petroleum and petroleum products and compounds
containing them, including gasoline, diesel fuel and oil; explosives, flammable
materials; radioactive materials; polychlorinated biphenyls and compounds
containing them; lead and lead-based paint; asbestos or asbestos-containing
materials; underground or above-ground storage tanks, whether empty or
containing any substance; any substance the presence of which on the Borrower’s
operations is prohibited by any Environmental Laws; toxic mold, any substance
that requires special handling; and any other material or substance now or in
the future defined as a “hazardous substance,” “hazardous material,” “hazardous
waste,” “toxic substance,” “toxic pollutant,” “contaminant,” “pollutant” or
other words of similar import within the meaning of any Environmental Law,
including: (a) any “hazardous substance” defined as such in (or for purposes of)
CERCLA, or any so-called “superfund” or “superlien” Law, including the judicial
interpretation thereof; (b) any “pollutant or contaminant” as defined in 42
U.S.C.A. § 9601(33); (c) any material now defined as “hazardous waste” pursuant
to 40 C.F.R. Part 260; (d) any petroleum or petroleum by-products, including
crude oil or any fraction thereof; (e) natural gas, natural gas liquids,
liquefied natural gas, or synthetic gas usable for fuel; (f) any “hazardous
chemical” as defined pursuant to 29 C.F.R. Part 1910; (g) any toxic or harmful
substances, wastes, materials, pollutants or contaminants (including, without
limitation, asbestos, polychlorinated biphenyls (“PCB’s”), flammable explosives,
radioactive materials, infectious substances, materials containing lead-based
paint or raw materials which include hazardous constituents); and (h) any other
toxic substance or contaminant that is subject to any Environmental Laws or
other past or present requirement of any Governmental Authority.

 

“Hazardous Materials Contamination” means contamination (whether now existing or
hereafter occurring) of the improvements, buildings, facilities, personalty,
soil, groundwater, air or other elements on or of the relevant property by
Hazardous Materials, or any derivatives thereof, or on or of any other property
as a result of Hazardous Materials, or any derivatives thereof, generated on,
emanating from or disposed of in connection with the relevant property.

 

“Indemnified Taxes” has the meaning set forth in Section 2.8(a).

 

“Indemnitees” has the meaning set forth in Section 12.14.

 

“Instrument” means “instrument”, as defined in Article 9 of the UCC.

 

9

 

 

“Intellectual Property” includes, without limitation, all copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work, whether published or unpublished, any
patents, patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, trademarks, trade names, service marks, mask
works, rights of use of any name, domain names, or any other similar rights, any
applications therefor, whether registered or not, and the goodwill of the
business of Borrower connected with and symbolized thereby, know-how, operating
manuals, trade secret rights, clinical and non-clinical data, rights to
unpatented inventions, and any claims for damage by way of any past, present, or
future infringement of any of the foregoing.

 

“Interest Period” means any period commencing on the first day of a calendar
month and ending on the last day of such calendar month.

 

“Inventory” means “inventory” as defined in Article 9 of the UCC.

 

“Investment” means any investment in any Person, whether by means of acquiring
(whether for cash, property, services, securities or otherwise), making or
holding Debt, securities, capital contributions, loans, time deposits, advances,
Guarantees or otherwise. The amount of any Investment shall be the original cost
of such Investment plus the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect thereto.

 

“Law” and “Laws” means any and all federal, state, provincial, territorial,
local and foreign statutes, laws, judicial decisions, regulations, ordinances,
rules, judgments, orders, decrees, codes, injunctions, permits, governmental
agreements and governmental restrictions, whether now or hereafter in effect,
which are applicable to Borrower in any particular circumstance.

 

“Lender” means each of (a) MCF, in its capacity as a Lender hereunder,
(b) Silicon Valley Bank, (c) each other Person that becomes a party hereto as
Lender pursuant to Section 11.17, and (d) the respective successors of all of
the foregoing, and “Lenders” means all of the foregoing.

 

“LIBOR Rate” means, for each Loan, a per annum rate of interest equal to the
greater of (a) two and one half of one percent (2.50%), and (b) the rate
determined by Agent (rounded upwards, if necessary, to the next 1/100th%) by
dividing (i) the Base LIBOR Rate for the Interest Period, by (ii) 100% minus the
Reserve Percentage. The LIBOR Rate shall be adjusted on and as of the effective
day of any change in the Reserve Percentage.

 

“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind, in respect of such asset. For the
purposes of this Agreement and the other Financing Documents, any Borrower or
any Subsidiary shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.

 

“Litigation” means any action, suit or proceeding before any court, mediator,
arbitrator or Governmental Authority.

 

“Loan Account” has the meaning set forth in Section 2.6(b).

 

“Loan(s)” means the Revolving Loans, or any combination of Revolving Loans, as
the context may require.

 

“Lockbox” has the meaning set forth in Section 2.11.

 

10

 

 

“Lockbox Account” means an account or accounts maintained at the Lockbox Bank
into which collections of Accounts are paid, which account or accounts shall be,
if requested by Agent, opened in the name of Agent (or a nominee of Agent).

 

“Lockbox Bank” has the meaning set forth in Section 2.11.

 

“Material Adverse Effect” means (a) a material impairment in the perfection or
priority of Agent’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) or prospects of Borrower; (c) a material impairment of
the prospect of repayment of any portion of the Obligations; or (d) Agent
determines, based upon information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrower shall fail to
comply with one or more of the financial covenants in Article 6 during the next
succeeding financial reporting period.

 

“Material Contracts” has the meaning set forth in Section 3.17.

 

“Material Intellectual Property” means all of Borrower’s Intellectual Property
and license agreements that are material to the condition (financial or other),
business or operations of Borrower, as determined by Agent.

 

“Maximum Lawful Rate” has the meaning set forth in Section 2.7.

 

“MCF” means MidCap Financial, LLC, and its successors and assigns.

 

“Minimum Balance” shall mean, at any time, an amount that equals the product of:
(a) the average Borrowing Base (or, if less on any given day, the Revolving Loan
Commitment) during the immediately preceding month multiplied by (b) the Minimum
Balance Percentage for such month.

 

“Minimum Balance Percentage” means fifty percent (50.0%).

 

“Multiemployer Plan” means a multiemployer plan within the meaning of
Section 4001(a)(3) of ERISA to which any Borrower or any other member of the
Controlled Group (or any Person who in the last five years was a member of the
Controlled Group) is making or accruing an obligation to make contributions or
has within the preceding five plan years (as determined on the applicable date
of determination) made contributions.

 

“Notes” has the meaning set forth in Section 2.3.

 

“Notice of Borrowing” means a notice of a Responsible Officer of Borrower,
appropriately completed and substantially in the form of Exhibit B hereto.

 

“Obligations” means all obligations, liabilities and indebtedness (monetary
(including post-petition interest, whether or not allowed) or otherwise) of each
Credit Party under this Agreement or any other Financing Document, in each case
howsoever created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due.

 

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

 

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

 

11

 

 

“Operative Documents” means the Financing Documents, Subordinated Debt
Documents, and any documents effecting any purchase or sale or other transaction
that is closing contemporaneously with the closing of the financing under this
Agreement.

 

“Ordinary Course of Business” means, in respect of any transaction involving any
Person, the ordinary course of business of such Person, as conducted by such
Person in accordance with past practices.

 

“Organizational Documents” means, with respect to any Person other than a
natural person, the documents by which such Person was organized (such as a
certificate of incorporation, certificate of limited partnership or articles of
organization, and including, without limitation, any certificates of designation
for preferred stock or other forms of preferred equity) and which relate to the
internal governance of such Person (such as by-laws, a partnership agreement or
an operating, limited liability company or members agreement).

 

“Payment Account” means the account specified on the signature pages hereof into
which all payments by or on behalf of each Borrower to Agent under the Financing
Documents shall be made, or such other account as Agent shall from time to time
specify by notice to Borrower Representative.

 

“PBGC” means the Pension Benefit Guaranty Corporation and any Person succeeding
to any or all of its functions under ERISA.

 

“Pension Plan” means any ERISA Plan that is subject to Section 412 of the Code
or Title IV of ERISA.

 

“Permits” means all governmental licenses, authorizations, provider numbers,
supplier numbers, registrations, permits, drug or device authorizations and
approvals, certificates, franchises, qualifications, accreditations, consents
and approvals of Borrower required under all applicable Laws and required for
Borrower in order to carry on its business as now conducted.

 

“Permitted Acquisition” means any acquisition permitted under the Term Loan
Agreement.

 

“Permitted Asset Dispositions” means the following Asset Dispositions, provided,
however, that at the time of such Asset Disposition, no Default or Event of
Default exists or would result from such Asset Disposition: (a) dispositions of
Inventory in the Ordinary Course of Business and not pursuant to any bulk sale,
(b) dispositions of furniture, fixtures and equipment in the Ordinary Course of
Business that the applicable Borrower determines in good faith is no longer used
or useful in the business of such Borrower, and (c) other dispositions approved
by Agent.

 

“Permitted Contest” means, with respect to any tax obligation or other
obligation allegedly or potentially owing from any Borrower to any governmental
tax authority or other third party, a contest maintained in good faith by
appropriate proceedings promptly instituted and diligently conducted and with
respect to which such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made on the books and
records and financial statements of Borrower; provided, however, that
(a) compliance with the obligation that is the subject of such contest is
effectively stayed during such challenge; (b) Borrowers’ title to, and its right
to use, the Collateral is not adversely affected thereby and Agent’s Lien and
priority on the Collateral are not adversely affected, altered or impaired
thereby; (c) Borrowers have given prior written notice to Agent of a Borrower’s
intent to so contest the obligation; (d) the Collateral or any part thereof or
any interest therein shall not be in any danger of being sold, forfeited or lost
by reason of such contest by Borrowers; (e) Borrowers have given Agent notice of
the commencement of such contest and upon request by Agent, from time to time,
notice of the status of such contest by Borrowers and/or confirmation of the
continuing satisfaction of this definition; and (f) upon a final determination
of such contest, Borrowers shall promptly comply with the requirements thereof.

 

12

 

 

“Permitted Contingent Obligations” means (a) Contingent Obligations arising in
respect of the Debt under the Financing Documents; (b) Contingent Obligations
resulting from endorsements for collection or deposit in the Ordinary Course of
Business; (c) Contingent Obligations outstanding on the date of this Agreement
and set forth on Schedule 5.1 (but not including any refinancings, extensions,
increases or amendments to the indebtedness underlying such Contingent
Obligations other than extensions of the maturity thereof without any other
change in terms); (d) Contingent Obligations incurred in the Ordinary Course of
Business with respect to surety and appeal bonds, performance bonds and other
similar obligations not to exceed $25,000 in the aggregate at any time
outstanding; (e) Contingent Obligations described in clauses (c) and (e) of the
definition thereof; and (f) other Contingent Obligations not permitted by
clauses (a) through (e) above, not to exceed $25,000 in the aggregate at any
time outstanding.

 

“Permitted Indebtedness” means: (a) Borrower’s Debt to Agent and each Lender
under this Agreement and the other Financing Documents; (b) Debt incurred as a
result of endorsing negotiable instruments received in the Ordinary Course of
Business; (c) purchase money Debt not to exceed $100,000 at any time (whether in
the form of a loan or a lease) used solely to acquire equipment used in the
Ordinary Course of Business and secured only by such equipment; (d) Debt
existing on the date of this Agreement and described on Schedule 5.1 (but not
including any refinancings, extensions, increases or amendments to such Debt
other than extensions of the maturity thereof without any other change in
terms); (e) trade accounts payable and other unsecured Debt arising and paid on
a timely basis and in the Ordinary Course of Business; (f) Subordinated Debt;
and (g) without duplication, “Permitted Indebtedness” (as such term is defined
in the Term Loan Agreement) permitted under the Term Loan Agreement, as in
effect on the Closing Date.

 

“Permitted Investments” means: (a) Investments shown on Schedule 5.7 and
existing on the Closing Date; (b) cash equivalents and (c) without duplication,
“Permitted Investments” (as such term is defined in the Term Loan Agreement)
permitted under the Term Loan Agreement, as in effect on the Closing Date.

 

“Permitted Liens” means: (a) deposits or pledges of cash to secure obligations
under workmen’s compensation, social security or similar laws, or under
unemployment insurance (but excluding Liens arising under ERISA) pertaining to a
Borrower’s employees, if any; (b) deposits or pledges of cash to secure bids,
tenders, contracts (other than contracts for the payment of money or the
deferred purchase price of property or services), leases, statutory obligations,
surety and appeal bonds and other obligations of like nature arising in the
Ordinary Course of Business; (c) carrier’s, warehousemen’s, mechanic’s,
workmen’s, materialmen’s or other like Liens on Collateral, other than any
Collateral which is part of the Borrowing Base, arising in the Ordinary Course
of Business with respect to obligations which are not due, or which are being
contested pursuant to a Permitted Contest; (d) Liens on Collateral, other than
Accounts, for taxes or other governmental charges not at the time delinquent or
thereafter payable without penalty or the subject of a Permitted Contest;
(e) attachments, appeal bonds, judgments and other similar Liens on Collateral
other than Accounts, for sums not exceeding $100,000 in the aggregate arising in
connection with court proceedings; provided, however, that the execution or
other enforcement of such Liens is effectively stayed and the claims secured
thereby are the subject of a Permitted Contest; (f) Liens and encumbrances in
favor of Agent under the Financing Documents; (g) Liens on Collateral, other
than Collateral which is part of the Borrowing Base, existing on the date hereof
and set forth on Schedule 5.2; (h) any Lien on any equipment securing Debt
permitted under subpart (c) of the definition of Permitted Indebtedness,
provided, however, that such Lien attaches concurrently with or within twenty
(20) days after the acquisition thereof; (i) Liens and encumbrances in favor of
the holders of any Affiliated Financing Documents; and (j) without duplication,
“Permitted Liens” (as such term is defined in the Term Loan Agreement) permitted
under the Term Loan Agreement, as in effect on the Closing Date.

 

13

 

 

“Permitted Modifications” means (a) such amendments or other modifications to a
Borrower’s Organizational Documents as are required under this Agreement or by
applicable Law and fully disclosed to Agent within thirty (30) days after such
amendments or modifications have become effective, and (b) such amendments or
modifications to a Borrower’s Organizational Documents (other than those
involving a change in the name of a Borrower or involving a reorganization of a
Borrower under the laws of a different jurisdiction) that would not adversely
affect the rights and interests of the Agent or Lenders and fully disclosed to
Agent within thirty (30) days after such amendments or modifications have become
effective.

 

“Person” means any natural person, corporation, limited liability company,
professional association, limited partnership, general partnership, joint stock
company, joint venture, association, company, trust, bank, trust company, land
trust, business trust or other organization, whether or not a legal entity, and
any Governmental Authority.

 

“Products” means any products manufactured, sold, developed, tested or marketed
by any Borrower or any of its Subsidiaries, including without limitation, those
products set forth on Schedule 3.24 (as updated from time to time in accordance
with Section 4.12 above); provided, however, that if Borrower shall fail to
comply with the obligations under Section 4.12 to give notice to Agent and
update Schedule 3.24 prior to manufacturing, selling, developing, testing or
marketing any new Product, any such improperly undisclosed Product shall be
deemed to be included in this definition; and provided, further, that products
manufactured by Borrower for unaffiliated third parties shall not be deemed
“Products” hereunder.

 

“Pro Rata Share” means (a) with respect to a Lender’s obligation to make
Revolving Loans, such Lender’s right to receive the fees described in
Section 2.2, the Revolving Loan Commitment Percentage of such Lender, (b) with
respect to a Lender’s right to receive payments of principal and interest with
respect to Revolving Loans, such Lender’s Revolving Loan Exposure with respect
thereto; and (c) for all other purposes (including, without limitation, the
indemnification obligations arising under Section 11.6) with respect to any
Lender, the percentage obtained by dividing (i) the sum of the Revolving Loan
Commitment Amount of such Lender (or, in the event the Revolving Loan Commitment
shall have been terminated, such Lender’s then existing Revolving Loan
Outstandings, by (ii) the sum of the Revolving Loan Commitment (or, in the event
the Revolving Loan Commitment shall have been terminated, the then existing
Revolving Loan Outstandings) of all Lenders.

 

“Required Lenders” means (a) for so long as all of the Persons that are Lenders
on the Closing Date (each, an “Original Lender”) have not assigned or
transferred any of their interests in their respective Revolving Loan
Commitment, Lenders holding one hundred percent (100%) of the aggregate
outstanding principal balance of the Revolving Loan Commitment, or (b) at any
time from and after any Original Lender has assigned or transferred any interest
in its Revolving Loan Commitment, Lenders holding sixty-six percent (66%) or
more of the aggregate outstanding principal balance of the Revolving Loan
Commitments, plus, in respect of this clause (b), (i) each Original Lender that
has not assigned or transferred any portion of its respective Revolving Loan
Commitment, and (ii) each assignee of an Original Lender, provided, however,
that such assignee was assigned or transferred and continues to hold 100% of the
assigning Original Lender’s interest in the Revolving Loan Commitment (in each
case in respect of clauses (i) and (ii) of this clause (b), whether or not such
Lender is included within the Lenders holding sixty-six percent (66%) of the
total Revolving Loan Commitments); provided, however, that notwithstanding the
foregoing, for purposes of Sections 10.1(e) and 10.1(f) hereof, the term
“Required Lenders” means (y) for so long as all Original Lenders retain 100% of
their interests in their respective Revolving Loan Commitments, Lenders holding
one hundred percent (100%) of the aggregate outstanding principal balance of the
total Revolving Loan Commitments, or (z) at any time from and after any Original
Lender has assigned or transferred any interest in its Revolving Loan
Commitments, Lenders holding sixty-six percent (66%) or more of the aggregate
outstanding principal balance of the total Revolving Loan Commitments, plus, in
respect of this clause (z), each Original Lender that has not assigned or
transferred any portion of its respective Revolving Loan Commitment (in each
case in respect of this clause (z), whether or not such Original Lender is
included within the Lenders holding sixty-six percent (66%) of the Revolving
Loan Commitments). For purposes of this definition only, a Lender shall be
deemed to include itself, and any Lender that is an Affiliate or Approved Fund
of such Lender.

 

14

 

 

“Required Permit” means a Permit (a) issued or required under Laws applicable to
the business of Borrower or any of its Subsidiaries or necessary in the
manufacturing, importing, exporting, possession, ownership, warehousing,
marketing, promoting, sale, labeling, furnishing, distribution or delivery of
goods or services under Laws applicable to the business of Borrower or any of
its Subsidiaries or any Drug Application (including without limitation, at any
point in time, all licenses, approvals and permits issued by the FDA or any
other applicable Governmental Authority necessary for the testing, manufacture,
marketing or sale of any Product by any applicable Borrower, as such activities
are being conducted by such Borrower with respect to such Product at such time),
and (b) issued by any Person from which Borrower or any of their Subsidiaries
have received an accreditation.

 

“Reserve Percentage” means, on any day, for any Lender, the maximum percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor Governmental Authority) for determining the reserve requirements
(including any basic, supplemental, marginal, or emergency reserves) that are in
effect on such date with respect to eurocurrency funding (currently referred to
as “eurocurrency liabilities”) of that Lender, but so long as such Lender is not
required or directed under applicable regulations to maintain such reserves, the
Reserve Percentage shall be zero.

 

“Responsible Officer” means any of the Chief Executive Officer, Chief Financial
Officer, Managing Member, or any other officer of the applicable Borrower
acceptable to Agent.

 

“Revolving Lender” means each Lender having a Revolving Loan Commitment Amount
in excess of zero (or, in the event the Revolving Loan Commitment shall have
been terminated at any time, each Lender at such time having Revolving Loan
Outstandings in excess of zero).

 

“Revolving Loan Availability” means, at any time, the Revolving Loan Limit minus
the Revolving Loan Outstandings.

 

“Revolving Loan Borrowing” means a borrowing of a Revolving Loan.

 

“Revolving Loan Commitment” means, as of any date of determination, the
aggregate Revolving Loan Commitment Amounts of all Lenders as of such date.

 

“Revolving Loan Commitment Amount” means, as to any Lender, the dollar amount
set forth opposite such Lender’s name on the Commitment Annex under the column
“Revolving Loan Commitment Amount” (if such Lender’s name is not so set forth
thereon, then the dollar amount on the Commitment Annex for the Revolving Loan
Commitment Amount for such Lender shall be deemed to be zero), as such amount
may be adjusted from time to time by any amounts assigned (with respect to such
Lender’s portion of Revolving Loans outstanding and its commitment to make
Revolving Loans) pursuant to the terms of any and all effective assignment
agreements to which such Lender is a party.

 

15

 

 

“Revolving Loan Commitment Percentage” means, as to any Lender, (a) on the
Closing Date, the percentage set forth opposite such Lender’s name on the
Commitment Annex under the column “Revolving Loan Commitment Percentage” (if
such Lender’s name is not so set forth thereon, then, on the Closing Date, such
percentage for such Lender shall be deemed to be zero), and (b) on any date
following the Closing Date, the percentage equal to the Revolving Loan
Commitment Amount of such Lender on such date divided by the Revolving Loan
Commitment on such date.

 

“Revolving Loan Exposure” means, with respect to any Lender on any date of
determination, the percentage equal to the amount of such Lender’s Revolving
Loan Outstandings on such date divided by the aggregate Revolving Loan
Outstandings of all Lenders on such date.

 

“Revolving Loan Limit” means, at any time, the lesser of (a) the Revolving Loan
Commitment and (b) the Borrowing Base.

 

“Revolving Loan Outstandings” means, at any time of calculation, (a) the then
existing aggregate outstanding principal amount of Revolving Loans, and (b) when
used with reference to any single Lender, the then existing outstanding
principal amount of Revolving Loans advanced by such Lender.

 

“Revolving Loans” has the meaning set forth in Section 2.1(b).

 

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

 

“Securities Account” means a “securities account” (as defined in Article 9 of
the UCC), an investment account, or other account in which investment property
or securities are held or invested for credit to or for the benefit of any
Borrower.

 

“Securities Account Control Agreement” means an agreement, in form and substance
satisfactory to Agent, among Agent, any applicable Borrower and each securities
intermediary in which such Borrower maintains a Securities Account pursuant to
which Agent shall obtain “control” (as defined in Article 9 of the UCC) over
such Securities Account.

 

“Security Document” means this Agreement and any other agreement, document or
instrument executed concurrently herewith or at any time hereafter pursuant to
which one or more Credit Parties or any other Person either (a) Guarantees
payment or performance of all or any portion of the Obligations, and/or
(b) provides, as security for all or any portion of the Obligations, a Lien on
any of its assets in favor of Agent for its own benefit and the benefit of the
Lenders, as any or all of the same may be amended, supplemented, restated or
otherwise modified from time to time.

 

“Solvent” means, with respect to any Person, that such Person (a) owns and will
own assets the fair saleable value of which are (i) greater than the total
amount of its liabilities (including Contingent Obligations), and (ii) greater
than the amount that will be required to pay the probable liabilities of its
then existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to it;
(b) has capital that is not unreasonably small in relation to its business as
presently conducted or after giving effect to any contemplated transaction; and
(c) does not intend to incur and does not believe that it will incur debts
beyond its ability to pay such debts as they become due.

 

16

 

 

“Subordinated Debt” means any Debt of Borrowers incurred pursuant to the terms
of the Subordinated Debt Documents and with the prior written consent of Agent,
all of which documents must be in form and substance acceptable to Agent in its
sole discretion.

 

“Subordinated Debt Documents” means any documents evidencing and/or securing
Debt governed by a Subordination Agreement, all of which documents must be in
form and substance acceptable to Agent in its sole discretion.

 

“Subordination Agreement” means any agreement between Agent and another creditor
of Borrowers, as the same may be amended, supplemented, restated or otherwise
modified from time to time in accordance with the terms thereof, pursuant to
which the Debt owing from Borrower and/or the Liens securing such Debt granted
by Borrower to such creditor are subordinated in any way to the Obligations and
the Liens created under the Security Documents, the terms and provisions of such
Subordination Agreements to have been agreed to by and be acceptable to Agent in
the exercise of its sole discretion.

 

“Subsidiary” means, with respect to any Person, (a) any corporation of which an
aggregate of more than fifty percent (50%) of the outstanding capital stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, capital stock of any
other class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of more than fifty percent (50%) of such
capital stock whether by proxy, agreement, operation of law or otherwise, and
(b) any partnership or limited liability company in which such Person and/or one
or more Subsidiaries of such Person shall have an interest (whether in the form
of voting or participation in profits or capital contribution) of more than
fifty percent (50%) or of which any such Person is a general partner or may
exercise the powers of a general partner. Unless the context otherwise requires,
each reference to a Subsidiary shall be a reference to a Subsidiary of a
Borrower.

 

“Taxes” has the meaning set forth in Section 2.8.

 

“Termination Date” means the earlier to occur of (a) the Commitment Expiry Date,
(b) any date on which Agent accelerates the maturity of the Loans pursuant to
Section 10.2, or (c) the termination date stated in any notice of termination of
this Agreement provided by Borrowers in accordance with Section 2.12.

 

“Term Loan Agreement” means that certain Loan and Security Agreement, dated as
of July 28, 2011, among Agent, the Lenders and Borrower, as amended by that
certain First Loan Modification agreement, dated as of the date hereof, as the
same may be further amended, amended and restated, modified, and/or supplemented
from time to time.

 

“Term Loan Documents” means the Term Loan Agreement and all other “Loan
Documents” (as such term is defined in the Term Loan Agreement), in each case as
the same may be further amended, amended and restated, modified, and/or
supplemented from time to time.

 

“UCC” means the Uniform Commercial Code of the State of Maryland or of any other
state the laws of which are required to be applied in connection with the
perfection of security interests in any Collateral.

 

“United States” means the United States of America.

 

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Section 1.2             Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder (including, without limitation,
determinations made pursuant to the exhibits hereto) shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP applied on a basis consistent with the most recent audited
consolidated financial statements of Borrower delivered to Agent and each of the
Lenders on or prior to the Closing Date.

 

Section 1.3             Other Definitional and Interpretive Provisions.
References in this Agreement to “Articles”, “Sections”, “Annexes”, “Exhibits” or
“Schedules” shall be to Articles, Sections, Annexes, Exhibits or Schedules of or
to this Agreement unless otherwise specifically provided. Any term defined
herein may be used in the singular or plural. “Include”, “includes” and
“including” shall be deemed to be followed by “without limitation”. Unless
otherwise specified herein, the settlement of all payments and fundings
hereunder between or among the parties hereto shall be made in lawful money of
the United States and in immediately available funds. References to any
agreement, instrument or document shall include all schedules, exhibits, annexes
and other attachments thereto. References to capitalized terms that are not
defined herein, but are defined in the UCC, shall have the meanings given them
in the UCC.

 

Section 1.4             Time is of the Essence. Time is of the essence in
Borrower’s and each other Credit Party’s performance under this Agreement and
all other Financing Documents.

 

Article 2 - LOANS

 

Section 2.1             Loans.

 

(a)                [Reserved]

 

(b)               Revolving Loans.

 

(i)                 Revolving Loans and Borrowings. On the terms and subject to
the conditions set forth herein, each Lender severally agrees to make loans to
Borrowers from time to time as set forth herein (each a “Revolving Loan”, and
collectively, “Revolving Loans”) equal to such Lender’s Revolving Loan
Commitment Percentage of Revolving Loans requested by Borrowers hereunder,
provided, however, that after giving effect thereto, the Revolving Loan
Outstandings shall not exceed the Revolving Loan Limit. Borrowers shall deliver
to Agent a Notice of Borrowing with respect to each proposed Revolving Loan
Borrowing, such Notice of Borrowing to be delivered before 1:00 p.m. (Eastern
time) one (1) Business Day prior to the date of such proposed borrowing. Each
Borrower and each Revolving Lender hereby authorizes Agent to make Revolving
Loans on behalf of Revolving Lenders, at any time in its sole discretion, to pay
principal owing in respect of the Loans and interest, fees, expenses and other
charges payable by Borrower from time to time arising under this Agreement or
any other Financing Document. The Borrowing Base shall be determined by Agent
based on the most recent Borrowing Base Certificate delivered to Agent in
accordance with this Agreement and such other information as may be available to
Agent. Without limiting any other rights and remedies of Agent hereunder or
under the other Financing Documents, the Revolving Loans shall be subject to
Agent’s continuing right to, after notice to Borrower, withhold from the
Borrowing Base reasonable reserves, and to increase and decrease such reserves
from time to time, if and to the extent that, after consultation with Borrower,
in Agent’s good faith credit judgment and reasonable discretion, such reserves
are necessary.

 

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(ii)               Mandatory Revolving Loan Repayments and Prepayments.

 

(A)              The Revolving Loan Commitment shall terminate on the
Termination Date. On such Termination Date, there shall become due, and
Borrowers shall pay, the entire outstanding principal amount of each Revolving
Loan, together with accrued and unpaid Obligations pertaining thereto.

 

(B)              If at any time the Revolving Loan Outstandings exceed the
Revolving Loan Limit, then, on the next succeeding Business Day, Borrowers shall
repay the Revolving Loans in an aggregate amount equal to such excess.

 

(C)              Principal payable on account of Revolving Loans shall be
payable by Borrowers to Agent (I) immediately upon the receipt by any Borrower
or Agent of any payments on or proceeds from any of the Accounts, to the extent
of such payments or proceeds, as further described in Section 2.11 below, and
(II) in full on the Termination Date.

 

(iii)             Optional Prepayments. Other than repayments made pursuant to
Section 2.11 below, Borrowers may from time to time prepay the Revolving Loans
in whole or in part.

 

(iv)             LIBOR Rate.

 

(A)              Except as provided in subsection (C) below, Revolving Loans
shall accrue interest at the LIBOR Rate plus the Applicable Margin.

 

(B)              [Reserved].

 

(C)              In the event that any change in market conditions or any law,
regulation, treaty, or directive, or any change therein or in the interpretation
of application thereof, shall at any time after the date hereof, in the
reasonable opinion of any Lender, make it unlawful or impractical for such
Lender to fund or maintain Loans bearing interest based upon the LIBOR Rate or
to continue such funding or maintaining, or to determine or charge interest
rates at the LIBOR Rate, such Lender shall give notice of such changed
circumstances to Agent and Borrowers and Agent promptly shall transmit the
notice to each other Lender and (I) in the case of any outstanding Loans of such
Lender bearing interest based upon the LIBOR Rate, the date specified in such
Lender’s notice shall be deemed to be the last day of the Interest Period of
such Loans, and interest upon such Lender’s Loans thereafter shall accrue
interest at the Base Rate plus the Applicable Margin, and (II)  such Loans shall
continue to accrue interest at Base Rate plus the Applicable Margin until such
Lender determines that it would no longer be unlawful or impractical to maintain
such Loans at the LIBOR Rate.

 

(D)              Anything to the contrary contained herein notwithstanding,
neither Agent nor any Lender is required actually to acquire eurodollar deposits
to fund or otherwise match fund any Obligation as to which interest accrues
based on the LIBOR Rate.

 

Section 2.2             Interest, Interest Calculations and Certain Fees.

 

(a)                Interest. From and following the Closing Date, except as
expressly set forth in this Agreement, Loans and the other Obligations shall
bear interest at the sum of the LIBOR Rate plus the Applicable Margin. Interest
on the Loans shall be paid in arrears on the first (1st) day of each month and
on the maturity of such Loans, whether by acceleration or otherwise. Interest on
all other Obligations shall be payable upon demand. For purposes of calculating
interest, all funds transferred to the Payment Account for application to any
Revolving Loans shall be subject to a five (5) Business Day clearance period and
all interest accruing on such funds during such clearance period shall accrue
for the benefit of Agent, and not for the benefit of the Lenders.

 

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(b)               Origination Fee. Contemporaneous with Borrower’s execution of
this Agreement, Borrowers shall pay Agent, for the benefit of all Lenders
committed to make Revolving Loans on the Closing Date, in accordance with their
respective Pro Rata Shares, a fee in an amount equal to (i) the Revolving Loan
Commitment, multiplied by (ii) one percent (1.00%). The origination fee shall be
non-refundable once paid.

 

(c)                Unused Line Fee. From and following the Closing Date on the
first day of each month, and payable in arrears, Borrowers shall pay Agent, for
the benefit of all Lenders committed to make Revolving Loans, in accordance with
their respective Pro Rata Shares, a fee equal to (i) (A) the Revolving Loan
Commitment minus (B) the average daily balance of the sum of the Revolving Loan
Outstandings during the preceding month, multiplied by (ii) one percent (1.00%)
per annum. The unused line fee shall be deemed fully earned when due and payable
and, once paid, shall be non-refundable.

 

(d)               Minimum Balance Fee. From and following the Closing Date on
the first day of each month, and payable in arrears, Borrowers shall pay Agent,
for the benefit of all Lenders committed to make Revolving Loans, in accordance
with their respective Pro Rata Shares, a fee equal to the product of (i) the
positive difference (if any), remaining after subtracting (A) the average
end-of-day principal balance of Revolving Loans outstanding during the
immediately preceding month (without giving effect to the clearance day
calculations referenced above or in Section 2.2(a) from (B) the Minimum Balance,
multiplied by (ii) the highest interest rate applicable to the Revolving Loans
during such month (or, during the existence of an Event of Default, the default
rate of interest set forth in Section 10.5(a)). The minimum balance fee shall be
deemed fully earned when due and payable and, once paid, shall be
non-refundable.

 

(e)                Collateral Management Fee. From and following the Closing
Date on the first day of each month, and payable in arrears, Borrowers shall pay
Agent, for its own account and not for the benefit of any other Lender, a fee in
an amount equal to the product obtained by multiplying (i) the greater of (A)
the average end-of-day principal balance of Revolving Loans outstanding during
the immediately preceding month and (B) the Minimum Balance, by (ii) one half of
one percent (0.50%) per annum. For purposes of calculating the average
end-of-day principal balance of Revolving Loans, all funds paid into the Payment
Account (or which were required to be paid into the Payment Account hereunder)
or otherwise received by Agent for the account of Borrowers shall be subject to
a five Business Day clearance period. The collateral management fee shall be
deemed fully earned when due and payable and, once paid, shall be
non-refundable.

 

(f)                Deferred Revolving Loan Origination Fee. If Lenders’ funding
obligations in respect of the Revolving Loan Commitment under this Agreement
terminate for any reason (whether by voluntary termination by Borrowers, by
reason of the occurrence of an Event of Default or otherwise) after the first
anniversary of the Closing Date but prior to the Commitment Expiry Date,
Borrowers shall pay to Agent, for the benefit of all Lenders committed to make
Revolving Loans on the Closing Date, a fee as compensation for the costs of such
Lenders being prepared to make funds available to Borrowers under this
Agreement, equal to an amount determined by multiplying the Revolving Loan
Commitment by the following applicable percentage amount: (i) five percent
(5.00%) during the first year following the Closing Date, (ii) three percent
(3.00%)% during the second year following the Closing Date, and (iii) one
percent (1.00%)% thereafter. All fees payable pursuant to this paragraph shall
be deemed fully earned and non-refundable as of the Closing Date.

 

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(g)                Audit Fees. Borrowers shall pay to Agent, for its own account
and not for the benefit of any other Lenders, all reasonable fees and expenses
in connection with audits and inspections of Borrowers’ books and records,
audits, valuations or appraisals of the Collateral, audits of Borrowers’
compliance with applicable Laws and such other matters as Agent shall deem
appropriate, which shall be due and payable on the first Business Day of the
month following the date of issuance by Agent of a written request for payment
thereof to Borrowers.

 

(h)               Wire Fees. Borrowers shall pay to Agent, for its own account
and not for the account of any other Lenders, on written demand, fees for
incoming and outgoing wires made for the account of Borrowers, such fees to be
based on Agent’s then current wire fee schedule (available upon written request
of the Borrowers).

 

(i)                 Late Charges. If payments of principal (other than a final
installment of principal upon the Termination Date), interest due on the
Obligations, or any other amounts due hereunder or under the other Financing
Documents are not timely made and remain overdue for a period of five (5) days,
Borrowers, without notice or demand by Agent, promptly shall pay to Agent, for
its own account and not for the benefit of any other Lenders, as additional
compensation to Agent in administering the Obligations, an amount equal to five
percent (5.0%) of each delinquent payment.

 

(j)                 Computation of Interest and Related Fees. All interest and
fees under each Financing Document shall be calculated on the basis of a 360-day
year for the actual number of days elapsed. The date of funding of a Loan shall
be included in the calculation of interest. The date of payment of a Loan shall
be excluded from the calculation of interest. If a Loan is repaid on the same
day that it is made, one (1) day’s interest shall be charged.

 

Section 2.3             Notes. The portion of the Loans made by each Lender
shall be evidenced, if so requested by such Lender, by one or more promissory
notes executed by Borrowers on a joint and several basis (each, a “Note”) in an
original principal amount equal to such Lender’s Revolving Loan Commitment
Amount.

 

Section 2.4             [Reserved]

 

Section 2.5             [Reserved]

 

Section 2.6             General Provisions Regarding Payment; Loan Account.

 

(a)                All payments to be made by each Borrower under any Financing
Document, including payments of principal and interest made hereunder and
pursuant to any other Financing Document, and all fees, expenses, indemnities
and reimbursements, shall be made without set-off, recoupment or counterclaim.
If any payment hereunder becomes due and payable on a day other than a Business
Day, such payment shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension (it being understood and agreed that,
solely for purposes of calculating financial covenants and computations
contained herein and determining compliance therewith, if payment is made, in
full, on any such extended due date, such payment shall be deemed to have been
paid on the original due date without giving effect to any extension thereto).
Any payments received in the Payment Account before 12:00 Noon (Eastern time) on
any date shall be deemed received by Agent on such date, and any payments
received in the Payment Account at or after 12:00 Noon (Eastern time) on any
date shall be deemed received by Agent on the next succeeding Business Day.

 

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(b)               Agent shall maintain a loan account (the “Loan Account”) on
its books to record Loans and other extensions of credit made by the Lenders
hereunder or under any other Financing Document, and all payments thereon made
by each Borrower. All entries in the Loan Account shall be made in accordance
with Agent’s customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded in Agent’s books and records at any
time shall be conclusive and binding evidence of the amounts due and owing to
Agent by each Borrower absent manifest error; provided, however, that any
failure to so record or any error in so recording shall not limit or otherwise
affect any Borrower’s duty to pay all amounts owing hereunder or under any other
Financing Document. Agent shall endeavor to provide Borrowers with a monthly
statement regarding the Loan Account (but neither Agent nor any Lender shall
have any liability if Agent shall fail to provide any such statement). Unless
any Borrower notifies Agent of any objection to any such statement (specifically
describing the basis for such objection) within ninety (90) days after the date
of receipt thereof, it shall be deemed final, binding and conclusive upon
Borrowers in all respects as to all matters reflected therein.

 

Section 2.7             Maximum Interest. In no event shall the interest charged
with respect to the Loans or any other Obligations of any Borrower under any
Financing Document exceed the maximum amount permitted under the laws of the
State of Maryland or of any other applicable jurisdiction. Notwithstanding
anything to the contrary herein or elsewhere, if at any time the rate of
interest payable hereunder or under any Note or other Financing Document (the
“Stated Rate”) would exceed the highest rate of interest permitted under any
applicable law to be charged (the “Maximum Lawful Rate”), then for so long as
the Maximum Lawful Rate would be so exceeded, the rate of interest payable shall
be equal to the Maximum Lawful Rate; provided, however, that if at any time
thereafter the Stated Rate is less than the Maximum Lawful Rate, each Borrower
shall, to the extent permitted by law, continue to pay interest at the Maximum
Lawful Rate until such time as the total interest received is equal to the total
interest which would have been received had the Stated Rate been (but for the
operation of this provision) the interest rate payable. Thereafter, the interest
rate payable shall be the Stated Rate unless and until the Stated Rate again
would exceed the Maximum Lawful Rate, in which event this provision shall again
apply. In no event shall the total interest received by any Lender exceed the
amount which it could lawfully have received had the interest been calculated
for the full term hereof at the Maximum Lawful Rate. If, notwithstanding the
prior sentence, any Lender has received interest hereunder in excess of the
Maximum Lawful Rate, such excess amount shall be applied to the reduction of the
principal balance of the Loans or to other amounts (other than interest) payable
hereunder, and if no such principal or other amounts are then outstanding, such
excess or part thereof remaining shall be paid to Borrowers. In computing
interest payable with reference to the Maximum Lawful Rate applicable to any
Lender, such interest shall be calculated at a daily rate equal to the Maximum
Lawful Rate divided by the number of days in the year in which such calculation
is made.

 

Section 2.8             Taxes; Capital Adequacy.

 

(a)                Any and all payments made by Borrower under this Agreement or
any other Loan Document shall be made free and clear of and without deduction
for any and all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any governmental
authority (including any interest, additions to tax or penalties applicable
thereto) other than any Taxes imposed on or measured by any Lender’s overall net
income and franchise Taxes imposed on it (in lieu of net income Taxes), by a
jurisdiction (or any political subdivision thereof) as a result of any Lender
being organized or resident, conducting business (other than a business deemed
to arise from such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, or otherwise with respect
to, this Agreement or any other Loan Document) or having its principal office in
such jurisdiction (“Indemnified Taxes”). If any Indemnified Taxes shall be
required by Law to be withheld or deducted from or in respect of any sum payable
under this Agreement or any other Loan Document to any Lender, (a) an additional
amount shall be payable as may be necessary so that, after making all required
withholdings or deductions (including withholdings or deductions applicable to
additional sums payable under this Section) such Lender receives an amount equal
to the sum it would have received had no such withholdings or deductions been
made, (b) Borrower shall make such withholdings or deductions, (c) Borrower
shall pay the full amount withheld or deducted to the relevant taxing authority
or other authority in accordance with applicable Laws, and (d) Borrower shall
deliver to such Lender evidence of such payment. Borrower’s obligation hereunder
shall survive the termination of this Agreement.

 

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(b)               Each Lender that (i) is organized under the laws of a
jurisdiction other than the United States, and (ii)(A) is a party hereto on the
Closing Date or (B) purports to become an assignee of an interest as a Lender
under this Agreement after the Closing Date (unless such Lender was already a
Lender hereunder immediately prior to such assignment) (each such Lender a
“Foreign Lender”) shall execute and deliver to each of Borrowers and Agent one
or more (as Borrowers or Agent may reasonably request) United States Internal
Revenue Service Forms W-8ECI, W-8BEN, W-8IMY (as applicable) and other
applicable forms, certificates or documents prescribed by the United States
Internal Revenue Service or reasonably requested by Agent certifying as to such
Lender’s entitlement to a complete exemption from withholding or deduction of
Taxes. Borrowers shall not be required to pay additional amounts to any Lender
pursuant to this Section 2.8 with respect to United States withholding and
income Taxes to the extent that the obligation to pay such additional amounts
would not have arisen but for the failure of such Lender to comply with this
paragraph other than as a result of a change in law.

 

(c)                If any new Laws or regulation increases a Lender’s costs or
reduces its income for any Revolving Loans, Borrower shall pay the increase in
cost or reduction in income or additional expense; provided, however, that
Borrower shall not be liable for any amount attributable to any period before
one hundred eighty (180) days prior to the date such Lender notifies Borrower of
such increased costs. Each Lender agrees that it shall allocate any increased
costs among its customers similarly affected in good faith and in a manner
consistent with such Lender’s customary practice.

 

(d)               If any Lender requires compensation under Section 2.8(d), or
requires any Borrower to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.8(a),
then, upon the written request of Borrower, such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder (subject to the
terms of this Agreement) to another of its offices, branches or affiliates, if,
in the judgment of such Lender, such designation or assignment (i) would
eliminate or materially reduce amounts payable pursuant to any such subsection,
as the case may be, in the future, and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender (as determined in its sole discretion). Borrowers hereby agree to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.

 

Section 2.9             Appointment of Borrower Representative. Each Borrower
hereby designates Borrower Representative as its representative and agent on its
behalf for the purposes of issuing Notices of Borrowing, Notices of LC Credit
Events and Borrowing Base Certificates, and giving instructions with respect to
the disbursement of the proceeds of the Loans, requesting Letters of Credit,
giving and receiving all other notices and consents hereunder or under any of
the other Financing Documents and taking all other actions (including in respect
of compliance with covenants) on behalf of any Borrower or Borrowers under the
Financing Documents. Borrower Representative hereby accepts such appointment.
Notwithstanding anything to the contrary contained in this Agreement, no
Borrower other than Borrower Representative shall be entitled to take any of the
foregoing actions. The proceeds of each Loan made hereunder shall be advanced to
or at the direction of Borrower Representative and if not used by Borrower
Representative in its business (for the purposes provided in this Agreement)
shall be deemed to be immediately advanced by Borrower Representative to the
appropriate other Borrower hereunder as an intercompany loan, and Borrowers
shall maintain accurate books and records with respect to all such intercompany
loans and all repayments thereof. Agent and each Lender may regard any notice or
other communication pursuant to any Financing Document from Borrower
Representative as a notice or communication from all Borrowers, and may give any
notice or communication required or permitted to be given to any Borrower or all
Borrowers hereunder to Borrower Representative on behalf of such Borrower or all
Borrowers. Each Borrower agrees that each notice, election, representation and
warranty, covenant, agreement and undertaking made on its behalf by Borrower
Representative shall be deemed for all purposes to have been made by such
Borrower and shall be binding upon and enforceable against such Borrower to the
same extent as if the same had been made directly by such Borrower.

 

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Section 2.10         Joint and Several Liability. Each Borrower hereunder shall
be jointly and severally obligated to repay all Loans made hereunder and all
other Obligations, regardless of which Borrower actually receives the Loans, as
if each Borrower hereunder directly received all such Loans.  Each Borrower
waives (a) any suretyship defenses available to it under the UCC or any other
applicable Law, and (b) any right to require the Lenders or Agent to: (i)
proceed against any Borrower or any other Person; (ii) proceed against or
exhaust any security; or (iii) pursue any other remedy.  Agent may exercise or
not exercise any right or remedy they have against any Borrower or any security
(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 the Lenders and Agent 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 2.10 shall be null and void.  If any
payment is made to a Borrower in contravention of this Section 2.10, such
Borrower shall hold such payment in trust for the Lenders and Agent and such
payment shall be promptly delivered to Agent for application to the Obligations,
whether matured or unmatured.

 

Section 2.11         Collections and Lockbox Account.

 

(a)                Borrowers shall maintain a lockbox (the “Lockbox”) with a
United States depository institution designated from time to time by Agent (the
“Lockbox Bank”), subject to the provisions of this Agreement, and shall execute
with the Lockbox Bank a Deposit Account Control Agreement and such other
agreements related to such Lockbox as Agent may require. Borrowers shall ensure
that all collections of Accounts are paid directly from Account Debtors (i) into
the Lockbox for deposit into the Lockbox Account and/or (ii) directly into the
Lockbox Account. To effect the foregoing, (A) within thirty (30) days following
the Closing Date, Borrowers shall send to each of its Account Debtors notices
instructing each such Account Debtor to remit all amounts owed to Borrowers to
the Lockbox and/or to the Lockbox Account, and (B) Borrowers shall thereafter
diligently pursue adherence to such payment instructions with its Account
Debtors to ensure that, within one hundred eighty (180) days following the
Closing Date, such Account Debtors are making payments of Accounts directly to
the Lockbox and/or to the Lockbox Account - it being the understanding of the
parties that the transition to requiring Account Debtors to make payment to the
Lockbox and/or Lockbox Account may take up to one hundred eighty (180) days, and
during such period, so long as Borrower remits any payments received by it into
the Lockbox Account pursuant to Section 2.11(e) below, Borrower shall be deemed
to be in compliance with this Section 2.11(a).

 

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(b)               All funds deposited into a Lockbox Account shall be
transferred into the Payment Account by the close of each Business Day.

 

(c)                Notwithstanding anything in any lockbox agreement or Deposit
Account Control Agreement to the contrary, Borrowers agree that they shall be
liable for any fees and charges in effect from time to time and charged by the
Lockbox Bank in connection with the Lockbox, the Lockbox Account, and that Agent
shall have no liability therefor. Borrowers hereby indemnify and agree to hold
Agent harmless from any and all liabilities, claims, losses and demands
whatsoever, including reasonable attorneys’ fees and expenses, arising from or
relating to actions of Agent or the Lockbox Bank pursuant to this Section or any
lockbox agreement or Deposit Account Control Agreement or similar agreement,
except to the extent of such losses arising solely from Agent’s gross negligence
or willful misconduct.

 

(d)               Agent shall apply, on a daily basis, all funds transferred
into the Payment Account pursuant to this Section to reduce the outstanding
Revolving Loans in such order of application as Agent shall elect. If as the
result of collections of Accounts pursuant to the terms and conditions of this
Section, a credit balance exists with respect to the Loan Account, such credit
balance shall not accrue interest in favor of Borrowers, but Agent shall
transfer such funds into an account designated by Borrower for so long as no
Event of Default exists.

 

(e)                To the extent that any collections of Accounts or proceeds of
other Collateral are not sent directly to the Lockbox or Lockbox Account but are
received by any Borrower, such collections shall be held in trust for the
benefit of Agent pursuant to an express trust created hereby and immediately
remitted, in the form received, to applicable Lockbox or Lockbox Account. No
such funds received by any Borrower shall be intentionally commingled with other
funds of the Borrowers. If any funds received by any Borrower are intentionally
commingled with other funds of the Borrowers for more than two (2) Business
Days, or are required to be deposited to a Lockbox or Lockbox Account and are
not so deposited within two (2) Business Days, then Borrower shall pay to Agent,
for its own account and not for the account of any other Lenders, a compliance
fee equal to $500 for each day after such two (2) Business Day cure period that
any such conditions exist.

 

(f)                Borrowers acknowledge and agree that compliance with the
terms of this Section is essential, and that Agent and Lenders will suffer
immediate and irreparable injury and have no adequate remedy at law, if any
Borrower, through acts or omissions, causes or permits Account Debtors to send
payments other than to the Lockbox or Lockbox Accounts or if any Borrower fails
to promptly deposit collections of Accounts or proceeds of other Collateral in
the Lockbox Account as herein required. Accordingly, in addition to all other
rights and remedies of Agent and Lenders hereunder, Agent shall have the right
to seek specific performance of the Borrowers’ obligations under this Section,
and any other equitable relief as Agent may deem necessary or appropriate, and
Borrowers waive any requirement for the posting of a bond in connection with
such equitable relief.

 

(g)                Borrowers shall not, and Borrowers shall not suffer or permit
any Credit Party to, (i) withdraw any amounts from any Lockbox Account,
(ii) change the procedures or sweep instructions under the agreements governing
any Lockbox Accounts, or (iii) send to or deposit in any Lockbox Account any
funds other than payments made with respect to any proceeds of Accounts or other
Collateral. Borrowers shall, and shall cause each Credit Party to, cooperate
with Agent in the identification and reconciliation on a daily basis of all
amounts received in or required to be deposited into the Lockbox Accounts. If
more than five percent (5%) of the collections of Accounts received by Borrowers
during any given fifteen (15) day period is not identified or reconciled to the
reasonable satisfaction of Agent within ten (10) Business Days of receipt, Agent
shall not be obligated to make further advances under this Agreement until such
amount is identified or is reconciled to the reasonable satisfaction of Agent,
as the case may be. In addition, if any such amount cannot be identified or
reconciled to the reasonable satisfaction of Agent, Agent may utilize its own
staff or, if it deems necessary, engage an outside auditor, in either case at
Borrowers’ expense (which in the case of Agent’s own staff shall be in
accordance with Agent’s then prevailing customary charges (plus expenses)), to
make such examination and report as may be necessary to identify and reconcile
such amount.

 

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(h)               If any Borrower breaches its obligation to direct payments of
the proceeds of the Collateral to the Lockbox Account, Agent, as the irrevocably
made, constituted and appointed true and lawful attorney for Borrowers, may, by
the signature or other act of any of Agent’s officers (without requiring any of
them to do so), direct any Account Debtor to pay proceeds of the Collateral to
Borrowers by directing payment to the Lockbox Account.

 

Section 2.12         Termination; Restriction on Termination.

 

(a)                Termination by Lenders. In addition to the rights set forth
in Section 10.2, Agent may, and at the direction of Required Lenders shall,
terminate this Agreement without notice upon or after the occurrence and during
the continuance of an Event of Default.

 

(b)               Termination by Borrowers. Upon at least thirty (30) days’
prior written notice to Agent and Lenders, Borrowers may, at its option,
terminate this Agreement; provided, however, that no such termination shall be
effective until Borrowers have complied with Section 2.2(f); and provided,
further, that Agent and Lenders shall have no obligation to release any of the
Collateral securing the Obligations under this Agreement while any portion of
the Debt under the Affiliated Financing Documents remains outstanding. Any
notice of termination given by Borrowers shall be irrevocable unless all Lenders
otherwise agree in writing and no Lender shall have any obligation to make any
Loans on or after the termination date stated in such notice. Borrowers may
elect to terminate this Agreement in its entirety only. No section of this
Agreement or type of Loan available hereunder may be terminated singly.

 

(c)                Effectiveness of Termination. All of the Obligations shall be
immediately due and payable upon the Termination Date. All undertakings,
agreements, covenants, warranties and representations of Borrowers contained in
the Financing Documents shall survive any such termination and Agent shall
retain its Liens in the Collateral and Agent and each Lender shall retain all of
its rights and remedies under the Financing Documents notwithstanding such
termination until all Obligations have been discharged or paid, in full, in
immediately available funds, including, without limitation, all Obligations
under Section 2.2(f) resulting from such termination. Notwithstanding the
foregoing or the payment in full of the Obligations, Agent shall not be required
to terminate its Liens in the Collateral unless, with respect to any loss or
damage Agent may incur as a result of dishonored checks or other items of
payment received by Agent from Borrower or any Account Debtor and applied to the
Obligations, Agent shall, at its option, (i) have received a written agreement
satisfactory to Agent, executed by Borrowers and by any Person whose loans or
other advances to Borrowers are used in whole or in part to satisfy the
Obligations, indemnifying Agent and each Lender from any such loss or damage or
(ii) have retained cash Collateral or other Collateral for such period of time
as Agent, in its reasonable discretion, may deem necessary to protect Agent and
each Lender from any such loss or damage.

 

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Article 3 - REPRESENTATIONS AND WARRANTIES

 

To induce Agent and Lenders to enter into this Agreement and to make the Loans
and other credit accommodations contemplated hereby, each Borrower hereby
represents and warrants to Agent and each Lender that:

 

Section 3.1             Existence and Power. Borrower is an entity as specified
on Schedule 3.1, is duly organized, validly existing and in good standing under
the laws of the jurisdiction specified on Schedule 3.1 and no other
jurisdiction, has the same legal name as it appears in Borrower’s Organizational
Documents and an organizational identification number (if any), in each case as
specified on Schedule 3.1, and has all powers and all Permits necessary or
desirable in the operation of its business as presently conducted or as proposed
to be conducted, except where the failure to have such Permits could not
reasonably be expected to have a Material Adverse Effect. Borrower is qualified
to do business as a foreign entity in each jurisdiction in which it is required
to be so qualified, which jurisdictions as of the Closing Date are specified on
Schedule 3.1, except where the failure to be so qualified could not reasonably
be expected to have a Material Adverse Effect. Except as set forth on
Schedule 3.1, Borrower (a) has not had, over the five (5) year period preceding
the Closing Date, any name other than its current name, or (b) was not
incorporated or organized under the laws of any jurisdiction other than its
current jurisdiction of incorporation or organization.

 

Section 3.2             Organization and Governmental Authorization; No
Contravention. The execution, delivery and performance by each Borrower of the
Operative Documents to which it is a party are within its powers, have been duly
authorized by all necessary action pursuant to its Organizational Documents,
require no further action by or in respect of, or filing with, any Governmental
Authority and do not violate, conflict with or cause a breach or a default under
(a) any Law applicable to any Borrower or any of the Organizational Documents of
any Borrower, or (b) agreement or instrument binding upon it, except for such
violations, conflicts, breaches or defaults as could not, with respect to this
clause (b), reasonably be expected to have a Material Adverse Effect. In
connection with the development, testing, manufacture, marketing or sale of each
and any Product by a Borrower, such Borrower shall comply fully and completely
in all respects with all Required Permits at all times issued by any
Governmental Authority the noncompliance with which could have a Material
Adverse Effect, specifically including the FDA, with respect to such
development, testing, manufacture, marketing or sales of such Product by
Borrower as such activities are at any such time being conducted by Borrower.

 

Section 3.3             Binding Effect. Each of the Operative Documents to which
any Credit Party is a party constitutes a valid and binding agreement or
instrument of such Credit Party, enforceable against such Credit Party in
accordance with its respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency or other similar laws relating to the
enforcement of creditors’ rights generally and by general equitable principles.

 

Section 3.4             Capitalization. The authorized equity securities of
Borrower as of the Closing Date is as set forth on Schedule 3.4. All issued and
outstanding equity securities of Borrower are duly authorized and validly
issued, fully paid, nonassessable, free and clear of all Liens other than those
in favor of Agent for the benefit of Agent and Lenders, and such equity
securities were issued in compliance with all applicable Laws. No shares of the
capital stock or other equity securities of Borrower, other than those described
above, are issued and outstanding as of the date set forth on Schedule 3.4.
Except as set forth on Schedule 3.4, as of the Closing Date there are no
preemptive or other outstanding rights, options, warrants, conversion rights or
similar agreements or understandings for the purchase or acquisition from
Borrower of any equity securities of any such entity.

 

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Section 3.5             Financial Information. All information delivered to
Agent and pertaining to the financial condition of Borrower fairly presents the
financial position of Borrower as of such date in conformity with GAAP (and as
to unaudited financial statements, subject to normal year-end adjustments and
the absence of footnote disclosures). Since September 30, 2011, there has been
no material adverse change in the business, operations, properties, prospects or
condition (financial or otherwise) of any Credit Party.

 

Section 3.6             Litigation. Except as set forth on Schedule 3.6 as of
the Closing Date, and except as hereafter disclosed to Agent in writing, there
is no Litigation involving, individually or in the aggregate, more than One
Hundred Thousand Dollars ($100,000.00) pending against, or to the knowledge of
any Responsible Officer, threatened against or affecting, any Credit Party or,
to Borrower’s knowledge, any party to any Operative Document other than
Borrower.

 

Section 3.7             Ownership of Property. Borrower is the lawful owner of,
has good and marketable title to and is in lawful possession of, or has valid
leasehold interests in, all properties and other assets (real or personal,
tangible, intangible or mixed) purported or reported to be owned or leased (as
the case may be) by such Person.

 

Section 3.8             No Default. No Event of Default, or to such Borrower’s
knowledge, Default, has occurred and is continuing. To Borrower’s knowledge,
Borrower is not in breach or default under or with respect to any contract,
agreement, lease or other instrument to which it is a party or by which its
property is bound or affected, which breach or default could reasonably be
expected to have a Material Adverse Effect.

 

Section 3.9             Labor Matters. As of the Closing Date, there are no
strikes or other labor disputes pending or, to any Borrower’s knowledge,
threatened against Borrower. To Borrower’s knowledge, hours worked and payments
made to the employees of the Credit Parties have not been in violation of the
Fair Labor Standards Act or any other applicable Law dealing with such matters.
To Borrower’s knowledge, all payments due from the Credit Parties, or for which
any claim known to any such Credit Party may be made against any of them, on
account of wages and employee and retiree health and welfare insurance and other
benefits have been paid or accrued as a liability on their books, as the case
may be. The consummation of the transactions contemplated by the Financing
Documents will not give rise to a right of termination or right of renegotiation
on the part of any union under any collective bargaining agreement to which it
is a party or by which it is bound.

 

Section 3.10         Regulated Entities. No Credit Party is an “investment
company” or a company “controlled” by an “investment company” or a “subsidiary”
of an “investment company,” all within the meaning of the Investment Company Act
of 1940.

 

Section 3.11         Margin Regulations. None of the proceeds from the Loans
have been or will be used, directly or indirectly, for the purpose of purchasing
or carrying any “margin stock” (as defined in Regulation U of the Federal
Reserve Board), for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry any “margin stock” or for any other
purpose which might cause any of the Loans to be considered a “purpose credit”
within the meaning of Regulation T, U or X of the Federal Reserve Board.

 

Section 3.12         Compliance With Laws; Anti-Terrorism Laws.

 

(a)                Borrower is in compliance with the requirements of all
applicable Laws, except for such Laws the noncompliance with which could not
reasonably be expected to have a Material Adverse Effect.

 

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(b)               None of the Credit Parties and, to the knowledge of the Credit
Parties, none of their Affiliates (i) is in violation of any Anti-Terrorism Law,
(ii) engages in or conspires to engage in any transaction that evades or avoids,
or has the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in any Anti-Terrorism Law, (iii) is a Blocked Person, or
is controlled by a Blocked Person, (iv) is acting or will act for or on behalf
of a Blocked Person, (v) is associated with, or will become associated with, a
Blocked Person or (vi) is providing, or will provide, material, financial or
technical support or other services to or in support of acts of terrorism of a
Blocked Person. Neither Borrower nor, to the knowledge of Borrower, any of its
Affiliates or agents acting or benefiting in any capacity in connection with the
transactions contemplated by this Agreement, (A) conducts any business or
engages in making or receiving any contribution of funds, goods or services to
or for the benefit of any Blocked Person, or (B) deals in, or otherwise engages
in any transaction relating to, any property or interest in property blocked
pursuant to Executive Order No. 13224, any similar executive order or other
Anti-Terrorism Law.

 

Section 3.13         Taxes. All federal, state and local tax returns, reports
and statements required to be filed by or on behalf of Borrower have been filed
with the appropriate Governmental Authorities in all jurisdictions in which such
returns, reports and statements are required to be filed and, except to the
extent subject to a Permitted Contest, all Taxes (including real property Taxes)
and other charges shown to be due and payable in respect thereof have been
timely paid prior to the date on which any fine, penalty, interest, late charge
or loss may be added thereto for nonpayment thereof. Except to the extent
subject to a Permitted Contest, all state and local sales and use Taxes required
to be paid by Borrower have been paid. All federal and state returns have been
filed by Borrower for all periods for which returns were due with respect to
employee income tax withholding, social security and unemployment taxes, and,
except to the extent subject to a Permitted Contest, the amounts shown thereon
to be due and payable have been paid in full or adequate provisions therefor
have been made.

 

Section 3.14         Compliance with ERISA.

 

(a)                Each ERISA Plan (and the related trusts and funding
agreements) complies in form and in operation with, has been administered in
compliance with, and the terms of each ERISA Plan satisfy, the applicable
requirements of ERISA and the Code in all material respects. Each ERISA Plan
which is intended to be qualified under Section 401(a) of the Code is so
qualified, and the United States Internal Revenue Service has issued a favorable
determination letter with respect to each such ERISA Plan which may be relied on
currently. Borrower has not incurred liability for any material excise tax under
any of Sections 4971 through 5000 of the Code.

 

(b)               Except as could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect, each Borrower and each
Subsidiary is in compliance with the applicable provisions of ERISA and the
provision of the Code relating to ERISA Plans and the regulations and published
interpretations therein. During the thirty-six (36) month period prior to the
Closing Date or the making of any Loan, (i) no steps have been taken to
terminate any Pension Plan, and (ii) no contribution failure has occurred with
respect to any Pension Plan sufficient to give rise to a Lien under
Section 302(f) of ERISA. No condition exists or event or transaction has
occurred with respect to any Pension Plan which could result in the incurrence
by Borrower of any material liability, fine or penalty. Borrower has not
incurred liability to the PBGC (other than for current premiums) with respect to
any employee Pension Plan. All contributions (if any) have been made on a timely
basis to any Multiemployer Plan that are required to be made by Borrower or any
other member of the Controlled Group under the terms of the plan or of any
collective bargaining agreement or by applicable Law; no Credit Party nor any
member of the Controlled Group has withdrawn or partially withdrawn from any
Multiemployer Plan, incurred any withdrawal liability with respect to any such
plan or received notice of any claim or demand for withdrawal liability or
partial withdrawal liability from any such plan, and no condition has occurred
which, if continued, could result in a withdrawal or partial withdrawal from any
such plan, and no Credit Party nor any member of the Controlled Group has
received any notice that any Multiemployer Plan is in reorganization, that
increased contributions may be required to avoid a reduction in plan benefits or
the imposition of any excise tax, that any such plan is or has been funded at a
rate less than that required under Section 412 of the Code, that any such plan
is or may be terminated, or that any such plan is or may become insolvent.

 

29

 

 

Section 3.15         Consummation of Operative Documents; Brokers. Except for
fees payable to Agent and/or Lenders, no broker, finder or other intermediary
has brought about the obtaining, making or closing of the transactions
contemplated by the Operative Documents, and Borrower has no obligation and will
have no obligation to any Person in respect of any finder’s or brokerage fees,
commissions or other expenses in connection herewith or therewith.

 

Section 3.16         Related Transactions. All transactions contemplated by the
Operative Documents to be consummated on or prior to the date hereof have been
so consummated (including, without limitation, the disbursement and transfer of
all funds in connection therewith) in all material respects pursuant to the
provisions of the applicable Operative Documents, true and complete copies of
which have been delivered to Agent, and in compliance with all applicable Law,
except for such Laws the noncompliance with which would not reasonably be
expected to have a Material Adverse Effect.

 

Section 3.17         Material Contracts. Except for the Operative Documents and
the other agreements set forth on Schedule 3.17 (collectively with the Operative
Documents, the “Material Contracts”; it being understood that Material Contracts
shall include all agreements that the Borrower reasonably determines are a
“material contract” requiring disclosure on Forms 10-K, 10-Q and 8-K, as filed
with the SEC), as of the Closing Date there are no (a) employment agreements
covering the senior management of Borrower (e.g. all officers required to report
stock holdings in Borrower on Form 3, as filed with the SEC), requiring payment
of more than Two Hundred Thousand Dollars ($200,000) in the aggregate in any
year, (b) Intellectual Property licenses or other lease or license agreements to
which Borrower is a party, either as lessor or lessee, or as licensor or
licensee (other than licenses arising from the purchase of “off the shelf”
products) requiring payment of more than Two Hundred Thousand Dollars ($200,000)
in the aggregate in any year, (c) customer, distribution, marketing or supply
agreements to which Borrower is a party requiring payment of more than Two
Hundred Fifty Thousand Dollars ($250,000) in the aggregate in any year, or (d)
any agreements or instruments to which Borrower is a party, and the breach,
nonperformance or cancellation of which could reasonably be expected to have a
Material Adverse Effect. The consummation of the transactions contemplated by
the Financing Documents will not give rise to a right of termination in favor of
any party to any Material Contract (other than Borrower), except for such
Material Contracts the noncompliance with which would not reasonably be expected
to have a Material Adverse Effect.

 

Section 3.18         Compliance with Environmental Requirements; No Hazardous
Materials. Except in each case as set forth on Schedule 3.18:

 

(a)                no notice, notification, demand, request for information,
citation, summons, complaint or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending,
or to such Borrower’s knowledge, threatened by any Governmental Authority or
other Person with respect to any (i) alleged violation by Borrower of any
Environmental Law, (ii) alleged failure by Borrower to have any Permits required
in connection with the conduct of its business or to comply with the terms and
conditions thereof, (iii) any generation, treatment, storage, recycling,
transportation or disposal of any Hazardous Materials, or (iv) release of
Hazardous Materials; and

 

30

 

 

(b)               no property now owned or leased by Borrower and, to the
knowledge of each Borrower, no such property previously owned or leased by
Borrower, to which Borrower has, directly or indirectly, transported or arranged
for the transportation of any Hazardous Materials, is listed or, to such
Borrower’s knowledge, proposed for listing, on the National Priorities List
promulgated pursuant to CERCLA, or CERCLIS (as defined in CERCLA) or any similar
state list or is the subject of federal, state or local enforcement actions or,
to the knowledge of such Borrower, other investigations which may lead to claims
against Borrower for clean-up costs, remedial work, damage to natural resources
or personal injury claims, including, without limitation, claims under CERCLA.

 

For purposes of this Section 3.18, Borrower shall be deemed to include any
business or business entity (including a corporation) that is, in whole or in
part, a predecessor of Borrower.

 

Section 3.19         Intellectual Property. A list of all of Borrower’s
Intellectual Property and all license agreements (including all in-bound license
agreements, but excluding over-the-counter software that is commercially
available to the public) is set forth on Schedule 3.19, which indicates, for
each item of property: (i) the name of Borrower owning such Intellectual
Property or licensee to such license agreement; (ii) Borrower’s identifier for
such property (i.e., name of patent, license, etc.), (iii) whether such property
is Intellectual Property (or application therefor) owned by Borrower or is
property to which Borrower has rights pursuant to a license agreement, (iv) the
expiration date of such Intellectual Property or license agreement, and (v)
whether such property constitutes Material Intellectual Property. In the case of
any Material Intellectual Property that is a license agreement, Schedule 3.19
further indicates, for each: (A) the name and address of the licensor, (B) the
name and date of the agreement pursuant to which such item of Material
Intellectual Property is licensed, (C) whether or not such license agreement
grants an exclusive license to Borrower, (D) whether there are any purported
restrictions in such license agreement as to the ability of Borrower to grant a
security interest in and/or to transfer any of its rights as a licensee under
such license agreement, and (E) whether a default under or termination of such
license agreement could interfere with Agent’s right to sell or assign such
license or any other Collateral. Except as noted on Schedule 3.19, Borrower is
the sole owner of its Intellectual Property, except for non-exclusive licenses
granted to its customers in the Ordinary Course of Business as identified on
Schedule 3.19. Each patent is valid and enforceable and no part of the
Intellectual Property has been judged invalid or unenforceable, in whole or in
part, and 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 could not reasonably be expected to have a Material
Adverse Effect.

 

Section 3.20         Solvency. After giving effect to the Loan advance and the
liabilities and obligations of Borrower under the Operative Documents, Borrower
is Solvent.

 

Section 3.21         Full Disclosure. No written representation, warranty or
other statement of Borrower in any certificate or written statement given to
Agent or any Lender, as of the date such representation, warranty, or other
statement was made, taken together with all such written certificates and
written statements given to Agent or any Lender, contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained in the certificates or statements not misleading (it being
recognized that 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).

 

Section 3.22         Interest Rate. To Borrower’s knowledge, the rate of
interest paid under the Notes and the method and manner of the calculation
thereof do not violate any usury or other law or applicable Laws, any of the
Organizational Documents, or any of the Operative Documents.

 

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Section 3.23         Subsidiaries. Borrowers do not own any stock, partnership
interests, limited liability company interests or other equity securities except
for Permitted Investments, and, except as noted on Schedule 3.23, no Borrower
has any Subsidiaries.

 

Section 3.24         Regulatory Compliance; Required Permits.

 

(a)               No Borrower has violated any Laws, ordinances or rules, the
violation of which could reasonably be expected to have a Material Adverse
Effect. None of Borrower’s or any of its Subsidiaries’ properties or assets has
been used by Borrower or any Subsidiary or, to Borrower’s knowledge, by previous
Persons, in disposing, producing, storing, treating, or transporting any
hazardous substance other than in material compliance with applicable Laws.
Borrower has obtained all Required Permits, or has contracted with third parties
holding Required Permits, necessary for compliance with all Laws and all such
Required Permits are current. 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 Governmental Authorities that are
necessary to continue their respective businesses as currently conducted, except
where the failure to do so would not reasonably be expected to have a Material
Adverse Effect.

 

(b)               All Products and all Required Permits are listed on Schedule
3.24 (as updated from time to time pursuant to Section 4.12), and Borrower has
delivered to Agent a copy of all such Required Permits as of the date hereof.

 

(c)               Without limiting the generality of Section 3.24(a) above, with
respect to any Product being tested or manufactured by Borrower, to Borrower’s
knowledge, Borrower has received, and such Product is the subject of, all
Required Permits needed in connection with the testing or manufacture of such
Product as such testing is currently being conducted by or on behalf of
Borrower, and Borrower has not received any notice from any applicable
Governmental Authority, specifically including the FDA, that such Governmental
Authority is conducting an investigation or review of (i) Borrower’s
manufacturing facilities and processes for such Product which have disclosed any
material deficiencies or violations of Laws and/or the Required Permits related
to the manufacture of such Product, or (ii) any such Required Permit or that any
such Required Permit has been revoked or withdrawn, nor has any such
Governmental Authority issued any order or recommendation stating that the
development, testing and/or manufacturing of such Product by Borrower should
cease.

 

(d)               Without limiting the generality of Section 3.24(a) above, with
respect to any Product marketed or sold by Borrower, to Borrower’s knowledge,
Borrower has received, and such Product is the subject of, all Required Permits
needed in connection with the marketing and sales of such Product as currently
being marketed or sold by Borrower, and Borrower has not received any notice
from any applicable Governmental Authority, specifically including the FDA, that
such Governmental Authority is conducting an investigation or review of any such
Required Permit or approval or that any such Required Permit has been revoked or
withdrawn, nor has any such Governmental Authority issued any order or
recommendation stating that such marketing or sales of such Product cease or
that such Product be withdrawn from the marketplace.

 

(e)               Without limiting the generality of Section 3.24(a) above, (i)
there have been no adverse clinical test results which have or could reasonably
be expected to cause a Material Adverse Effect, and (ii) there have been (X) no
Product recalls or (Y) voluntary Product withdrawals from any market that could
reasonably be expected to cause a Material Adverse Effect.

 

(f)               Borrower has not experienced any significant failures in its
manufacturing of any Product such that the amount of such Product successfully
manufactured by Borrower in accordance with all specifications thereof and the
required payments related thereto in any month shall decrease significantly with
respect to the quantities of such Product produced in the prior month.

 

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Article 4 - AFFIRMATIVE COVENANTS

 

Each Borrower agrees that, so long as any Credit Exposure exists:

 

Section 4.1             Financial Statements and Other Reports. Borrower will
deliver to Agent: (a) as soon as available, but no later than forty (40) days
after the last day of each month, a company prepared consolidated balance sheet,
cash flow and income statement covering Borrower’s consolidated operations
during the period, prepared under GAAP, consistently applied, certified by a
Responsible Officer and in a form acceptable to Agent; (b) together with the
financial reporting package described in (a) above, evidence of payment and
satisfaction of all payroll, withholding and similar taxes due and owing by all
Borrowers with respect to the payroll period(s) occurring during such month;
(c) as soon as available, but no later than one-hundred twenty (120) days after
the last day of Borrower’s fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm acceptable to Agent in its reasonable discretion;
(d) within five (5) days of delivery, copies of all statements, reports and
notices made available to all of Borrower’s security holders or to any holders
of Subordinated Debt; (e) all reports on Form 10-K, 10-Q and 8-K filed with the
SEC, which are posted on Borrower’s website at www.bacterin.com and the SEC’s
website at www.sec.gov (such access being sufficient for notice and delivery of
such reports); (f) as soon as available, but no later than forty (40) days after
the last day of each month, a report of any legal actions pending or threatened
against any Borrower or any of its Subsidiaries that are likely to result in
damages or costs to any Borrower or any of its Subsidiaries of One Hundred
Thousand Dollars ($100,000) or more; (g) as soon as available, but no later than
forty (40) days after the last day of each month (but in any event prior to
registering any Intellectual Property with the United States Copyright Office)
(i) notice that Borrower has acquired and/or developed any new Material
Intellectual Property, (ii) notice that Borrower has entered into or become
bound by any additional material license agreement (other than over-the-counter
software that is commercially available to the public) and (iii) deliver to
Agent an updated Schedule 3.19 reflecting same, and upon any other material
change in Borrower’s Material Intellectual Property from that listed on Schedule
3.19; Borrower shall take such steps as Agent requests to obtain the consent of,
or waiver by, any person whose consent or waiver is necessary for (i) all
licenses or agreements to be deemed “Collateral” and for Agent to have a
security interest in it that might otherwise be restricted or prohibited by Law
or by the terms of any such license or agreement, whether now existing or
entered into in the future, and (ii) Agent to have the ability in the event of a
liquidation of any Collateral to dispose of such Collateral in accordance with
Agent’s rights and remedies under this Agreement and the other Loan Documents;
and (h) budgets, sales projections, operating plans and other financial
information and information, reports or statements regarding the Borrowers,
their business and the Collateral as Agent may from time to time reasonably
request. Each Borrower will, within forty (40) days after the last day of each
month, deliver to Agent with the monthly financial statements, a duly completed
Compliance Certificate signed by a Responsible Officer setting forth
calculations showing compliance with the financial covenants set forth in this
Agreement. Promptly upon their becoming available, Borrowers shall deliver to
Agent copies of all Material Contracts filed with Form 10-K, 10-Q and 8-K filed
with the SEC, which are posted on Borrower’s website at www.bacterin.com and the
SEC’s website at www.sec.gov (such access being sufficient for notice and
delivery of such reports). Each Borrower will, within ten (10) days after the
last day of each month, deliver to Agent a duly completed Borrowing Base
Certificate signed by a Responsible Officer, with aged listings of accounts
receivable and accounts payable (by invoice date). Borrowers shall, every ninety
(90) days on a schedule to be designated by Agent, and at such other times as
Agent shall request, deliver to Agent a schedule of Eligible Accounts denoting
the thirty (30) largest Account Debtors during such quarter.

 

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Section 4.2             Payment and Performance of Obligations. Each Borrower
(a) will pay and discharge, and cause each Subsidiary to pay and discharge, on a
timely basis as and when due, all of their respective obligations and
liabilities, except for such obligations and/or liabilities (i) that may be the
subject of a Permitted Contest, and (ii) the nonpayment or nondischarge of which
could not reasonably be expected to have a Material Adverse Effect or result in
a Lien against any Collateral, except for Permitted Liens, (b) without limiting
anything contained in the foregoing clause (a), pay all amounts due and owing in
respect of Taxes (including without limitation, payroll tax liabilities) on a
timely basis as and when due, and in any case prior to the date (including
extensions), on which any fine, penalty, interest, late charge or loss may be
added thereto for nonpayment thereof, (c) will maintain, and cause each
Subsidiary to maintain, in accordance with GAAP, appropriate reserves for the
accrual of all of their respective obligations and liabilities, and (d) will not
breach or permit any Subsidiary to breach, or permit to exist any default under,
the terms of any lease, commitment, contract, instrument or obligation to which
it is a party, or by which its properties or assets are bound, except for such
breaches or defaults which could not reasonably be expected to have a Material
Adverse Effect.

 

Section 4.3             Maintenance of Existence. Each Borrower will preserve,
renew and keep in full force and effect and in good standing, and will cause
each Subsidiary to preserve, renew and keep in full force and effect and in good
standing, their respective existence and their respective rights, privileges and
franchises necessary or desirable in the normal conduct of business.

 

Section 4.4             Maintenance of Property; Insurance.

 

(a)                Each Borrower will keep, and will cause each Subsidiary to
keep, all property useful and necessary in its business in good working order
and condition, ordinary wear and tear excepted. If all or any part of the
Collateral useful or necessary in its business, or upon which any Borrowing Base
is calculated, becomes damaged or destroyed, each Borrower will, and will cause
each Subsidiary to, promptly and completely repair and/or restore the affected
Collateral in a good and workmanlike manner, regardless of whether Agent agrees
to disburse insurance proceeds or other sums to pay costs of the work of repair
or reconstruction.

 

(b)               Upon completion of any Permitted Contest, Borrowers shall, and
will cause each Subsidiary to, promptly pay the amount due, if any, and deliver
to Agent proof of the completion of the contest and payment of the amount due,
if any, following which Agent shall return the security, if any, deposited with
Agent pursuant to the definition of Permitted Contest.

 

(c)                Each of the Borrowers will maintain, or cause to be
maintained, (i) casualty insurance on all real and personal property on an all
risks basis (including the perils of flood, windstorm and quake), covering the
repair and replacement cost of all such property and coverage, business
interruption and rent loss coverages with extended period of indemnity (for the
period required by Agent from time to time) and indemnity for extra expense, in
each case without application of coinsurance and with agreed amount
endorsements, (ii) general and professional liability insurance (including
products/completed operations liability coverage), and (iii) such other
insurance coverage in such amounts and with respect to such risks as Agent may
request from time to time; provided, however, that in no event shall such
insurance be in amounts or with coverage less than, or with carriers with
qualifications inferior to, any of the insurance or carriers in existence as of
the Closing Date (or required to be in existence after the Closing Date under a
Financing Document), as evidenced by the insurance certificates attached hereto
as Schedule 4.4. All such insurance shall be provided by insurers having an A.M.
Best policyholders rating reasonably acceptable to Agent.

 

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(d)               On or prior to the Closing Date, and at all times thereafter,
each Borrower will cause Agent to be named as an additional insured, assignee
and lender loss payee (which shall include, as applicable, identification as
mortgagee), as applicable, on each insurance policy required to be maintained
pursuant to this Section 4.4 pursuant to endorsements in form and substance
acceptable to Agent. Borrowers shall deliver to Agent and the Lenders (i) on the
Closing Date, a certificate from Borrowers’ insurance broker dated such date
showing the amount of coverage as of such date, and that such policies will
include effective waivers (whether under the terms of any such policy or
otherwise) by the insurer of all claims for insurance premiums against all loss
payees and additional insureds and all rights of subrogation against all loss
payees and additional insureds, and that if all or any part of such policy is
canceled, terminated or expires, the insurer will forthwith give notice thereof
to each additional insured, assignee and loss payee and that no cancellation,
reduction in amount or material change in coverage thereof shall be effective
until at least thirty (30) days after receipt by each additional insured,
assignee and loss payee of written notice thereof, (ii) on an annual basis, and
upon the request of any Lender through Agent from time to time full information
as to the insurance carried, (iii) within twenty (20) days of receipt of notice
from any insurer, a copy of any notice of cancellation, nonrenewal or material
change in coverage from that existing on the date of this Agreement,
(iv) forthwith, notice of any cancellation or nonrenewal of coverage by any
Borrower, and (v) at least twenty (20) days prior to expiration of any policy of
insurance, evidence of renewal of such insurance upon the terms and conditions
herein required.

 

(e)                In the event any Borrower fails to provide Agent with
evidence of the insurance coverage required by this Agreement, Agent may obtain
such insurance policies required in this Section 4.4 following ten (10) Business
Days’ notice to Borrower and the subsequent failure during such ten (10)
Business Day period by Borrower to obtain such required insurance. This
insurance may, but need not, protect such Borrower’s interests. The coverage
purchased by Agent may not pay any claim made by such Borrower or any claim that
is made against such Borrower in connection with the Collateral. Such Borrower
may later cancel any insurance purchased by Agent, but only after providing
Agent with evidence that such Borrower has obtained insurance as required by
this Agreement. If Agent purchases insurance for the Collateral following ten
(10) Business Days’ notice to Borrower and the subsequent failure during such
ten (10) Business Day period by Borrower to obtain such required insurance,
Borrowers will be responsible for the costs of that insurance to the fullest
extent provided by law, including interest and other charges imposed by Agent in
connection with the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance. The costs of the insurance may be
added to the Obligations. The costs of the insurance may be more than the cost
of insurance such Borrower is able to obtain on its own.

 

Section 4.5             Compliance with Laws and Material Contracts. Each
Borrower will comply, and cause each Subsidiary to comply, with the requirements
of all applicable Laws and Material Contracts, except to the extent that failure
to so comply could not reasonably be expected to (a) have a Material Adverse
Effect, or (b) result in any Lien upon either (i) a material portion of the
assets of any such Person in favor of any Governmental Authority, or (ii) any
Collateral which is part of the Borrowing Base.

 

Section 4.6             Inspection of Property, Books and Records. Each Borrower
will keep, and will cause each Subsidiary to keep, proper books of record
substantially in accordance with GAAP in which full, true and correct entries
shall be made of all dealings and transactions in relation to its business and
activities; and will permit, and will cause each Subsidiary to permit, at the
sole cost of the applicable Borrower or any applicable Subsidiary,
representatives of Agent and of any Lender to visit and inspect any of their
respective properties, to examine and make abstracts or copies from any of their
respective books and records, to conduct a collateral audit and analysis of
their respective operations and the Collateral, to verify the amount and age of
the Accounts, the identity and credit of the respective Account Debtors, to
review the billing practices of Borrowers and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants as often as may reasonably be desired. In the
absence of an Event of Default, Agent or any Lender exercising any rights
pursuant to this Section 4.6 shall give the applicable Borrower or any
applicable Subsidiary commercially reasonable prior notice of such exercise. No
notice shall be required during the existence and continuance of any Default or
any time during which Agent reasonably believes a Default exists.

 

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Section 4.7             Use of Proceeds. Borrowers shall use the proceeds of
Revolving Loans solely for transaction fees incurred in connection with the
Financing Documents and for working capital needs of Borrowers. No portion of
the proceeds of the Loans will be used for family, personal, agricultural or
household use.

 

Section 4.8             Estoppel Certificates. After written request by Agent,
Borrowers, within fifteen (15) days and at their expense, will furnish Agent
with a statement, duly acknowledged and certified, setting forth (a) the amount
of the original principal amount of the Notes, and the unpaid principal amount
of the Notes, (b) the rate of interest of the Notes, (c) the date payments of
interest and/or principal were last paid, (d) any offsets or defenses to the
payment of the Obligations, and if any are alleged, the nature thereof, (e) that
the Notes and this Agreement have not been modified or if modified, giving
particulars of such modification, and (f) that there has occurred and is then
continuing no Default or if such Default exists, the nature thereof, the period
of time it has existed, and the action being taken to remedy such Default. After
written request by Agent, Borrowers, within fifteen (15) days and at their
expense, will furnish Agent with a certificate, signed by a Responsible Officer
of Borrowers, updating all of the representations and warranties contained in
this Agreement and the other Financing Documents and certifying that all of the
representations and warranties contained in this Agreement and the other
Financing Documents, as updated pursuant to such certificate, are true, accurate
and complete as of the date of such certificate.

 

Section 4.9             Notices of Litigation and Defaults. Borrowers will give
prompt written notice to Agent (a) of any litigation or governmental proceedings
pending or threatened (in writing) against Borrowers or other Credit Party which
would reasonably be expected to have a Material Adverse Effect with respect to
Borrowers or any other Credit Party or which in any manner calls into question
the validity or enforceability of any Financing Document, (b) upon any Borrower
becoming aware of the existence of any Default or Event of Default, (c) if
Borrower is in breach or default under or with respect to any Material Contract,
or if Borrower is in breach or default under or with respect to any other
contract, agreement, lease or other instrument to which it is a party or by
which its property is bound or affected, which breach or default could
reasonably be expected to have a Material Adverse Effect, (d) of any strikes or
other labor disputes pending or, to any Borrower’s knowledge, threatened against
Borrower, (e) if there is any infringement or claim of infringement by any other
Person with respect to any Intellectual Property rights of Borrower that could
reasonably be expected to have a Material Adverse Effect, or if there is any
claim by any other Person that Borrower in the conduct of its business is
infringing on the Intellectual Property Rights of others, and (f) of all
returns, recoveries, disputes and claims that involve more than $100,000.
Borrowers represent and warrant that Schedule 3.6 sets forth a complete list of
all matters existing as of the Closing Date for which notice could be required
under this Section and all litigation or governmental proceedings pending or
threatened (in writing) against Borrowers as of the Closing Date that involve
more than $100,000 or that could reasonably be expected to have a Material
Adverse Effect.

 

Section 4.10         Hazardous Materials; Remediation.

 

(a)                If any release or disposal of Hazardous Materials shall occur
or shall have occurred on any real property or any other assets of any Borrower
or any other Credit Party, such Borrower will cause, or direct the applicable
Credit Party to cause, the prompt containment and removal of such Hazardous
Materials and the remediation of such real property or other assets as is
necessary to comply with all Environmental Laws and to preserve the value of
such real property or other assets. Without limiting the generality of the
foregoing, each Borrower shall, and shall cause each other Credit Party to,
comply with each Environmental Law requiring the performance at any real
property by any Borrower or any other Credit Party of activities in response to
the release or threatened release of a Hazardous Material.

 

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(b)               Borrowers will provide Agent within thirty (30) days after
written demand therefor with a bond, letter of credit or similar financial
assurance evidencing to the reasonable satisfaction of Agent that sufficient
funds are available to pay the cost of removing, treating and disposing of any
Hazardous Materials or Hazardous Materials Contamination as required by
applicable Laws and discharging any assessment which may be established on any
property as a result thereof, such demand to be made, if at all, upon Agent’s
reasonable business determination that the failure to remove, treat or dispose
of any Hazardous Materials or Hazardous Materials Contamination required by
applicable Law, or the failure to discharge any such assessment could reasonably
be expected to have a Material Adverse Effect.

 

Section 4.11         Further Assurances.

 

(a)                Each Borrower will, at its own cost and expense, promptly and
duly take, execute, acknowledge and deliver all such further acts, documents and
assurances as may from time to time be necessary or as Agent or the Required
Lenders may from time to time reasonably request in order to carry out the
intent and purposes of the Financing Documents and the transactions contemplated
thereby, including all such actions to (i) establish, create, preserve, protect
and perfect a first priority Lien (subject only to Permitted Liens) in favor of
Agent for itself and for the benefit of the Lenders on the Collateral (including
Collateral acquired after the date hereof), and (ii) unless Agent shall agree
otherwise in writing, cause all Subsidiaries of Borrowers to be jointly and
severally obligated with the other Borrowers under all covenants and obligations
under this Agreement, including the obligation to repay the Obligations. Without
limiting the generality of the foregoing, (x) Borrowers shall, at the time of
the delivery of any Compliance Certificate disclosing the acquisition by an
Borrower of any registered Intellectual Property or application for the
registration of Intellectual Property, deliver to Agent a duly completed and
executed supplement to the applicable Borrower’s Patent Security Agreement or
Trademark Security Agreement in form and substance acceptable to Agent, and
(y) at the request of Agent, following the disclosure by Borrowers on any
Compliance Certificate of the acquisition by any Borrower of any rights under a
license as a licensee with respect to any registered Intellectual Property or
application for the registration of any Intellectual Property owned by another
Person, Borrowers shall execute any documents requested by Agent to establish,
create, preserve, protect and perfect a first priority lien in favor of Agent,
to the extent legally possible, in such Borrower’s rights under such license and
shall use their commercially reasonable best efforts to obtain the written
consent of the licensor which such license to the granting in favor of Agent of
a Lien on such Borrower’s rights as licensee under such license.

 

(b)               Upon receipt of an affidavit of an officer of Agent or a
Lender as to the loss, theft, destruction or mutilation of any Note or any other
Financing Document which is not of public record, and, in the case of any such
mutilation, upon surrender and cancellation of such Note or other applicable
Financing Document, Borrowers will issue, in lieu thereof, a replacement Note or
other applicable Financing Document, dated the date of such lost, stolen,
destroyed or mutilated Note or other Financing Document in the same principal
amount thereof and otherwise of like tenor.

 

(c)                [Reserved]

 

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(d)               Upon the request of Agent, Borrowers shall obtain a landlord’s
agreement from the lessor of any business location where any portion of the
Collateral included in or proposed to be included in the Borrowing Base, or the
records relating to such Collateral and/or software and equipment relating to
such records or Collateral, is stored or located, which agreement or letter
shall be reasonably satisfactory in form and substance to Agent. Borrowers shall
timely and fully pay and perform its obligations under all leases and other
agreements with respect to each leased location where any Collateral, or any
records related thereto, is or may be located.

 

Section 4.12         Notices of New Products or Required Permits. If, after the
Closing Date, Borrower determines to manufacture, sell, develop, test or market
any new Product, other than new Products that are derivatives of current
Products, Borrower shall, within forty (40) days after the end of each month,
give written notice to Agent of such determination (which notice may be in the
form of a press release attached to an 8-K filing and shall include a brief
description of such Product), plus upon request, a list of all Required Permits
relating to such new Product (and a copy of such Required Permits if requested
by Agent) and/or Borrower’s manufacture, sale, development, testing or marketing
thereof issued or outstanding as of the date of such notice), along with a copy
of an updated Schedule 3.24; provided, however, that if Borrower shall at any
time obtain any new or additional Required Permits from the FDA, DEA, or
parallel state or local authorities, or foreign counterparts of the FDA, DEA, or
parallel state or local authorities, with respect to any Product which has
previously been disclosed to Agent, Borrower shall promptly give written notice
to Agent of such new or additional Required Permits (along with a copy thereof
if requested by Agent).

 

Section 4.13         Power of Attorney. Each of the officers of Agent is hereby
irrevocably made, constituted and appointed the true and lawful attorney for
Borrowers (without requiring any of them to act as such) with full power of
substitution to do the following: (a) endorse the name of Borrowers upon any and
all checks, drafts, money orders, and other instruments for the payment of money
that are payable to Borrowers and constitute collections on Borrowers’ Accounts;
(b) so long as Agent has provided not less than five (5) Business Days’ prior
written notice to Borrower to perform the same and Borrower has failed to take
such action, execute in the name of Borrowers any schedules, assignments,
instruments, documents, and statements that Borrowers are obligated to give
Agent under this Agreement; (c) after the occurrence and during the continuance
of an Event of Default, take any action Borrowers are required to take under
this Agreement; (d) so long as Agent has provided not less than five (5)
Business Days’ prior written notice to Borrower to perform the same and Borrower
has failed to take such action, do such other and further acts and deeds in the
name of Borrowers that Agent may deem necessary or desirable to enforce any
Account or other Collateral or perfect Agent’s security interest or Lien in any
Collateral; and (e) after the occurrence and during the continuance of an Event
of Default, do such other and further acts and deeds in the name of Borrowers
that Agent may deem necessary or desirable to enforce its rights with regard to
any Account or other Collateral. This power of attorney shall be coupled with an
interest and irrevocable until all outstanding Obligations are paid in full, and
Agent and Lenders have no further Credit Exposure.

 

Section 4.14         Borrowing Base Collateral Administration.

 

(a)                All data and other information relating to Accounts or other
intangible Collateral shall at all times be kept by Borrowers, at their
respective offices and shall not be moved from such locations without
(i) providing prior written notice to Agent, and (ii) obtaining the prior
written consent of Agent, which consent shall not be unreasonably withheld.

 

(b)               Borrowers shall provide prompt written notice to each Person
who either is currently an Account Debtor or becomes an Account Debtor at any
time following the date of this Agreement that directs each Account Debtor to
make payments into the Lockbox, and hereby authorizes Agent, upon Borrowers’
failure to send such notices within ten (10) days after the date of this
Agreement (or ten (10) days after the Person becomes an Account Debtor), to send
any and all similar notices to such Person. Agent reserves the right to notify
Account Debtors that Agent has been granted a Lien upon all Accounts.

 

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Article 5 - NEGATIVE COVENANTS

 

Each Borrower agrees that, so long as any Credit Exposure exists:

 

Section 5.1             Debt; Contingent Obligations. No Borrower will, or will
permit any Subsidiary to, directly or indirectly, create, incur, assume,
guarantee or otherwise become or remain directly or indirectly liable with
respect to, any Debt, except for Permitted Indebtedness. No Borrower will, or
will permit any Subsidiary to, directly or indirectly, create, assume, incur or
suffer to exist any Contingent Obligations, except for Permitted Contingent
Obligations.

 

Section 5.2             Liens. No Borrower will, or will permit any Subsidiary
to, directly or indirectly, create, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired by it, except for Permitted Liens.

 

Section 5.3             Distributions. No Borrower will, or will permit any
Subsidiary to, directly or indirectly, declare, order, pay, make or set apart
any sum for any Distribution (other than repurchases of capital stock pursuant
to the terms of employee stock purchase plans, employee restricted stock
agreements or similar plans).

 

Section 5.4             Restrictive Agreements. No Borrower will, or will permit
any Subsidiary to, directly or indirectly (a) enter into or assume any agreement
(other than the Financing Documents and any agreements for purchase money debt
permitted under clauses (c) and (d) of the definition of Permitted Indebtedness)
prohibiting the creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired, or (b) create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
restriction of any kind (except as provided by the Financing Documents) on the
ability of any Subsidiary to: (i) pay or make Distributions to any Borrower or
any Subsidiary (other than as permitted in Section 5.3 above); (ii) pay any Debt
owed to any Borrower or any Subsidiary; (iii) make loans or advances to any
Borrower or any Subsidiary; or (iv) transfer any of its property or assets to
any Borrower or any Subsidiary.

 

Section 5.5             Payments and Modifications of Subordinated Debt.
Borrower will not, and will not permit any Subsidiary to, directly or indirectly
(a) declare, pay, make or set aside any amount for payment in respect of
Subordinated Debt, except for payments made in full compliance with and
expressly permitted under the Subordination Agreement, (b) amend or otherwise
modify the terms of any Subordinated Debt, except for amendments or
modifications made in full compliance with the Subordination Agreement, (c)
declare, pay, make or set aside any amount for payment in respect of any Debt
hereinafter incurred that, by its terms, or by separate agreement, is
subordinated to the Obligations, except for payments made in full compliance
with and expressly permitted under the subordination provisions applicable
thereto, or (d) amend or otherwise modify the terms of any such Debt if the
effect of such amendment or modification is to (i) increase the interest rate or
fees on, or change the manner or timing of payment of, such Debt, (ii)
accelerate or shorten the dates upon which payments of principal or interest are
due on, or the principal amount of, such Debt, (iii) change in a manner adverse
to any Credit Party or Agent any event of default or add or make more
restrictive any covenant with respect to such Debt, (iv) change the prepayment
provisions of such Debt or any of the defined terms related thereto, (v) change
the subordination provisions thereof (or the subordination terms of any guaranty
thereof), or (vi) change or amend any other term if such change or amendment
would materially increase the obligations of the obligor or confer additional
material rights on the holder of such Debt in a manner adverse to Borrower, any
Subsidiaries, Agents or Lenders. Borrower shall, prior to entering into any such
amendment or modification, deliver to Agent reasonably in advance of the
execution thereof, any final or execution form copy thereof.

 

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Section 5.6             Consolidations, Mergers and Sales of Assets; Change in
Control. No Borrower will, directly or indirectly (a) consolidate or merge or
amalgamate with or into any other Person, or (b) consummate any Asset
Dispositions other than Permitted Asset Dispositions; provided, however, that no
prior written consent shall be required for any Permitted Acquisition or any
merger or acquisition in which, simultaneously with any such merger or
acquisition, all Obligations are assumed or paid off and all commitments of the
Lenders to make Loans have terminated; and provided further that a Subsidiary of
Borrower may merge or consolidate into another Subsidiary that is a Loan Party
or into Borrower, so long as (w) Borrower has provided Agent with prior written
notice of such transaction, (x) Borrower shall be the surviving legal entity,
(y) Borrower’s tangible net worth is not thereby reduced, and (z) as long as no
Event of Default is occurring prior thereto or arises as a result therefrom . No
Borrower will suffer or permit to occur any Change in Control.

 

Section 5.7             Purchase of Assets, Investments. No Borrower will
directly or indirectly (a) acquire or enter into any agreement to acquire any
assets other than in the Ordinary Course of Business; (b) engage or enter into
any agreement to engage in any joint venture or partnership with any other
Person or acquire or create any Subsidiary; or (c) acquire or own or enter into
any agreement to acquire or own any Investment in any Person, other than
Permitted Investments.

 

Section 5.8             Transactions with Affiliates. Except as otherwise
disclosed on Schedule 5.8, and except for transactions that are disclosed to
Agent in advance of being entered into and which contain terms that are no less
favorable to the applicable Borrower than those which might be obtained from a
third party not an Affiliate of Borrower, no Borrower will, or will permit any
Subsidiary to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of any Borrower.

 

Section 5.9             Modification of Organizational Documents. No Borrower
will, or will permit any Subsidiary to, directly or indirectly, amend or
otherwise modify any Organizational Documents of such Person, except for
Permitted Modifications.

 

Section 5.10         Modification of Certain Agreements. No Borrower will, or
will permit any Subsidiary to, directly or indirectly, amend or otherwise modify
any Material Contract, which amendment or modification in any case: (a) is
contrary to the terms of this Agreement or any other Financing Document;
(b) could reasonably be expected to be adverse to the rights, interests or
privileges of the Agent or the Lenders or their ability to enforce the same;
(c) results in the imposition or expansion in any material respect of any
obligation of or restriction or burden on any Borrower or any Subsidiary; or
(d) reduces in any material respect any rights or benefits of any Borrower or
any Subsidiaries (it being understood and agreed that any such determination
shall be in the discretion of the Agent). Each Borrower shall, prior to entering
into any amendment or other modification of any of the foregoing documents,
deliver to Agent reasonably in advance of the execution thereof, any final or
execution form copy of amendments or other modifications to such documents, and
such Borrower agrees not to take, nor permit any of its Subsidiaries to take,
any such action with respect to any such documents without obtaining such
approval from Agent.

 

Section 5.11         Conduct of Business. No Borrower will, or will permit any
Subsidiary to, directly or indirectly, engage in any business other than the
businesses currently engaged in by Borrower and such Subsidiary, in each case as
described on Schedule 5.11. No Borrower will, or will permit any Subsidiary to,
other than in the Ordinary Course of Business, change its normal billing payment
and reimbursement policies and procedures with respect to its Accounts
(including, without limitation, the amount and timing of finance charges, fees
and write-offs).

 

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Section 5.12         Lease Payments. No Borrower will, or will permit any
Subsidiary to, directly or indirectly, incur or assume (whether pursuant to a
Guarantee or otherwise) any liability for rental payments except in the Ordinary
Course of Business.

 

Section 5.13         Limitation on Sale and Leaseback Transactions. No Borrower
will, or will permit any Subsidiary to, directly or indirectly, enter into any
arrangement with any Person whereby, in a substantially contemporaneous
transaction, any Borrower or any Subsidiaries sells or transfers all or
substantially all of its right, title and interest in an asset and, in
connection therewith, acquires or leases back the right to use such asset.

 

Section 5.14         Deposit Accounts and Securities Accounts; Payroll and
Benefits Accounts. No Borrower will, or will permit any Subsidiary to, directly
or indirectly, establish any new Deposit Account or Securities Account without
prior written notice to Agent, and unless Agent, such Borrower or such
Subsidiary and the bank, financial institution or securities intermediary at
which the account is to be opened enter into a Deposit Account Control Agreement
or Securities Account Control Agreement prior to or concurrently with the
establishment of such Deposit Account or Securities Account. Borrowers represent
and warrant that Schedule 5.14 lists all of the Deposit Accounts and Securities
Accounts of each Borrower as of the Closing Date. The provisions of this
Section requiring Deposit Account Control Agreements shall not apply to Deposit
Accounts exclusively used for payroll, payroll taxes and other employee wage and
benefit payments to or for the benefit of Borrowers’ employees and identified to
Agent by Borrowers as such; provided, however, that at all times that any
Obligations remain outstanding, Borrower shall maintain one or more separate
Deposit Accounts to hold any and all amounts to be used for payroll, payroll
taxes and other employee wage and benefit payments, and shall not commingle any
monies allocated for such purposes with funds in any other Deposit Account.

 

Section 5.15         Compliance with Anti-Terrorism Laws. Agent hereby notifies
Borrowers that pursuant to the requirements of Anti-Terrorism Laws, and Agent’s
policies and practices, Agent is required to obtain, verify and record certain
information and documentation that identifies Borrowers and its principals,
which information includes the name and address of each Borrower and its
principals and such other information that will allow Agent to identify such
party in accordance with Anti-Terrorism Laws. No Borrower will, or will permit
any Subsidiary to, directly or indirectly, knowingly enter into any Material
Contracts with any Blocked Person or any Person listed on the OFAC Lists. Each
Borrower shall immediately notify Agent if such Borrower has knowledge that any
Borrower, any additional Credit Party or any of their respective Affiliates or
agents acting or benefiting in any capacity in connection with the transactions
contemplated by this Agreement is or becomes a Blocked Person or (a) is
convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is
arraigned and held over on charges involving money laundering or predicate
crimes to money laundering. No Borrower will, or will permit any Subsidiary to,
directly or indirectly, (i) conduct any business or engage in any transaction or
dealing with any Blocked Person, including, without limitation, the making or
receiving of any contribution of funds, goods or services to or for the benefit
of any Blocked Person, (ii) deal in, or otherwise engage in any transaction
relating to, any property or interests in property blocked pursuant to Executive
Order No. 13224, any similar executive order or other Anti-Terrorism Law, or
(iii) engage in or conspire to engage in any transaction that evades or avoids,
or has the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

 

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Article 6 - FINANCIAL COVENANTS

 

Section 6.1             Minimum Net Revenue. Borrowers shall maintain, on a
consolidated basis, net revenue for the following periods as stated below, to be
tested as of the first (1st) day of the second (2nd) calendar month immediately
following such periods:

 

Period Net Revenue         January 1, 2011 through December 31, 2011
$25,237,625.00         February 1, 2011 through January 31, 2012 $26,305,795.00
        March 1, 2011 through February 29, 2012 $27,452,470.00         April 1,
2011 through March 31, 2012 $28,918,100.00         May 1, 2011 through April 30,
2012 $29,736,819.00         June 1, 2011 through May 31, 2012 $30,738,249.00    
    July 1, 2011 through June 30, 2012 $32,550,457.00         October 1, 2011
through September 30, 2012 $36,595,250.00         January 1, 2012 through Dec
31, 2012 $41,103,527.00         April 1, 2012 through March 31, 2013
$46,175,998.00         July 1, 2012 through June 30, 2013 $51,592,980.00        
October 1, 2012 through September 30, 2013 $57,355,881.00         January 1,
2013 through December 31, 2013 $63,466,220.00  

 

In addition, maintain on a consolidated basis with respect to Borrowers net
revenue for each Future Testing Period in an amount greater than or equal to
eighty percent (80.0%) of the net revenue projected for such Future Testing
Period pursuant to the current Annual Financial Projection, to be tested as of
the first (1st) day of the second (2nd) calendar month immediately following
each such Future Testing Period. Each Borrower agrees that it shall deliver the
Annual Fiscal Projection for each calendar year, commencing with the calendar
year commencing January 1, 2014, on or before January 31 of such fiscal year,
and that Borrower’s failure to deliver any Annual Fiscal Projection within three
(3) Business Days’ notice from Agent after the date when required pursuant to
this Section 6.1 shall constitute an immediate Event of Default. For purposes of
this Section 6.1, the term “Future Testing Period” means each twelve (12) month
period ending on the last day of each calendar quarter, commencing with the
calendar quarter ending March 31, 2014, and the term “Annual Financial
Projection” means Borrower’s annual financial projection with respect to any
calendar year, as approved by Borrower’s board of directors, as of the end of
the prior calendar year and delivered to Agent.

 

Section 6.2             Evidence of Compliance. Borrowers shall furnish to
Agent, together with the financial reporting required of Borrowers in
Section 4.1 hereof, evidence (in form and content satisfactory to Agent) of
Borrowers’ compliance with the covenants in Section 6.1 and evidence that no
Event of Default specified in Section 6.1 has occurred. Such evidence shall
include, without limitation, (a) a statement and report, on a form approved by
Agent, detailing Borrowers’ calculations, and (b) if requested by Agent, back-up
documentation (including, without limitation, invoices, receipts and other
evidence of costs incurred during such quarter as Agent shall reasonably
require) evidencing the propriety of the calculations.

 

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Article 7 - CONDITIONS

 

Section 7.1             Conditions to Closing. The obligation of each Lender to
make the initial Loans on the Closing Date shall be subject to the receipt by
Agent of each agreement, document and instrument set forth on the closing
checklist prepared by Agent or its counsel, each in form and substance
satisfactory to Agent, and such other closing deliverables reasonably requested
by Agent and Lenders, and to the satisfaction of the following conditions
precedent, each to the satisfaction of Agent and Lenders and their respective
counsel in their sole discretion:

 

(a)                evidence of the consummation of the transactions (other than
the funding of the Loan and the closing of any acquisition for which the
proceeds of the Loan are purchase money) contemplated by the Operative Documents
including, without limitation, the funding of any and all investments
contemplated by the Operative Documents;

 

(b)               the payment of all fees, expenses and other amounts due and
payable under each Financing Document;

 

(c)                since June 30, 2011, the absence of any material adverse
change in any aspect of the business, operations, properties, prospects or
condition (financial or otherwise) of any Credit Party or any seller of any
assets or business to be purchased by any Borrower contemporaneous with the
Closing Date, or any event or condition which could reasonably be expected to
result in such a material adverse change; and

 

(d)               the receipt of the initial Borrowing Base Certificate,
prepared as of the Closing Date.

 

Each Lender, by delivering its signature page to this Agreement, shall be deemed
to have acknowledged receipt of, and consented to and approved, each Financing
Document, each additional Operative Document and each other document, agreement
and/or instrument required to be approved by Agent, Required Lenders or Lenders,
as applicable, on the Closing Date.

 

Section 7.2             Conditions to Each Loan. The obligation of the Lenders
to make a Loan is subject to the satisfaction of the following additional
conditions:

 

(a)                in the case of a Revolving Loan Borrowing, receipt by Agent
of a Notice of Borrowing (or telephonic notice if permitted by this Agreement)
and updated Borrowing Base Certificate;

 

(b)               the fact that, immediately after such borrowing and after
application of the proceeds thereof or after such issuance, the Revolving Loan
Outstandings will not exceed the Revolving Loan Limit;

 

(c)                the fact that, immediately before and after such advance or
issuance, no Default or Event of Default shall have occurred and be continuing;

 

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(d)               the fact that the representations and warranties of each
Credit Party contained in the Financing Documents shall be true, correct and
complete on and as of the date of such borrowing or issuance, except to the
extent that any such representation or warranty relates to a specific date in
which case such representation or warranty shall be true and correct as of such
earlier date; and

 

(e)                the fact that no adverse change in the condition (financial
or otherwise), properties, business, prospects, or operations of Borrowers or
any other Credit Party shall have occurred and be continuing with respect to
Borrowers or any Credit Party since the date of this Agreement.

 

Each giving of a Notice of Borrowing hereunder and each acceptance by any
Borrower of the proceeds of any Loan made hereunder shall be deemed to be (y) a
representation and warranty by each Borrower on the date of such notice or
acceptance as to the facts specified in this Section, and (z) a restatement by
each Borrower that each and every one of the representations made by it in any
of the Financing Documents is true and correct as of such date (except to the
extent that such representations and warranties expressly relate solely to an
earlier date).

 

Section 7.3             Searches. Before the Closing Date, and thereafter (as
and when determined by Agent in its discretion), Agent shall have the right to
perform, all at Borrowers’ expense, the searches described in clauses (a), (b),
and (c) below against Borrowers and any other Credit Party, the results of which
are to be consistent with Borrowers’ representations and warranties under this
Agreement and the satisfactory results of which shall be a condition precedent
to all advances of Loan proceeds: (a) UCC searches with the Secretary of State
of the jurisdiction in which the applicable Person is organized; (b) judgment,
pending litigation, federal tax lien, personal property tax lien, and corporate
and partnership tax lien searches, in each jurisdiction searched under clause
(a) above; and (c) searches of applicable corporate, limited liability company,
partnership and related records to confirm the continued existence, organization
and good standing of the applicable Person and the exact legal name under which
such Person is organized.

 

Section 7.4             Post-Closing Requirements. Borrowers shall complete each
of the post-closing obligations and/or provide to Agent each of the documents,
instruments, agreements and information listed on Schedule 7.4 attached hereto
on or before the date set forth for each such item thereon, each of which shall
be completed or provided in form and substance satisfactory to Agent.

 

Article 8 – [RESERVED]

 

Article 9 - SECURITY AGREEMENT

 

Section 9.1             Generally. As security for the payment and performance
of the Obligations, and without limiting any other grant of a Lien and security
interest in any Security Document, Borrowers hereby assign and grant to Agent,
for the benefit of itself and Lenders, a continuing first priority Lien on and
security interest in, upon, and to the personal property set forth on
Schedule 9.1 attached hereto and made a part hereof.

 

Section 9.2             Representations and Warranties and Covenants Relating to
Collateral.

 

(a)                Schedule 9.2 sets forth (i) each chief executive office and
principal place of business of each Borrower and each of their respective
Subsidiaries, and (ii) all of the addresses (including all warehouses) at which
any of the Collateral is located and/or books and records of Borrowers regarding
any of the Collateral are kept, which such Schedule 9.2 indicates in each case
which Borrower(s) have Collateral and/or books and records located at such
address, and, in the case of any such address not owned by one or more of the
Borrowers(s), indicates the nature of such location (e.g., leased business
location operated by Borrower(s), third party warehouse, consignment location,
processor location, etc.) and the name and address of the third party owning
and/or operating such location.

 

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(b)               Without limiting the generality of Section 3.2, except as
indicated on Schedule 3.19 with respect to any rights of any Borrower as a
licensee under any license of Intellectual Property owned by another Person, and
except for the filing of financing statements under the UCC, to Borrower’s
knowledge, no authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or consent of any other Person is
required for (i) the grant by each Borrower to Agent of the security interests
and Liens in the Collateral provided for under this Agreement and the other
Security Documents (if any), or (ii) the exercise by Agent of its rights and
remedies with respect to the Collateral provided for under this Agreement and
the other Security Documents or under any applicable Law, including the UCC and
neither any such grant of Liens in favor of Agent or exercise of rights by Agent
shall violate or cause a default under any agreement between any Borrower and
any other Person relating to any such collateral, including any license to which
a Borrower is a party, whether as licensor or licensee, with respect to any
Intellectual Property, whether owned by such Borrower or any other Person.

 

(c)                As of the Closing Date, no Borrower has any ownership
interest in any Chattel Paper (as defined in Article 9 of the UCC), letter of
credit rights, commercial tort claims, Instruments, documents or investment
property (other than equity interests in any Subsidiaries of such Borrower
disclosed on Schedule 3.4) and Borrowers shall give notice to Agent promptly
(but in any event not later than the delivery by Borrowers of the next
Compliance Certificate required pursuant to Section 4.1 above) upon the
acquisition by any Borrower of any such Chattel Paper, letter of credit rights,
commercial tort claims, Instruments, documents, investment property. No Person
other than Agent or (if applicable) any Lender has “control” (as defined in
Article 9 of the UCC) over any Deposit Account, investment property (including
Securities Accounts and commodities account), letter of credit rights or
electronic chattel paper in which any Borrower has any interest (except for such
control arising by operation of law in favor of any bank or securities
intermediary or commodities intermediary with whom any Deposit Account,
Securities Account or commodities account of Borrowers is maintained).

 

(d)               Borrowers shall not, and shall not permit any Credit Party to,
take any of the following actions or make any of the following changes unless
Borrowers have given at least thirty (30) days prior written notice to Agent of
Borrowers’ intention to take any such action (which such written notice shall
include an updated version of any Schedule impacted by such change) and have
executed any and all documents, instruments and agreements and taken any other
actions which Agent may request after receiving such written notice in order to
protect and preserve the Liens, rights and remedies of Agent with respect to the
Collateral: (i) change the legal name or organizational identification number of
any Borrower as it appears in official filings in the jurisdiction of its
organization, (ii) change the jurisdiction of incorporation or formation of any
Borrower or Credit Party or allow any Borrower or Credit Party to designate any
jurisdiction as an additional jurisdiction of incorporation for such Borrower or
Credit Party, or change the type of entity that it is, or (iii) change its chief
executive office, principal place of business, or the location of its records
concerning the Collateral or move any Collateral to or place any Collateral on
any location that is not then listed on the Schedules and/or establish any
business location at any location that is not then listed on the Schedules.

 

(e)                Borrowers shall not adjust, settle or compromise the amount
or payment of any Account, or release wholly or partly any Account Debtor, or
allow any credit or discount thereon (other than adjustments, settlements,
compromises, credits and discounts in the Ordinary Course of Business, made
while no Default exists and in amounts which are not material with respect to
the Account and which, after giving effect thereto, do not cause the Borrowing
Base to be less than the Revolving Loan Outstandings) without the prior written
consent of Agent. Without limiting the generality of this Agreement or any other
provisions of any of the Financing Documents relating to the rights of Agent
after the occurrence and during the continuance of an Event of Default, Agent
shall have the right at any time after the occurrence and during the continuance
of an Event of Default to: (i) exercise the rights of Borrowers with respect to
the obligation of any Account Debtor to make payment or otherwise render
performance to Borrowers and with respect to any property that secures the
obligations of any Account Debtor or any other Person obligated on the
Collateral, and (ii) adjust, settle or compromise the amount or payment of such
Accounts.

 

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Article 10 - EVENTS OF DEFAULT

 

Section 10.1         Events of Default. For purposes of the Financing Documents,
the occurrence of any of the following conditions and/or events, whether
voluntary or involuntary, by operation of law or otherwise, shall constitute an
“Event of Default”:

 

(a)                (i) any Borrower shall fail to pay when due any principal,
interest, premium or fee under any Financing Document or any other amount
payable under any Financing Document, (ii) there shall occur any default in the
performance of or compliance with any of the following sections of this
Agreement: Section 2.11, Section 4.2(b), Section 4.4(c), Section 4.6, Section
4.11, Section 4.12, and Article 5, or (iii) there shall occur any default in the
performance of or compliance with Section 4.1 and/or Article 6 of this Agreement
and Borrower Representative has received written notice from Agent or Required
Lenders of such default;

 

(b)               any Credit Party defaults in the performance of or compliance
with any term contained in this Agreement or in any other Financing Document,
including, without limitation, the Term Loan Documents (other than occurrences
described in other provisions of this Section 10.1 for which a different grace
or cure period is specified or for which no grace or cure period is specified
and thereby constitute immediate Events of Default), ten (10) days after the
occurrence thereof; provided, however, that if the default cannot by its nature
be cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional period
(which shall not in any case exceed thirty (30) days) to attempt to cure such
default, and within such reasonable time period the failure to cure the default
shall not be deemed an Event of Default (but no additional Credit Exposure shall
be made during such cure period).

 

(c)                any representation, warranty, certification or statement made
by any Credit Party or any other Person in any Financing Document or in any
certificate, financial statement or other document delivered pursuant to any
Financing Document is incorrect in any respect (or in any material respect if
such representation, warranty, certification or statement is not by its terms
already qualified as to materiality) when made (or deemed made);

 

(d)               (i) failure of any Credit Party to pay when due or within any
applicable grace period any principal, interest or other amount on Debt (other
than the Loans), or the occurrence of any breach, default, condition or event
with respect to any Debt (other than the Loans), if the effect of such failure
or occurrence is to cause or to permit the holder or holders of any such Debt,
to cause, Debt or other liabilities having an individual principal amount in
excess of $100,000 or having an aggregate principal amount in excess of $100,000
to become or be declared due prior to its stated maturity, or (ii) the
occurrence of any breach or default under any terms or provisions of any
Subordinated Debt Document or under any agreement subordinating the Subordinated
Debt to all or any portion of the Obligations or the occurrence of any event
requiring the prepayment of any Subordinated Debt;

 

46

 

 

(e)                any Credit Party or any Subsidiary of a Borrower shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or shall consent
to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;

 

(f)                an involuntary case or other proceeding shall be commenced
against any Credit Party or any Subsidiary of a Borrower seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of thirty (30) days; or an order for relief shall be entered against any
Credit Party or any Subsidiary of a Borrower under applicable federal
bankruptcy, insolvency or other similar law in respect of (i) bankruptcy,
liquidation, winding-up, dissolution or suspension of general operations,
(ii) composition, rescheduling, reorganization, arrangement or readjustment of,
or other relief from, or stay of proceedings to enforce, some or all of the
debts or obligations, or (iii) possession, foreclosure, seizure or retention,
sale or other disposition of, or other proceedings to enforce security over, all
or any substantial part of the assets of such Credit Party or Subsidiary;

 

(g)                (i) institution of any steps by any Person to terminate a
Pension Plan if as a result of such termination any Credit Party or any member
of the Controlled Group could be required to make a contribution to such Pension
Plan, or could incur a liability or obligation to such Pension Plan, in excess
of $25,000, (ii) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA, or (iii) there
shall occur any withdrawal or partial withdrawal from a Multiemployer Plan and
the withdrawal liability (without unaccrued interest) to Multiemployer Plans as
a result of such withdrawal (including any outstanding withdrawal liability that
any Credit Party or any member of the Controlled Group have incurred on the date
of such withdrawal) exceeds $25,000;

 

(h)               one or more judgments or orders for the payment of money (not
paid or fully covered by insurance maintained in accordance with the
requirements of this Agreement and as to which the relevant insurance company
has acknowledged coverage) aggregating in excess of $100,000 shall be rendered
against any or all Credit Parties and either (i) enforcement proceedings shall
have been commenced by any creditor upon any such judgments or orders, or
(ii) there shall be any period of ten (10) consecutive days during which a stay
of enforcement of any such judgments or orders, by reason of a pending appeal,
bond or otherwise, shall not be in effect;

 

(i)                 any Lien created by any of the Security Documents shall at
any time fail to constitute a valid and perfected Lien on all of the Collateral
purported to be encumbered thereby, subject to no prior or equal Lien except
Permitted Liens, or any Credit Party shall so assert;

 

(j)                 the institution by any Governmental Authority of criminal
proceedings against any Credit Party;

 

(k)               a default or event of default occurs under any Guarantee of
any portion of the Obligations;

 

47

 

 

(l)                 any Borrower makes any payment on account of any Debt that
has been subordinated to any of the Obligations, other than payments
specifically permitted by the terms of such subordination;

 

(m)             if any Borrower is or becomes an entity whose equity is
registered with the SEC, and/or is publicly traded on and/or registered with a
public securities exchange, such Borrower’s equity fails to remain registered
with the SEC in good standing, and/or such equity fails to remain publicly
traded on and registered with a public securities exchange;

 

(n)               the occurrence of any fact, event or circumstance that could
reasonably be expected to result in a Material Adverse Effect, if such default
shall have continued unremedied for a period of ten (10) days after written
notice from Agent;

 

(o)               Agent determines, based on information available to it and in
its reasonable judgment, that there is a reasonable likelihood that Borrowers
shall fail to comply with one or more financial covenants in Article 6 during
the next succeeding financial reporting period;

 

(p)               there shall occur any default or event of default under the
Affiliated Financing Documents;

 

(q)               (i) the institution of any proceeding by the DEA, FDA or
similar Governmental Authority to order the withdrawal of any Product or Product
category from the market or to enjoin Borrower or any representative of Borrower
from manufacturing, marketing, selling or distributing any Product or Product
category, (ii) the institution of any action or proceeding by any of the DEA,
FDA, or any other Governmental Authority to revoke, suspend, reject, withdraw,
limit, or restrict any Required Permit held by Borrower or any representative of
Borrower, which, in each case, could cause a Material Adverse Effect, (iii) the
commencement of any enforcement action against Borrower by the DEA, FDA or any
other Governmental Authority, (iv) (X) the recall of any Products from the
market, or (Y) the voluntary withdrawal of any material Products from the market
which could reasonably be expected to cause a Material Adverse Effect, (v)
actions to discontinue the sale of any material Products, or (vi) the occurrence
of adverse test results in connection with a Product which could cause a
Material Adverse Effect;

 

(r)                 there shall occur a material adverse change in the financial
condition or business prospects of any Borrower, or if Agent in good faith deems
the Lenders insecure as a result of acts or events bearing upon the financial
condition of any Borrower or the repayment of the Notes, which default shall
have continued unremedied for a period of ten (10) days after written notice
from Agent; or

 

(s)                the occurrence and continuance of an Event of Default under
any of the Term Loan Documents.

 

Notwithstanding the foregoing, if a Credit Party fails to comply with any same
provision of this Agreement two (2) times in any twelve (12) month period and
Agent has given to Borrower Representative in connection with each such failure
any notice to which Borrowers would be entitled under this Section before such
failure could become an Event of Default, then all subsequent failures by a
Credit Party to comply with such provision of this Agreement shall effect an
immediate Event of Default (without the expiration of any applicable cure
period) with respect to all subsequent failures by a Credit Party to comply with
such provision of this Agreement, and Agent thereupon may exercise any remedy
set forth in this Article 10 without affording Borrowers any opportunity to cure
such Event of Default.

 

48

 

 

All cure periods provided for in this Section 10.1 shall run concurrently with
any cure period provided for in any applicable Financing Documents under which
the default occurred.

 

Section 10.2         Acceleration and Suspension or Termination of Revolving
Loan Commitment. Upon the occurrence and during the continuance of an Event of
Default, Agent may, and shall if requested by Required Lenders, (a) by notice to
Borrower Representative suspend or terminate the Revolving Loan Commitment and
the obligations of Agent and the Lenders with respect thereto, in whole or in
part (and, if in part, each Lender’s Revolving Loan Commitment shall be reduced
in accordance with its Pro Rata Share), and/or (b) by notice to Borrower
Representative declare all or any portion of the Obligations to be, and the
Obligations shall thereupon become, immediately due and payable, with accrued
interest thereon, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by each Borrower and Borrowers will pay the
same; provided, however, that in the case of any of the Events of Default
specified in Section 10.1(e) or 10.1(f) above, without any notice to any
Borrower or any other act by Agent or the Lenders, the Revolving Loan Commitment
and the obligations of Agent and the Lenders with respect thereto shall
thereupon immediately and automatically terminate and all of the Obligations
shall become immediately and automatically due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
each Borrower and Borrowers will pay the same.

 

Section 10.3         UCC Remedies.

 

(a)                Upon the occurrence of and during the continuance of an Event
of Default under this Agreement or the other Financing Documents, Agent, in
addition to all other rights, options, and remedies granted to Agent under this
Agreement or at law or in equity, may exercise, either directly or through one
or more assignees or designees, all rights and remedies granted to it under all
Financing Documents and under the UCC in effect in the applicable
jurisdiction(s) and under any other applicable law; including, without
limitation:

 

(i)                 the right to take possession of, send notices regarding, and
collect directly the Collateral, with or without judicial process;

 

(ii)               the right to (by its own means or with judicial assistance)
enter any of Borrowers’ premises and take possession of the Collateral, or
render it unusable, or to render it usable or saleable, or dispose of the
Collateral on such premises in compliance with subsection (iii) below and to
take possession of Borrowers’ original books and records, to obtain access to
Borrowers’ data processing equipment, computer hardware and software relating to
the Collateral and to use all of the foregoing and the information contained
therein in any manner Agent deems appropriate, without any liability for rent,
storage, utilities, or other sums, and Borrowers shall not resist or interfere
with such action (if Borrowers’ books and records are prepared or maintained by
an accounting service, contractor or other third party agent, Borrowers hereby
irrevocably authorize such service, contractor or other agent, upon notice by
Agent to such Person that an Event of Default has occurred and is continuing, to
deliver to Agent or its designees such books and records, and to follow Agent’s
instructions with respect to further services to be rendered);

 

(iii)             the right to require Borrowers at Borrowers’ expense to
assemble all or any part of the Collateral and make it available to Agent at any
place designated by Lender;

 

(iv)             the right to notify postal authorities to change the address
for delivery of Borrowers’ mail to an address designated by Agent and to
receive, open and dispose of all mail addressed to any Borrower; and/or

 

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(v)               the right to enforce Borrowers’ rights against Account Debtors
and other obligors, including, without limitation, (i) the right to collect
Accounts directly in Agent’s own name (as agent for Lenders) and to charge the
collection costs and expenses, including attorneys’ fees, to Borrowers, and
(ii) the right, in the name of Agent or any designee of Agent or Borrowers, to
verify the validity, amount or any other matter relating to any Accounts by
mail, telephone, telegraph or otherwise, including, without limitation,
verification of Borrowers’ compliance with applicable Laws. Borrowers shall
cooperate fully with Agent in an effort to facilitate and promptly conclude such
verification process. Such verification may include contacts between Agent and
applicable federal, state and local regulatory authorities having jurisdiction
over the Borrowers’ affairs, all of which contacts Borrowers hereby irrevocably
authorize.

 

(b)               Each Borrower agrees that a notice received by it at least ten
(10) days before the time of any intended public sale, or the time after which
any private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition. If permitted
by applicable law, any perishable Collateral which threatens to speedily decline
in value or which is sold on a recognized market may be sold immediately by
Agent without prior notice to Borrowers. At any sale or disposition of
Collateral, Agent may (to the extent permitted by applicable law) purchase all
or any part of the Collateral, free from any right of redemption by Borrowers,
which right is hereby waived and released. Each Borrower covenants and agrees
not to interfere with or impose any obstacle to Agent’s exercise of its rights
and remedies with respect to the Collateral. Agent shall have no obligation to
clean-up or otherwise prepare the Collateral for sale. Agent may comply with any
applicable state or federal law requirements in connection with a disposition of
the Collateral and compliance will not be considered to adversely affect the
commercial reasonableness of any sale of the Collateral. Agent may sell the
Collateral without giving any warranties as to the Collateral. Agent may
specifically disclaim any warranties of title or the like. This procedure will
not be considered to adversely affect the commercial reasonableness of any sale
of the Collateral. If Agent sells any of the Collateral upon credit, Borrowers
will be credited only with payments actually made by the purchaser, received by
Agent and applied to the indebtedness of the purchaser. In the event the
purchaser fails to pay for the Collateral, Agent may resell the Collateral and
Borrowers shall be credited with the proceeds of the sale. Borrowers shall
remain liable for any deficiency if the proceeds of any sale or disposition of
the Collateral are insufficient to pay all Obligations.

 

(c)                Without restricting the generality of the foregoing and for
the purposes aforesaid, each Borrower hereby appoints and constitutes Agent its
lawful attorney-in-fact with full power of substitution in the Collateral, upon
the occurrence and during the continuance of an Event of Default, to (i) use
unadvanced funds remaining under this Agreement or which may be reserved,
escrowed or set aside for any purposes hereunder at any time, or to advance
funds in excess of the face amount of the Notes, (ii) pay, settle or compromise
all existing bills and claims, which may be Liens or security interests, or to
avoid such bills and claims becoming Liens against the Collateral, (iii) execute
all applications and certificates in the name of such Borrower and to prosecute
and defend all actions or proceedings in connection with the Collateral, and
(iv) do any and every act which such Borrower might do in its own behalf; it
being understood and agreed that this power of attorney in this subsection (c)
shall be a power coupled with an interest and cannot be revoked.

 

(d)               Agent and each Lender is hereby granted a non-exclusive,
royalty-free license or other right to use, without charge, Borrowers’ labels,
mask works, rights of use of any name, any other Intellectual Property and
advertising matter, and any similar property as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral
and, in connection with Agent’s exercise of its rights under this Article,
Borrowers’ rights under all licenses (whether as licensor or licensee) and all
franchise agreements inure to Agent’s and each Lender’s benefit.

 

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Section 10.4         [Reserved]

 

Section 10.5         Default Rate of Interest. At the election of Agent or
Required Lenders, after the occurrence of an Event of Default and for so long as
it continues, the Loans and other Obligations shall bear interest at rates that
are five percent (5.0%) per annum in excess of the rates otherwise payable under
this Agreement.

 

Section 10.6         Setoff Rights. During the continuance of any Event of
Default, each Lender is hereby authorized by each Borrower at any time or from
time to time, with reasonably prompt subsequent notice to such Borrower (any
prior or contemporaneous notice being hereby expressly waived) to set off and to
appropriate and to apply any and all (a) balances held by such Lender or any of
such Lender’s Affiliates at any of its offices for the account of such Borrower
or any of its Subsidiaries (regardless of whether such balances are then due to
such Borrower or its Subsidiaries), and (b) other property at any time held or
owing by such Lender to or for the credit or for the account of such Borrower or
any of its Subsidiaries, against and on account of any of the Obligations;
except that no Lender shall exercise any such right without the prior written
consent of Agent. Any Lender exercising a right to set off shall purchase for
cash (and the other Lenders shall sell) interests in each of such other Lender’s
Pro Rata Share of the Obligations as would be necessary to cause all Lenders to
share the amount so set off with each other Lender in accordance with their
respective Pro Rata Share of the Obligations. Each Borrower agrees, to the
fullest extent permitted by law, that any Lender and any of such Lender’s
Affiliates may exercise its right to set off with respect to the Obligations as
provided in this Section 10.6.

 

Section 10.7         Application of Proceeds.

 

(a)                Notwithstanding anything to the contrary contained in this
Agreement, upon the occurrence and during the continuance of an Event of
Default, each Borrower irrevocably waives the right to direct the application of
any and all payments at any time or times thereafter received by Agent from or
on behalf of such Borrower or any Guarantor of all or any part of the
Obligations, and, as between Borrowers on the one hand and Agent and Lenders on
the other, Agent shall have the continuing and exclusive right to apply and to
reapply any and all payments received against the Obligations in such manner as
Agent may deem advisable notwithstanding any previous application by Agent.

 

(b)               Following the occurrence and continuance of an Event of
Default, but absent the occurrence and continuance of an Acceleration Event,
Agent shall apply any and all payments received by Agent in respect of the
Obligations, and any and all proceeds of Collateral received by Agent, in such
order as Agent may from time to time elect.

 

(c)                Notwithstanding anything to the contrary contained in this
Agreement, if an Acceleration Event shall have occurred, and so long as it
continues, Agent shall apply any and all payments received by Agent in respect
of the Obligations, and any and all proceeds of Collateral received by Agent, in
the following order: first, to all fees, costs, indemnities, liabilities,
obligations and expenses incurred by or owing to Agent with respect to this
Agreement, the other Financing Documents or the Collateral; second, to all fees,
costs, indemnities, liabilities, obligations and expenses incurred by or owing
to any Lender with respect to this Agreement, the other Financing Documents or
the Collateral; third, to accrued and unpaid interest on the Obligations
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts); fourth, to the principal amount of the
Obligations outstanding; and fifth to any other indebtedness or obligations of
Borrowers owing to Agent or any Lender under the Financing Documents. Any
balance remaining shall be delivered to Borrowers or to whomever may be lawfully
entitled to receive such balance or as a court of competent jurisdiction may
direct. In carrying out the foregoing, (y) amounts received shall be applied in
the numerical order provided until exhausted prior to the application to the
next succeeding category, and (z) each of the Persons entitled to receive a
payment in any particular category shall receive an amount equal to its Pro Rata
Share of amounts available to be applied pursuant thereto for such category.

 

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Section 10.8         Waivers.

 

(a)                Except as otherwise provided for in this Agreement and to the
fullest extent permitted by applicable law, each Borrower waives:
(i) presentment, demand and protest, and notice of presentment, dishonor, intent
to accelerate, acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all Financing Documents,
the Notes or any other notes, commercial paper, accounts, contracts, documents,
Instruments, Chattel Paper and Guarantees at any time held by Lenders on which
any Borrower may in any way be liable, and hereby ratifies and confirms whatever
Lenders may do in this regard; (ii) all rights to notice and a hearing prior to
Agent’s or any Lender’s taking possession or control of, or to Agent’s or any
Lender’s replevy, attachment or levy upon, any Collateral or any bond or
security which might be required by any court prior to allowing Agent or any
Lender to exercise any of its remedies; and (iii) the benefit of all valuation,
appraisal and exemption Laws. Each Borrower acknowledges that it has been
advised by counsel of its choices and decisions with respect to this Agreement,
the other Financing Documents and the transactions evidenced hereby and thereby.

 

(b)               Each Borrower for itself and all its successors and assigns,
(i) agrees that its liability shall not be in any manner affected by any
indulgence, extension of time, renewal, waiver, or modification granted or
consented to by Lender; (ii) consents to any indulgences and all extensions of
time, renewals, waivers, or modifications that may be granted by Agent or any
Lender with respect to the payment or other provisions of the Financing
Documents, and to any substitution, exchange or release of the Collateral, or
any part thereof, with or without substitution, and agrees to the addition or
release of any Borrower, endorsers, guarantors, or sureties, or whether
primarily or secondarily liable, without notice to any other Borrower and
without affecting its liability hereunder; (iii) agrees that its liability shall
be unconditional and without regard to the liability of any other Borrower,
Agent or any Lender for any tax on the indebtedness; and (iv) to the fullest
extent permitted by law, expressly waives the benefit of any statute or rule of
law or equity now provided, or which may hereafter be provided, which would
produce a result contrary to or in conflict with the foregoing.

 

(c)                To the extent that Agent or any Lender may have acquiesced in
any noncompliance with any requirements or conditions precedent to the closing
of the Loans or to any subsequent disbursement of Loan proceeds, such
acquiescence shall not be deemed to constitute a waiver by Agent or any Lender
of such requirements with respect to any future disbursements of Loan proceeds
and Agent may at any time after such acquiescence require Borrowers to comply
with all such requirements. Any forbearance by Agent or Lender in exercising any
right or remedy under any of the Financing Documents, or otherwise afforded by
applicable law, including any failure to accelerate the maturity date of the
Loans, shall not be a waiver of or preclude the exercise of any right or remedy
nor shall it serve as a novation of the Notes or as a reinstatement of the Loans
or a waiver of such right of acceleration or the right to insist upon strict
compliance of the terms of the Financing Documents. Agent’s or any Lender’s
acceptance of payment of any sum secured by any of the Financing Documents after
the due date of such payment shall not be a waiver of Agent’s and such Lender’s
right to either require prompt payment when due of all other sums so secured or
to declare a default for failure to make prompt payment. The procurement of
insurance or the payment of taxes or other Liens or charges by Agent as the
result of an Event of Default shall not be a waiver of Agent’s right to
accelerate the maturity of the Loans, nor shall Agent’s receipt of any
condemnation awards, insurance proceeds, or damages under this Agreement operate
to cure or waive any Credit Party’s default in payment of sums secured by any of
the Financing Documents.

 

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(d)               Without limiting the generality of anything contained in this
Agreement or the other Financing Documents, each Borrower agrees that if an
Event of Default is continuing (i) Agent and Lenders shall not be subject to any
“one action” or “election of remedies” law or rule, and (ii) all Liens and other
rights, remedies or privileges provided to Agent or Lenders shall remain in full
force and effect until Agent or Lenders have exhausted all remedies against the
Collateral and any other properties owned by Borrowers and the Financing
Documents and other security instruments or agreements securing the Loans have
been foreclosed, sold and/or otherwise realized upon in satisfaction of
Borrowers’ obligations under the Financing Documents.

 

(e)                Nothing contained herein or in any other Financing Document
shall be construed as requiring Agent or any Lender to resort to any part of the
Collateral for the satisfaction of any of Borrowers’ obligations under the
Financing Documents in preference or priority to any other Collateral, and Agent
may seek satisfaction out of all of the Collateral or any part thereof, in its
absolute discretion in respect of Borrowers’ obligations under the Financing
Documents. In addition, Agent shall have the right from time to time to
partially foreclose upon any Collateral in any manner and for any amounts
secured by the Financing Documents then due and payable as determined by Agent
in its sole discretion, including, without limitation, the following
circumstances: (i) in the event any Borrower defaults beyond any applicable
grace period in the payment of one or more scheduled payments of principal
and/or interest, Agent may foreclose upon all or any part of the Collateral to
recover such delinquent payments, or (ii) in the event Agent elects to
accelerate less than the entire outstanding principal balance of the Loans,
Agent may foreclose all or any part of the Collateral to recover so much of the
principal balance of the Loans as Lender may accelerate and such other sums
secured by one or more of the Financing Documents as Agent may elect.
Notwithstanding one or more partial foreclosures, any unforeclosed Collateral
shall remain subject to the Financing Documents to secure payment of sums
secured by the Financing Documents and not previously recovered.

 

(f)                To the fullest extent permitted by law, each Borrower, for
itself and its successors and assigns, waives in the event of foreclosure of any
or all of the Collateral any equitable right otherwise available to any Credit
Party which would require the separate sale of any of the Collateral or require
Agent or Lenders to exhaust their remedies against any part of the Collateral
before proceeding against any other part of the Collateral; and further in the
event of such foreclosure each Borrower does hereby expressly consent to and
authorize, at the option of Agent, the foreclosure and sale either separately or
together of each part of the Collateral.

 

Section 10.9         Injunctive Relief. The parties acknowledge and agree that,
in the event of a breach or threatened breach of any Credit Party’s obligations
under any Financing Documents, Agent and Lenders may have no adequate remedy in
money damages and, accordingly, shall be entitled to an injunction (including,
without limitation, a temporary restraining order, preliminary injunction, writ
of attachment, or order compelling an audit) against such breach or threatened
breach, including, without limitation, maintaining any cash management and
collection procedure described herein. However, no specification in this
Agreement of a specific legal or equitable remedy shall be construed as a waiver
or prohibition against any other legal or equitable remedies in the event of a
breach or threatened breach of any provision of this Agreement. Each Credit
Party waives, to the fullest extent permitted by law, the requirement of the
posting of any bond in connection with such injunctive relief. By joining in the
Financing Documents as a Credit Party, each Credit Party specifically joins in
this Section as if this Section were a part of each Financing Document executed
by such Credit Party.

 

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Section 10.10     Marshalling; Payments Set Aside. Neither Agent nor any Lender
shall be under any obligation to marshal any assets in payment of any or all of
the Obligations. To the extent that Borrower makes any payment or Agent enforces
its Liens or Agent or any Lender exercises its right of set-off, and such
payment or the proceeds of such enforcement or set-off is subsequently
invalidated, declared to be fraudulent or preferential, set aside, or required
to be repaid by anyone, then to the extent of such recovery, the Obligations or
part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefore, shall be revived and continued in full force and effect as
if such payment had not been made or such enforcement or set-off had not
occurred.

 

Article 11 - AGENT

 

Section 11.1         Appointment and Authorization. Each Lender hereby
irrevocably appoints and authorizes Agent to enter into each of the Financing
Documents to which it is a party (other than this Agreement) on its behalf and
to take such actions as Agent on its behalf and to exercise such powers under
the Financing Documents as are delegated to Agent by the terms thereof, together
with all such powers as are reasonably incidental thereto. Subject to the terms
of Section 11.16 and to the terms of the other Financing Documents, Agent is
authorized and empowered to amend, modify, or waive any provisions of this
Agreement or the other Financing Documents on behalf of Lenders. The provisions
of this Article 11 are solely for the benefit of Agent and Lenders and neither
any Borrower nor any other Credit Party shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement, Agent shall act solely as agent of Lenders and does
not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any Borrower or any other Credit
Party. Agent may perform any of its duties hereunder, or under the Financing
Documents, by or through its agents or employees.

 

Section 11.2         Agent and Affiliates. Agent shall have the same rights and
powers under the Financing Documents as any other Lender and may exercise or
refrain from exercising the same as though it were not Agent, and Agent and its
Affiliates may lend money to, invest in and generally engage in any kind of
business with each Credit Party or Affiliate of any Credit Party as if it were
not Agent hereunder.

 

Section 11.3         Action by Agent. The duties of Agent shall be mechanical
and administrative in nature. Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender. Nothing in this Agreement or
any of the Financing Documents is intended to or shall be construed to impose
upon Agent any obligations in respect of this Agreement or any of the Financing
Documents except as expressly set forth herein or therein.

 

Section 11.4         Consultation with Experts. Agent may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.

 

Section 11.5         Liability of Agent. Neither Agent nor any of its directors,
officers, agents or employees shall be liable to any Lender for any action taken
or not taken by it in connection with the Financing Documents, except that Agent
shall be liable with respect to its specific duties set forth hereunder but only
to the extent of its own gross negligence or willful misconduct in the discharge
thereof as determined by a final non-appealable judgment of a court of competent
jurisdiction. Neither Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (a) any statement, warranty or representation made in connection with
any Financing Document or any borrowing hereunder; (b) the performance or
observance of any of the covenants or agreements specified in any Financing
Document; (c) the satisfaction of any condition specified in any Financing
Document; (d) the validity, effectiveness, sufficiency or genuineness of any
Financing Document, any Lien purported to be created or perfected thereby or any
other instrument or writing furnished in connection therewith; (e) the existence
or non-existence of any Default or Event of Default; or (f) the financial
condition of any Credit Party. Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex, facsimile or electronic transmission or
similar writing) believed by it to be genuine or to be signed by the proper
party or parties. Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith and if any such apportionment
or distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them).

 

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Section 11.6         Indemnification. Each Lender shall, in accordance with its
Pro Rata Share, indemnify Agent (to the extent not reimbursed by Borrowers) upon
demand against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from Agent’s
gross negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction) that Agent may suffer or incur in
connection with the Financing Documents or any action taken or omitted by Agent
hereunder or thereunder. If any indemnity furnished to Agent for any purpose
shall, in the opinion of Agent, be insufficient or become impaired, Agent may
call for additional indemnity and cease, or not commence, to do the acts
indemnified against even if so directed by Required Lenders until such
additional indemnity is furnished.

 

Section 11.7         Right to Request and Act on Instructions. Agent may at any
time request instructions from Lenders with respect to any actions or approvals
which by the terms of this Agreement or of any of the Financing Documents Agent
is permitted or desires to take or to grant, and if such instructions are
promptly requested, Agent shall be absolutely entitled to refrain from taking
any action or to withhold any approval and shall not be under any liability
whatsoever to any Person for refraining from any action or withholding any
approval under any of the Financing Documents until it shall have received such
instructions from Required Lenders or all or such other portion of the Lenders
as shall be prescribed by this Agreement. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against Agent as a result of
Agent acting or refraining from acting under this Agreement or any of the other
Financing Documents in accordance with the instructions of Required Lenders (or
all or such other portion of the Lenders as shall be prescribed by this
Agreement) and, notwithstanding the instructions of Required Lenders (or such
other applicable portion of the Lenders), Agent shall have no obligation to take
any action if it believes, in good faith, that such action would violate
applicable Law or exposes Agent to any liability for which it has not received
satisfactory indemnification in accordance with the provisions of Section 11.6.

 

Section 11.8         Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under the Financing Documents.

 

Section 11.9         Collateral Matters. Lenders irrevocably authorize Agent, at
its option and in its discretion, to (a) release any Lien granted to or held by
Agent under any Security Document (i) upon termination of the Loan Commitment
and payment in full of all Obligations; or (ii) constituting property sold or
disposed of as part of or in connection with any disposition permitted under any
Financing Document (it being understood and agreed that Agent may conclusively
rely without further inquiry on a certificate of a Responsible Officer as to the
sale or other disposition of property being made in full compliance with the
provisions of the Financing Documents); and (b) release or subordinate any Lien
granted to or held by Agent under any Security Document constituting personal
property described herein (it being understood and agreed that Agent may
conclusively rely without further inquiry on a certificate of a Responsible
Officer as to the identification of any personal property described herein).
Upon request by Agent at any time, Lenders will confirm Agent’s authority to
release and/or subordinate particular types or items of Collateral pursuant to
this Section 11.9.

 

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Section 11.10     Agency for Perfection. Agent and each Lender hereby appoint
each other Lender as agent for the purpose of perfecting Agent’s security
interest in assets which, in accordance with the Uniform Commercial Code in any
applicable jurisdiction, can be perfected by possession or control. Should any
Lender (other than Agent) obtain possession or control of any such assets, such
Lender shall notify Agent thereof, and, promptly upon Agent’s request therefor,
shall deliver such assets to Agent or in accordance with Agent’s instructions or
transfer control to Agent in accordance with Agent’s instructions. Each Lender
agrees that it will not have any right individually to enforce or seek to
enforce any Security Document or to realize upon any Collateral for the Loan
unless instructed to do so by Agent (or consented to by Agent), it being
understood and agreed that such rights and remedies may be exercised only by
Agent.

 

Section 11.11     Notice of Default. Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default except with
respect to defaults in the payment of principal, interest and fees required to
be paid to Agent for the account of Lenders, unless Agent shall have received
written notice from a Lender or a Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
“notice of default”. Agent will notify each Lender of its receipt of any such
notice. Agent shall take such action with respect to such Default or Event of
Default as may be requested by Required Lenders (or all or such other portion of
the Lenders as shall be prescribed by this Agreement) in accordance with the
terms hereof. Unless and until Agent has received any such request, Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable or in the best interests of Lenders.

 

Section 11.12     Assignment by Agent; Resignation of Agent; Successor Agent.

 

(a)                Agent may at any time assign its rights, powers, privileges
and duties hereunder to (i) another Lender, or (ii) any Person to whom Agent, in
its capacity as a Lender, has assigned (or will assign, in conjunction with such
assignment of agency rights hereunder) 50% or more of its Loan, in each case
without the consent of the Lenders or Borrowers. Following any such assignment,
Agent shall give notice to the Lenders and Borrowers. An assignment by Agent
pursuant to this subsection (a) shall not be deemed a resignation by Agent for
purposes of subsection (b) below.

 

(b)               Without limiting the rights of Agent to designate an assignee
pursuant to subsection (a) above, Agent may at any time give notice of its
resignation to the Lenders and Borrowers. Upon receipt of any such notice of
resignation, Required Lenders shall have the right to appoint a successor Agent.
If no such successor shall have been so appointed by Required Lenders and shall
have accepted such appointment within ten (10) Business Days after the retiring
Agent gives notice of its resignation, then the retiring Agent may on behalf of
the Lenders, appoint a successor Agent; provided, however, that if Agent shall
notify Borrowers and the Lenders that no Person has accepted such appointment,
then such resignation shall nonetheless become effective in accordance with such
notice from Agent that no Person has accepted such appointment and, from and
following delivery of such notice, (i) the retiring Agent shall be discharged
from its duties and obligations hereunder and under the other Financing
Documents, and (ii) all payments, communications and determinations provided to
be made by, to or through Agent shall instead be made by or to each Lender
directly, until such time as Required Lenders appoint a successor Agent as
provided for above in this paragraph.

 

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(c)                Upon (i) an assignment permitted by subsection (a) above, or
(ii) the acceptance of a successor’s appointment as Agent pursuant to subsection
(b) above, such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring (or retired) Agent, and
the retiring Agent shall be discharged from all of its duties and obligations
hereunder and under the other Financing Documents (if not already discharged
therefrom as provided above in this paragraph). The fees payable by Borrowers to
a successor Agent shall be the same as those payable to its predecessor unless
otherwise agreed between Borrowers and such successor. After the retiring
Agent’s resignation hereunder and under the other Financing Documents, the
provisions of this Article and Section 11.12 shall continue in effect for the
benefit of such retiring Agent and its sub-agents in respect of any actions
taken or omitted to be taken by any of them while the retiring Agent was acting
or was continuing to act as Agent.

 

Section 11.13     Payment and Sharing of Payment.

 

(a)                Revolving Loan Advances, Payments and Settlements; Interest
and Fee Payments.

 

(i)                 Agent shall have the right, on behalf of Revolving Lenders
to disburse funds to Borrowers for all Revolving Loans requested or deemed
requested by Borrowers pursuant to the terms of this Agreement. Agent shall be
conclusively entitled to assume, for purposes of the preceding sentence, that
each Revolving Lender, other than any Non-Funding Revolving Lenders, will fund
its Pro Rata Share of all Revolving Loans requested by Borrowers. Each Revolving
Lender shall reimburse Agent on demand, in accordance with the provisions of the
immediately following paragraph, for all funds disbursed on its behalf by Agent
pursuant to the first sentence of this clause (i), or if Agent so requests, each
Revolving Lender will remit to Agent its Pro Rata Share of any Revolving Loan
before Agent disburses the same to a Borrower. If Agent elects to require that
each Revolving Lender make funds available to Agent, prior to a disbursement by
Agent to a Borrower, Agent shall advise each Revolving Lender by telephone,
facsimile or e-mail of the amount of such Revolving Lender’s Pro Rata Share of
the Revolving Loan requested by such Borrower no later than noon (Eastern time)
on the date of funding of such Revolving Loan, and each such Revolving Lender
shall pay Agent on such date such Revolving Lender’s Pro Rata Share of such
requested Revolving Loan, in same day funds, by wire transfer to the Payment
Account, or such other account as may be identified by Agent to Revolving
Lenders from time to time. If any Lender fails to pay the amount of its Pro Rata
Share of any funds advanced by Agent pursuant to the first sentence of this
clause (i) within one (1) Business Day after Agent’s demand, Agent shall
promptly notify Borrower, and Borrowers shall immediately repay such amount to
Agent. Any repayment required by Borrowers pursuant to this Section 11.13 shall
be accompanied by accrued interest thereon from and including the date such
amount is made available to a Borrower to but excluding the date of payment at
the rate of interest then applicable to Revolving Loans. Nothing in this
Section 11.13 or elsewhere in this Agreement or the other Financing Documents
shall be deemed to require Agent to advance funds on behalf of any Lender or to
relieve any Lender from its obligation to fulfill its commitments hereunder or
to prejudice any rights that Agent or any Borrower may have against any Lender
as a result of any default by such Lender hereunder.

 

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(ii)               On a Business Day of each week as selected from time to time
by Agent, or more frequently (including daily), if Agent so elects (each such
day being a “Settlement Date”), Agent will advise each Revolving Lender by
telephone, facsimile or e-mail of the amount of each such Revolving Lender’s
percentage interest of the Revolving Loan balance as of the close of business of
the Business Day immediately preceding the Settlement Date. In the event that
payments are necessary to adjust the amount of such Revolving Lender’s actual
percentage interest of the Revolving Loans to such Lender’s required percentage
interest of the Revolving Loan balance as of any Settlement Date, the Revolving
Lender from which such payment is due shall pay Agent, without setoff or
discount, to the Payment Account before 1:00 p.m. (Eastern time) on the Business
Day following the Settlement Date the full amount necessary to make such
adjustment. Any obligation arising pursuant to the immediately preceding
sentence shall be absolute and unconditional and shall not be affected by any
circumstance whatsoever. In the event settlement shall not have occurred by the
date and time specified in the second preceding sentence, interest shall accrue
on the unsettled amount at the rate of interest then applicable to Revolving
Loans.

 

(iii)             On each Settlement Date, Agent shall advise each Revolving
Lender by telephone, facsimile or e-mail of the amount of such Revolving
Lender’s percentage interest of principal, interest and fees paid for the
benefit of Revolving Lenders with respect to each applicable Revolving Loan, to
the extent of such Revolving Lender’s Revolving Loan Exposure with respect
thereto, and shall make payment to such Revolving Lender before 1:00 p.m.
(Eastern time) on the Business Day following the Settlement Date of such amounts
in accordance with wire instructions delivered by such Revolving Lender to
Agent, as the same may be modified from time to time by written notice to Agent;
provided, however, that, in the case such Revolving Lender is a Defaulted
Lender, Agent shall be entitled to set off the funding short-fall against that
Defaulted Lender’s respective share of all payments received from any Borrower.

 

(iv)             On the Closing Date, Agent, on behalf of Lenders, may elect to
advance to Borrowers the full amount of the initial Loans to be made on the
Closing Date prior to receiving funds from Lenders, in reliance upon each
Lender’s commitment to make its Pro Rata Share of such Loans to Borrowers in a
timely manner on such date. If Agent elects to advance the initial Loans to
Borrower in such manner, Agent shall be entitled to receive all interest that
accrues on the Closing Date on each Lender’s Pro Rata Share of such Loans unless
Agent receives such Lender’s Pro Rata Share of such Loans before 3:00 p.m.
(Eastern time) on the Closing Date.

 

(v)               It is understood that for purposes of advances to Borrowers
made pursuant to this Section 11.13, Agent will be using the funds of Agent, and
pending settlement, (A) all funds transferred from the Payment Account to the
outstanding Revolving Loans shall be applied first to advances made by Agent to
Borrowers pursuant to this Section 11.13, and (B) all interest accruing on such
advances shall be payable to Agent.

 

(vi)             The provisions of this Section 11.13(a) shall be deemed to be
binding upon Agent and Lenders notwithstanding the occurrence of any Default or
Event of Default, or any insolvency or bankruptcy proceeding pertaining to any
Borrower or any other Credit Party.

 

(b)               [Reserved]

 

(c)                Return of Payments.

 

(i)                 If Agent pays an amount to a Lender under this Agreement in
the belief or expectation that a related payment has been or will be received by
Agent from a Borrower and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender on demand without
setoff, counterclaim or deduction of any kind, together with interest accruing
on a daily basis at the Federal Funds Rate.

 

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

 

(d)               Defaulted Lenders. The failure of any Defaulted Lender to make
any payment required by it hereunder shall not relieve any other Lender of its
obligations to make payment, but neither any other Lender nor Agent shall be
responsible for the failure of any Defaulted Lender to make any payment required
hereunder. Notwithstanding anything set forth herein to the contrary, a
Defaulted Lender shall not have any voting or consent rights under or with
respect to any Financing Document or constitute a “Lender” (or be included in
the calculation of “Required Lenders” hereunder) for any voting or consent
rights under or with respect to any Financing Document.

 

(e)                Sharing of Payments. If any Lender shall obtain any payment
or other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan (other than pursuant to the terms of
Section 2.8(d)) in excess of its Pro Rata Share of payments entitled pursuant to
the other provisions of this Section 11.13, such Lender shall purchase from the
other Lenders such participations in extensions of credit made by such other
Lenders (without recourse, representation or warranty) as shall be necessary to
cause such purchasing Lender to share the excess payment or other recovery
ratably with each of them; provided, however, that if all or any portion of the
excess payment or other recovery is thereafter required to be returned or
otherwise recovered from such purchasing Lender, such portion of such purchase
shall be rescinded and each Lender which has sold a participation to the
purchasing Lender shall repay to the purchasing Lender the purchase price to the
ratable extent of such return or recovery, without interest. Each Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this clause (e) may, to the fullest extent permitted by law,
exercise all its rights of payment (including pursuant to Section 10.6) with
respect to such participation as fully as if such Lender were the direct
creditor of Borrowers in the amount of such participation). If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this clause (e) applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such secured
claim in a manner consistent with the rights of the Lenders entitled under this
clause (e) to share in the benefits of any recovery on such secured claim.

 

Section 11.14     Right to Perform, Preserve and Protect. If any Credit Party
fails to perform any obligation hereunder or under any other Financing Document,
Agent itself may, but shall not be obligated to, cause such obligation to be
performed at Borrowers’ expense. Agent is further authorized by Borrowers and
the Lenders to make expenditures from time to time which Agent, in its
reasonable business judgment, deems necessary or desirable to (a) preserve or
protect the business conducted by Borrowers, the Collateral, or any portion
thereof, and/or (b) enhance the likelihood of, or maximize the amount of,
repayment of the Loan and other Obligations. Each Borrower hereby agrees to
reimburse Agent on demand for any and all costs, liabilities and obligations
incurred by Agent pursuant to this Section 11.14. Each Lender hereby agrees to
indemnify Agent upon demand for any and all costs, liabilities and obligations
incurred by Agent pursuant to this Section 11.14, in accordance with the
provisions of Section 11.6.

 

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Section 11.15     Additional Titled Agents. Except for rights and powers, if
any, expressly reserved under this Agreement to any bookrunner, arranger or to
any titled agent named on the cover page of this Agreement, other than Agent
(collectively, the “Additional Titled Agents”), and except for obligations,
liabilities, duties and responsibilities, if any, expressly assumed under this
Agreement by any Additional Titled Agent, no Additional Titled Agent, in such
capacity, has any rights, powers, liabilities, duties or responsibilities
hereunder or under any of the other Financing Documents. Without limiting the
foregoing, no Additional Titled Agent shall have nor be deemed to have a
fiduciary relationship with any Lender. At any time that any Lender serving as
an Additional Titled Agent shall have transferred to any other Person (other
than any Affiliates) all of its interests in the Loan, such Lender shall be
deemed to have concurrently resigned as such Additional Titled Agent.

 

Section 11.16     Amendments and Waivers.

 

(a)                No provision of this Agreement or any other Financing
Document may be materially amended, waived or otherwise modified unless such
amendment, waiver or other modification is in writing and is signed or otherwise
approved by Borrowers, the Required Lenders and any other Lender to the extent
required under Section 11.16(b).

 

(b)               In addition to the required signatures under Section 11.16(a),
no provision of this Agreement or any other Financing Document may be amended,
waived or otherwise modified unless such amendment, waiver or other modification
is in writing and is signed or otherwise approved by the following Persons:

 

(i)                 if any amendment, waiver or other modification would
increase a Lender’s funding obligations in respect of any Loan, by such Lender;
and/or

 

(ii)               if the rights or duties of Agent are affected thereby, by
Agent;

 

provided, however, that, in each of (i) and (ii) above, no such amendment,
waiver or other modification shall, unless signed or otherwise approved in
writing by all the Lenders directly affected thereby, (A) reduce the principal
of, rate of interest on or any fees with respect to any Loan or forgive any
principal, interest (other than default interest) or fees (other than late
charges) with respect to any Loan; (B) postpone the date fixed for, or waive,
any payment (other than any mandatory prepayment pursuant to Section 2.1(b)(ii))
of principal of any Loan, or of interest on any Loan (other than default
interest) or any fees provided for hereunder (other than late charges) or
postpone the date of termination of any commitment of any Lender hereunder;
(C) change the definition of the term Required Lenders or the percentage of
Lenders which shall be required for Lenders to take any action hereunder;
(D) release all or substantially all of the Collateral, authorize any Borrower
to sell or otherwise dispose of all or substantially all of the Collateral or
release any Guarantor of all or any portion of the Obligations or its Guarantee
obligations with respect thereto, except, in each case with respect to this
clause (D), as otherwise may be provided in this Agreement or the other
Financing Documents (including in connection with any disposition permitted
hereunder); (E) amend, waive or otherwise modify this Section 11.16(b) or the
definitions of the terms used in this Section 11.16(b) insofar as the
definitions affect the substance of this Section 11.16(b); (F) consent to the
assignment, delegation or other transfer by any Credit Party of any of its
rights and obligations under any Financing Document or release any Borrower of
its payment obligations under any Financing Document, except, in each case with
respect to this clause (F), pursuant to a merger or consolidation permitted
pursuant to this Agreement; or (G) amend any of the provisions of Section 10.7
or amend any of the definitions Pro Rata Share, Revolving Loan Commitment,
Revolving Loan Commitment Amount, Revolving Loan Commitment Percentage, or that
provide for the Lenders to receive their Pro Rata Shares of any fees, payments,
setoffs or proceeds of Collateral hereunder. It is hereby understood and agreed
that all Lenders shall be deemed directly affected by an amendment, waiver or
other modification of the type described in the preceding clauses (C), (D), (E),
(F) and (G) of the preceding sentence.

 

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Section 11.17     Assignments and Participations.

 

(a)                Assignments.

 

(i)                 Any Lender may at any time assign to one or more Eligible
Assignees all or any portion of such Lender’s Loan together with all related
obligations of such Lender hereunder. Except as Agent may otherwise agree, the
amount of any such assignment (determined as of the date of the applicable
Assignment Agreement or, if a “Trade Date” is specified in such Assignment
Agreement, as of such Trade Date) shall be in a minimum aggregate amount equal
to $1,000,000 or, if less, the assignor’s entire interests in the outstanding
Loan; provided, however, that, in connection with simultaneous assignments to
two or more related Approved Funds, such Approved Funds shall be treated as one
assignee for purposes of determining compliance with the minimum assignment size
referred to above. Borrowers and Agent shall be entitled to continue to deal
solely and directly with such Lender in connection with the interests so
assigned to an Eligible Assignee until Agent shall have received and accepted an
effective Assignment Agreement executed, delivered and fully completed by the
applicable parties thereto and a processing fee of $3,500 to be paid by the
assigning Lender; provided, however, that only one processing fee shall be
payable in connection with simultaneous assignments to two or more related
Approved Funds.

 

(ii)               From and after the date on which the conditions described
above have been met, (A) such Eligible Assignee shall be deemed automatically to
have become a party hereto and, to the extent of the interests assigned to such
Eligible Assignee pursuant to such Assignment Agreement, shall have the rights
and obligations of a Lender hereunder, and (B) the assigning Lender, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such Assignment Agreement, shall be released from its rights and obligations
hereunder (other than those that survive termination pursuant to Section 12.1).
Upon the request of the Eligible Assignee (and, as applicable, the assigning
Lender) pursuant to an effective Assignment Agreement, each Borrower shall
execute and deliver to Agent for delivery to the Eligible Assignee (and, as
applicable, the assigning Lender) Notes in the aggregate principal amount of the
Eligible Assignee’s Loan (and, as applicable, Notes in the principal amount of
that portion of the principal amount of the Loan retained by the assigning
Lender). Upon receipt by the assigning Lender of such Note, the assigning Lender
shall return to Borrower any prior Note held by it.

 

(iii)             Agent, acting solely for this purpose as an agent of Borrower,
shall maintain at its offices located in Bethesda, Maryland a copy of each
Assignment Agreement delivered to it and a register for the recordation of the
names and addresses of each Lender, and the commitments of, and principal amount
of the Loan owing to, such Lender pursuant to the terms hereof. The entries in
such register shall be conclusive, and Borrower, Agent and Lenders may treat
each Person whose name is recorded therein pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice to
the contrary. Such register shall be available for inspection by Borrower and
any Lender, at any reasonable time upon reasonable prior notice to Agent.

 

(iv)             Notwithstanding the foregoing provisions of this
Section 11.17(a) or any other provision of this Agreement, any Lender may at any
time pledge or assign a security interest in all or any portion of its rights
under this Agreement to secure obligations of such Lender, including any pledge
or assignment to secure obligations to a Federal Reserve Bank; provided,
however, that no such pledge or assignment shall release such Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.

 

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(v)               Notwithstanding the foregoing provisions of this
Section 11.17(a) or any other provision of this Agreement, Agent has the right,
but not the obligation, to effectuate assignments of Loan via an electronic
settlement system acceptable to Agent as designated in writing from time to time
to the Lenders by Agent (the “Settlement Service”). At any time when the Agent
elects, in its sole discretion, to implement such Settlement Service, each such
assignment shall be effected by the assigning Lender and proposed assignee
pursuant to the procedures then in effect under the Settlement Service, which
procedures shall be consistent with the other provisions of this
Section 11.17(a). Each assigning Lender and proposed Eligible Assignee shall
comply with the requirements of the Settlement Service in connection with
effecting any assignment of Loan pursuant to the Settlement Service. With the
prior written approval of Agent, Agent’s approval of such Eligible Assignee
shall be deemed to have been automatically granted with respect to any transfer
effected through the Settlement Service. Assignments and assumptions of the Loan
shall be effected by the provisions otherwise set forth herein until Agent
notifies Lenders of the Settlement Service as set forth herein.

 

(b)               Participations. Any Lender may at any time, without the
consent of, or notice to, any Borrower or Agent, sell to one or more Persons
participating interests in its Loan, commitments or other interests hereunder
(any such Person, a “Participant”). In the event of a sale by a Lender of a
participating interest to a Participant, (i) such Lender’s obligations hereunder
shall remain unchanged for all purposes, (ii) Borrowers and Agent shall continue
to deal solely and directly with such Lender in connection with such Lender’s
rights and obligations hereunder, and (iii) all amounts payable by each Borrower
shall be determined as if such Lender had not sold such participation and shall
be paid directly to such Lender. Each Borrower agrees that if amounts
outstanding under this Agreement are due and payable (as a result of
acceleration or otherwise), each Participant shall be deemed to have the right
of set-off in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest were
owing directly to it as a Lender under this Agreement; provided, however, that
such right of set-off shall be subject to the obligation of each Participant to
share with Lenders, and Lenders agree to share with each Participant, as
provided in Section 11.5.

 

(c)                Replacement of Lenders. Within thirty (30) days after:
(i) receipt by Agent of notice and demand from any Lender for payment of
additional costs as provided in Section 2.8(d), which demand shall not have been
revoked, (ii) any Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 2.8(a), (iii) any Lender is a Defaulted Lender, and the circumstances
causing such status shall not have been cured or waived; or (iv) any failure by
any Lender to consent to a requested amendment, waiver or modification to any
Financing Document in which Required Lenders have already consented to such
amendment, waiver or modification but the consent of each Lender, or each Lender
affected thereby, is required with respect thereto (each relevant Lender in the
foregoing clauses (i) through (iv) being an “Affected Lender”) each of Borrower
Representative and Agent may, at its option, notify such Affected Lender and, in
the case of Borrowers’ election, the Agent, of such Person’s intention to
obtain, at Borrowers’ expense, a replacement Lender (“Replacement Lender”) for
such Lender, which Replacement Lender shall be an Eligible Assignee and, in the
event the Replacement Lender is to replace an Affected Lender described in the
preceding clause (iv), such Replacement Lender consents to the requested
amendment, waiver or modification making the replaced Lender an Affected Lender.
In the event Borrowers or Agent, as applicable, obtains a Replacement Lender
within ninety (90) days following notice of its intention to do so, the Affected
Lender shall sell, at par, and assign all of its Loan and funding commitments
hereunder to such Replacement Lender in accordance with the procedures set forth
in Section 11.17(a); provided, however, that (A) Borrowers shall have reimbursed
such Lender for its increased costs and additional payments for which it is
entitled to reimbursement under Section 2.8(a) or Section 2.8(d), as applicable,
of this Agreement through the date of such sale and assignment, and
(B) Borrowers shall pay to Agent the $3,500 processing fee in respect of such
assignment. In the event that a replaced Lender does not execute an Assignment
Agreement pursuant to Section 11.17(a) within five (5) Business Days after
receipt by such replaced Lender of notice of replacement pursuant to this
Section 11.17(c) and presentation to such replaced Lender of an Assignment
Agreement evidencing an assignment pursuant to this Section 11.17(c), such
replaced Lender shall be deemed to have consented to the terms of such
Assignment Agreement, and any such Assignment Agreement executed by Agent, the
Replacement Lender and, to the extent required pursuant to Section 11.17(a),
Borrowers, shall be effective for purposes of this Section 11.17(c) and
Section 11.17(a). Upon any such assignment and payment, such replaced Lender
shall no longer constitute a “Lender” for purposes hereof, other than with
respect to such rights and obligations that survive termination as set forth in
Section 12.1.

 

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(d)               Credit Party Assignments. No Credit Party may assign, delegate
or otherwise transfer any of its rights or other obligations hereunder or under
any other Financing Document without the prior written consent of Agent and each
Lender.

 

Section 11.18     Funding and Settlement Provisions Applicable When Non-Funding
Lenders Exist. So long as Agent has not waived the conditions to the funding of
Revolving Loans set forth in Section 7.2, any Lender may deliver a notice to
Agent stating that such Lender shall cease making Revolving Loans due to the
non-satisfaction of one or more conditions to funding Loans set forth in
Section 7.2, and specifying any such non-satisfied conditions. Any Lender
delivering any such notice shall become a non-funding Lender (a “Non-Funding
Lender”) for purposes of this Agreement commencing on the Business Day following
receipt by Agent of such notice, and shall cease to be a Non-Funding Lender on
the date on which such Lender has either revoked the effectiveness of such
notice or acknowledged in writing to each of Agent the satisfaction of the
condition(s) specified in such notice, or Required Lenders waive the conditions
to the funding of such Loans giving rise to such notice by Non-Funding Lender.
Each Non-Funding Lender shall remain a Lender for purposes of this Agreement to
the extent that such Non-Funding Lender has Revolving Loans Outstanding in
excess of zero; provided, however, that during any period of time that any
Non-Funding Lender exists, and notwithstanding any provision to the contrary set
forth herein, the following provisions shall apply:

 

(a)                For purposes of determining the Pro Rata Share of each
Revolving Lender under clause (c) of the definition of such term, each
Non-Funding Lender shall be deemed to have a Revolving Loan Commitment Amount as
in effect immediately before such Lender became a Non-Funding Lender.

 

(b)               Except as provided in clause (a) above, the Revolving Loan
Commitment Amount of each Non-Funding Lender shall be deemed to be zero.

 

(c)                The Revolving Loan Commitment at any date of determination
during such period shall be deemed to be equal to the sum of (i) the aggregate
Revolving Loan Commitment Amounts of all Lenders, other than the Non-Funding
Lenders as of such date plus (ii) the aggregate Revolving Loan Outstandings of
all Non-Funding Lenders as of such date.

 

(d)               [Reserved]

 

(e)                Agent shall have no right to make or disburse Revolving Loans
for the account of any Non-Funding Lender pursuant to Section 11.13, or to
assume that any Non-Funding Lender will fund its Pro Rata Share of any Revolving
Loans requested by Borrower during such period.

 

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(f)                Agent shall have no right to make or disburse Revolving Loans
for the account of any Non-Funding Lender pursuant to Section 2.1(b)(i) to pay
interest, fees, expenses and other charges of any Credit Party.

 

(g)                [Reserved]

 

(h)               To the extent that Agent applies proceeds of Collateral or
other payments received by Agent to repayment of Revolving Loans pursuant to
Section 10.7, such payments and proceeds shall be applied first in respect of
Revolving Loans made at the time any Non-Funding Lenders exist, and second in
respect of all other outstanding Revolving Loans.

 

Section 11.19     Buy-Out Upon Refinancing. MCF shall have the right to purchase
from the other Lenders all of their respective interests in the Loan at par in
connection with any refinancing of the Loan upon one or more new economic terms,
but which refinancing is structured as an amendment and restatement of the Loan
rather than a payoff of the Loan.

 

Section 11.20     Definitions. As used in this Article 11, the following terms
have the following meanings:

 

“Additional Titled Agents” has the meaning set forth in Section 11.15.

 

“Affected Lender” has the meaning set forth in Section 11.17(c).

 

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

 

“Assignment Agreement” means an assignment agreement in form and substance
acceptable to Agent.

 

“Defaulted Lender” means, so long as such failure shall remain in existence and
uncured, any Lender which shall have failed to make any Loan or other credit
accommodation, disbursement, settlement or reimbursement required pursuant to
the terms of any Financing Document.

 

“Eligible Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c) an
Approved Fund, and (d) any other Person (other than a natural person) approved
by Agent; provided, however, that notwithstanding the foregoing, (x) “Eligible
Assignee” shall not include any Borrower or any of a Borrower’s Affiliates, and
(y) no proposed assignee intending to assume all or any portion of the Revolving
Loan Commitment shall be an Eligible Assignee unless such proposed assignee
either already holds a portion of such Revolving Loan Commitment, or has been
approved as an Eligible Assignee by Agent.

 

“Federal Funds Rate” means, for any day, the rate of interest per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided, however, that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day, and (b) if no such rate is so
published on such next preceding Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Agent on such day on such transactions
as determined by Agent.

 

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“Replacement Lender” has the meaning set forth in Section 11.17(c).

 

“Settlement Service” has the meaning set forth in Section 11.17(a)(v).

 

Article 12 - MISCELLANEOUS

 

Section 12.1         Survival. All agreements, representations and warranties
made herein and in every other Financing Document shall survive the execution
and delivery of this Agreement and the other Financing Documents and the other
Operative Documents. The provisions of Section 2.9 and Articles 11 and 12 shall
survive the payment of the Obligations (both with respect to any Lender and all
Lenders collectively) and any termination of this Agreement and any judgment
with respect to any Obligations, including any final foreclosure judgment with
respect to any Security Document, and no unpaid or unperformed, current or
future, Obligations will merge into any such judgment.

 

Section 12.2         No Waivers. No failure or delay by Agent or any Lender in
exercising any right, power or privilege under any Financing Document shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein and therein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
Any reference in any Financing Document to the “continuing” nature of any Event
of Default shall not be construed as establishing or otherwise indicating that
any Borrower or any other Credit Party has the independent right to cure any
such Event of Default, but is rather presented merely for convenience should
such Event of Default be waived in accordance with the terms of the applicable
Financing Documents.

 

Section 12.3         Notices.

 

(a)                All notices, requests and other communications to any party
hereunder shall be in writing (including prepaid overnight courier, facsimile
transmission or similar writing) and shall be given to such party at its
address, facsimile number or e-mail address set forth on the signature pages
hereof (or, in the case of any such Lender who becomes a Lender after the date
hereof, in an assignment agreement or in a notice delivered to Borrower
Representative and Agent by the assignee Lender forthwith upon such assignment)
or at such other address, facsimile number or e-mail address as such party may
hereafter specify for the purpose by notice to Agent and Borrower
Representative; provided, however, that notices, requests or other
communications shall be permitted by electronic means only in accordance with
the provisions of Section 12.3(b) and (c). Each such notice, request or other
communication shall be effective (i) if given by facsimile, when such notice is
transmitted to the facsimile number specified by this Section and the sender
receives a confirmation of transmission from the sending facsimile machine,
(ii) if given by mail, prepaid overnight courier or any other means, when
received or when receipt is refused at the applicable address specified by this
Section 12.3(a), and (iii) with respect to all reports on Form 10-K, 10-Q and
8-K filed with the SEC, a link to Borrower’s website at www.bacterin.com and/or
the SEC’s website at www.sec.gov granting access to such reports (delivery of
such link granting access being sufficient for notice and delivery of such
reports).

 

(b)               Notices and other communications to the parties hereto may be
delivered or furnished by electronic communication (including e-mail and
Internet or intranet websites) pursuant to procedures approved from time to time
by Agent, provided, however, that the foregoing shall not apply to notices sent
directly to any Lender if such Lender has notified the Agent that it is
incapable of receiving notices by electronic communication. The Agent or
Borrower Representative may, in their discretion, agree to accept notices and
other communications to them hereunder by electronic communications pursuant to
procedures approved by it, provided, however, that approval of such procedures
may be limited to particular notices or communications.

 

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(c)                Unless the Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgment from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgment), and (ii) notices or communications posted to an
Internet or intranet website shall be deemed received upon the deemed receipt by
the intended recipient at its e-mail address as described in the foregoing
clause (i) of notification that such notice or communication is available and
identifying the website address therefor, provided, however, that if any such
notice or other communication is not sent or posted during normal business
hours, such notice or communication shall be deemed to have been sent at the
opening of business on the next Business Day.

 

Section 12.4         Severability. In case any provision of or obligation under
this Agreement or any other Financing Document shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.

 

Section 12.5         Headings. Headings and captions used in the Financing
Documents (including the Exhibits, Schedules and Annexes hereto and thereto) are
included for convenience of reference only and shall not be given any
substantive effect.

 

Section 12.6         Confidentiality. Agent and each Lender shall hold all
non-public information regarding the Credit Parties and their respective
businesses identified as such by Borrowers and obtained by Agent or any Lender
pursuant to the requirements hereof in accordance with such Person’s customary
procedures for handling information of such nature, except that disclosure of
such information may be made (a) to their respective agents, employees,
Subsidiaries, Affiliates, attorneys, auditors, professional consultants, rating
agencies, insurance industry associations and portfolio management services,
(b) to prospective transferees or purchasers of any interest in the Loans, the
Agent or a Lender, provided, however, that any such Persons are bound by
obligations of confidentiality, (c) as required by Law, subpoena, judicial order
or similar order and in connection with any litigation, (d) as may be required
in connection with the examination, audit or similar investigation of such
Person, and (e) to a Person that is a trustee, investment advisor, collateral
manager, servicer, noteholder or secured party in a Securitization (as
hereinafter defined) in connection with the administration, servicing and
reporting on the assets serving as collateral for such Securitization. For the
purposes of this Section, “Securitization” shall mean (i) the pledge of the
Loans as collateral security for loans to a Lender, or (ii) a public or private
offering by a Lender or any of its Affiliates or their respective successors and
assigns, of securities which represent an interest in, or which are
collateralized, in whole or in part, by the Loans. Confidential information
shall include only such information identified as such at the time provided to
Agent and shall not include information that either: (y) is in the public
domain, or becomes part of the public domain after disclosure to such Person
through no fault of such Person, or (z) is disclosed to such Person by a Person
other than a Credit Party, provided, however, Agent does not have actual
knowledge that such Person is prohibited from disclosing such information. The
obligations of Agent and Lenders under this Section 12.6 shall supersede and
replace the obligations of Agent and Lenders under any confidentiality agreement
in respect of this financing executed and delivered by Agent or any Lender prior
to the date hereof.

 

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Section 12.7         Waiver of Consequential and Other Damages. To the fullest
extent permitted by applicable law, no Borrower shall assert, and each Borrower
hereby waives, any claim against any Indemnitee (as defined below), on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of this Agreement, any other Financing Document or any agreement or
instrument contemplated hereby or thereby, the transactions contemplated hereby
or thereby, any Loan or the use of the proceeds thereof. No Indemnitee shall be
liable for any damages arising from the use by unintended recipients of any
information or other materials distributed by it through telecommunications,
electronic or other information transmission systems in connection with this
Agreement or the other Financing Documents or the transactions contemplated
hereby or thereby.

 

Section 12.8         GOVERNING LAW; SUBMISSION TO JURISDICTION.

 

(a)                THIS AGREEMENT, EACH NOTE AND EACH OTHER FINANCING DOCUMENT,
AND ALL MATTERS RELATING HERETO OR THERETO OR ARISING THEREFROM (WHETHER
SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
MARYLAND, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

 

(b)               EACH BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF MONTGOMERY, STATE OF MARYLAND AND
IRREVOCABLY AGREES THAT, SUBJECT TO AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS
SHALL BE LITIGATED IN SUCH COURTS. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS
TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH BORROWER BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH
BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE
COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

Section 12.9         WAIVER OF JURY TRIAL. EACH BORROWER, AGENT AND THE LENDERS
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH BORROWER, AGENT AND
EACH LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO
A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO
THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AND THAT EACH WILL CONTINUE TO
RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH BORROWER, AGENT AND
EACH LENDER WARRANTS AND REPRESENTS THAT IT HAS HAD THE OPPORTUNITY OF REVIEWING
THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS.

 

Section 12.10     Publication; Advertisement.

 

(a)                Publication. No Credit Party will directly or indirectly
publish, disclose or otherwise use in any public disclosure, advertising
material, promotional material, press release or interview, any reference to the
name, logo or any trademark of MCF or any of its Affiliates or any reference to
this Agreement or the financing evidenced hereby, in any case except (i) as
required by Law, subpoena or judicial or similar order, in which case the
applicable Credit Party shall give Agent prior written notice of such
publication or other disclosure, or (ii) with MCF’s prior written consent. Agent
and Lenders hereby consent to the disclosure of this Agreement, and summaries
and descriptions of this Agreement, in each case to the extent required in
Borrower’s SEC filings.

 

67

 

 

(b)               Advertisement. Each Lender and each Credit Party hereby
authorizes MCF to publish the name of such Lender and Credit Party, the
existence of the financing arrangements referenced under this Agreement, the
primary purpose and/or structure of those arrangements, the amount of credit
extended under each facility, the title and role of each party to this
Agreement, and the total amount of the financing evidenced hereby in any
“tombstone”, comparable advertisement or press release which MCF elects to
submit for publication. In addition, each Lender and each Credit Party agrees
that MCF may provide lending industry trade organizations with information
necessary and customary for inclusion in league table measurements after the
Closing Date. With respect to any of the foregoing, MCF shall provide Borrowers
with an opportunity to review and confer with MCF regarding the contents of any
such tombstone, advertisement or information, as applicable, prior to its
submission for publication and, following such review period, MCF may, from time
to time, publish such information in any media form desired by MCF, until such
time that Borrowers shall have requested MCF cease any such further publication.

 

Section 12.11     Counterparts; Integration. This Agreement and the other
Financing Documents may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. Signatures by facsimile or by electronic
mail delivery of an electronic version of any executed signature page shall bind
the parties hereto. This Agreement and the other Financing Documents constitute
the entire agreement and understanding among the parties hereto and supersede
any and all prior agreements and understandings, oral or written, relating to
the subject matter hereof.

 

Section 12.12     No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.

 

Section 12.13     Lender Approvals. Unless expressly provided herein to the
contrary, any approval, consent, waiver or satisfaction of Agent or Lenders with
respect to any matter that is the subject of this Agreement, the other Financing
Documents may be granted or withheld by Agent and Lenders in their sole and
absolute discretion and credit judgment.

 

Section 12.14     Expenses; Indemnity

 

(a)                Borrowers hereby agree to promptly pay (i) all costs and
expenses of Agent (including, without limitation, the fees, costs and expenses
of counsel to, and independent appraisers and consultants retained by Agent) in
connection with the examination, review, due diligence investigation,
documentation, negotiation, closing and syndication of the transactions
contemplated by the Financing Documents, in connection with the performance by
Agent of its rights and remedies under the Financing Documents and in connection
with the continued administration of the Financing Documents including (A) any
amendments, modifications, consents and waivers to and/or under any and all
Financing Documents, and (B) any periodic public record searches conducted by or
at the request of Agent (including, without limitation, title investigations,
UCC searches, fixture filing searches, judgment, pending litigation and tax lien
searches and searches of applicable corporate, limited liability, partnership
and related records concerning the continued existence, organization and good
standing of certain Persons); (ii) without limitation of the preceding clause
(i), all costs and expenses of Agent in connection with the creation, perfection
and maintenance of Liens pursuant to the Financing Documents; (iii) without
limitation of the preceding clause (i), all costs and expenses of Agent in
connection with (A) protecting, storing, insuring, handling, maintaining or
selling any Collateral, (B) any litigation, dispute, suit or proceeding relating
to any Financing Document, and (C) any workout, collection, bankruptcy,
insolvency and other enforcement proceedings under any and all of the Financing
Documents; (iv) without limitation of the preceding clause (i), all costs and
expenses of Agent in connection with Agent’s reservation of funds in
anticipation of the funding of the initial Loans to be made hereunder; and
(v) all costs and expenses incurred by Lenders in connection with any
litigation, dispute, suit or proceeding relating to any Financing Document and
in connection with any workout, collection, bankruptcy, insolvency and other
enforcement proceedings under any and all Financing Documents, whether or not
Agent or Lenders are a party thereto. If Agent or any Lender uses in-house
counsel for any of these purposes, Borrowers further agree that the Obligations
include reasonable charges for such work commensurate with the fees that would
otherwise be charged by outside legal counsel selected by Agent or such Lender
for the work performed.

 

68

 

 

(b)               Each Borrower hereby agrees to indemnify, pay and hold
harmless Agent and Lenders and the officers, directors, employees, trustees,
agents, investment advisors, collateral managers, servicers, and counsel of
Agent and Lenders (collectively called the “Indemnitees”) from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including the fees and disbursements of counsel for such
Indemnitee) in connection with any investigative, response, remedial,
administrative or judicial matter or proceeding, whether or not such Indemnitee
shall be designated a party thereto and including any such proceeding initiated
by or on behalf of a Credit Party, and the reasonable expenses of investigation
by engineers, environmental consultants and similar technical personnel and any
commission, fee or compensation claimed by any broker (other than any broker
retained by Agent or Lenders) asserting any right to payment for the
transactions contemplated hereby, which may be imposed on, incurred by or
asserted against such Indemnitee as a result of or in connection with the
transactions contemplated hereby or by the other Operative Documents (including
(i)(A) as a direct or indirect result of the presence on or under, or escape,
seepage, leakage, spillage, discharge, emission or release from, any property
now or previously owned, leased or operated by Borrower, any Subsidiary or any
other Person of any Hazardous Materials, (B) arising out of or relating to the
offsite disposal of any materials generated or present on any such property, or
(C) arising out of or resulting from the environmental condition of any such
property or the applicability of any governmental requirements relating to
Hazardous Materials, whether or not occasioned wholly or in part by any
condition, accident or event caused by any act or omission of Borrower or any
Subsidiary, and (ii) proposed and actual extensions of credit under this
Agreement) and the use or intended use of the proceeds of the Loans and, except
that Borrower shall have no obligation hereunder to an Indemnitee with respect
to any liability resulting from the gross negligence or willful misconduct of
such Indemnitee, as determined by a final non-appealable judgment of a court of
competent jurisdiction. To the extent that the undertaking set forth in the
immediately preceding sentence may be unenforceable, Borrower shall contribute
the maximum portion which it is permitted to pay and satisfy under applicable
Law to the payment and satisfaction of all such indemnified liabilities incurred
by the Indemnitees or any of them.

 

(c)                Notwithstanding any contrary provision in this Agreement, the
obligations of Borrowers under this Section 12.14 shall survive the payment in
full of the Obligations and the termination of this Agreement. NO INDEMNITEE
SHALL BE RESPONSIBLE OR LIABLE TO THE BORROWERS OR TO ANY OTHER PARTY TO ANY
FINANCING DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY
OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT,
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF
CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY
OTHER FINANCING DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED
HEREUNDER OR THEREUNDER.

 

69

 

 

Section 12.15     [Reserved]

 

Section 12.16     Reinstatement. This Agreement shall remain in full force and
effect and continue to be effective should any petition or other proceeding be
filed by or against any Credit Party for liquidation or reorganization, should
any Credit Party become insolvent or make an assignment for the benefit of any
creditor or creditors or should an interim receiver, receiver, receiver and
manager or trustee be appointed for all or any significant part of any Credit
Party’s assets, and shall continue to be effective or to be reinstated, as the
case may be, if at any time payment and performance of the Obligations, or any
part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or
must otherwise be restored or returned by any obligee of the Obligations,
whether as a fraudulent preference reviewable transaction or otherwise, all as
though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.

 

Section 12.17     Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of Borrowers and Agent and each Lender and their
respective successors and permitted assigns.

 

Section 12.18     USA PATRIOT Act Notification. Agent (for itself and not on
behalf of any Lender) and each Lender hereby notifies Borrowers that pursuant to
the requirements of the USA PATRIOT Act, it is required to obtain, verify and
record certain information and documentation that identifies Borrowers, which
information includes the name and address of Borrower and such other information
that will allow Agent or such Lender, as applicable, to identify Borrowers in
accordance with the USA PATRIOT Act.

 

 

 

[SIGNATURES APPEAR ON FOLLOWING PAGE(S)]

 

70

 

 

IN WITNESS WHEREOF, intending to be legally bound, and intending that this
Agreement constitute an agreement executed under seal, each of the parties have
caused this Agreement to be executed under seal the day and year first above
mentioned.

 

 

BORROWERS:

 

 

 

BACTERIN INTERNATIONAL HOLDINGS, INC.,
a Delaware corporation

 

By: /s/ John P. Gandolfo                                        (SEAL)
Name: John P. Gandolfo
Title: CFO

 

 

BACTERIN INTERNATIONAL, INC.,
a Nevada corporation

 

By: /s/ John P. Gandolfo                                        (SEAL)
Name: John P. Gandolfo
Title: CFO

 

 

Address:

 

Bacterin International Holdings, Inc.

664 Cruiser Lane

Belgrade, Montana 59714

Attention: John Gandolfo, CFO

E-Mail: jgandolfo@bacterin.com

 

 

[Signature Page - Revolving Credit and Security Agreement]

 

 

AGENT:

MIDCAP FINANCIAL, LLC, as Agent

 

By: /s/ Brett Robinson                         
Name: Brett Robinson
Title: Managing Director

 

 

Address:

 

7255 Woodmont Avenue, Suite 200
Bethesda, Maryland 20814
Attn: Account Manager for Bacterin revolver transaction
Facsimile: 301-941-1450

 

 

 

Payment Account Designation:

 

Wachovia Bank (McLean, VA)
ABA #: 121-000-248
Account Name: MidCap Funding IV, LLC - Collections
Account #: 2000036282803

Attention: Bacterin revolver transaction

 

 

 

 

[Signature Page - Revolving Credit and Security Agreement]

 

 

LENDER:

MIDCAP FINANCIAL, LLC, as Lender

 

By: /s/ Brett Robinson                         

Name: Brett Robinson
Title: Managing Director

 

 

Address:

 

7255 Woodmont Avenue, Suite 200
Bethesda, Maryland 20814
Attn: Account Manager for Bacterin revolver transaction
Facsimile: 301-941-1450

 

 

 

Payment Account Designation:

 

Wachovia Bank (McLean, VA)
ABA #: 121-000-248
Account Name: MidCap Funding IV, LLC - Collections
Account #: 2000036282803

Attention: Bacterin revolver transaction

 

 

 

 

[Signature Page - Revolving Credit and Security Agreement]

 

 

LENDER:

SILICON VALLEY BANK, as Lender

 

By: /s/ Derek Johnson                       

Name: Derek Johnson
Title: Relationship Manager

 

 

Address:

 

380 Interlocken Crescent, Suite 600
Broomfield, Colorado 80021
Attn: Account Manager for Bacterin revolver transaction
Facsimile: (303) 469-4934

 

 

[Signature Page - Revolving Credit and Security Agreement]

 

 

ANNEXES, EXHIBITS AND SCHEDULES

 

 

ANNEXES       Annex A Commitment Annex         EXHIBITS        Exhibit A
Compliance Certificate Exhibit B Notice of Borrowing         SCHEDULES      
Schedule 3.1 Existence, Organizational ID Numbers, Foreign Qualification, Prior
Names Schedule 3.4 Capitalization Schedule 3.6 Litigation Schedule 3.17 Material
Contracts Schedule 3.18 Environmental Compliance Schedule 3.19 Intellectual
Property Schedule 3.23 Subsidiaries Schedule 3.24 Products and Required Permits
Schedule 4.4 Insurance Schedule 5.1 Debt; Contingent Obligations Schedule 5.2
Liens Schedule 5.7 Permitted Investments Schedule 5.8 Transactions with
Affiliates Schedule 5.11 Conduct of Business Schedule 5.14 Deposit Accounts and
Securities Accounts Schedule 7.4 Post-Closing Obligations Schedule 9.1
Collateral Schedule 9.2 Location of Collateral        

 

 

 

 

Annex A to Credit Agreement (Commitment Annex)

 

 

Lender

 

Revolving Loan

Commitment Amount

 

Revolving Loan

Commitment Percentage

MidCap Financial, LLC

 

$3,333,333.33 66.67%

Silicon Valley Bank

 

$1,666,666.67 33.33%

TOTAL

 

$5,000,000.00 100.00%

 

 

 

 

Exhibit A to Credit Agreement (Form of Compliance Certificate)

 

 

COMPLIANCE CERTIFICATE

 

This Compliance Certificate is given by _____________________, a Responsible
Officer of Bacterin International, Inc. (“Borrower Representative”), pursuant to
that certain Credit and Security Agreement dated as of April 23, 2012 among the
Borrower Representative, Bacterin International Holdings, Inc., MidCap
Financial, LLC, individually as a Lender and as Agent, Silicon Valley Bank, as a
Lender, and the financial institutions or other entities from time to time
parties hereto, each as a Lender (as such agreement may have been amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”). Capitalized terms used herein without definition shall have the
meanings set forth in the Credit Agreement.

 

The undersigned Responsible Officer hereby certifies to Agent and Lenders that:

 

(a) the financial statements delivered with this certificate in accordance with
Section 4.1 of the Credit Agreement fairly present in all material respects the
results of operations and financial condition of Borrowers as of the dates and
the accounting period covered by such financial statements;

 

(b) I have reviewed the terms of the Credit Agreement and have made, or caused
to be made under my supervision, a review in reasonable detail of the
transactions and conditions of Borrowers during the accounting period covered by
such financial statements, and such review has not disclosed the existence
during or at the end of such accounting period, and I have no knowledge of the
existence as of the date hereof, of any condition or event that constitutes a
Default or an Event of Default, except as set forth in Schedule 1 hereto, which
includes a description of the nature and period of existence of such Default or
an Event of Default and what action Borrowers have taken, are undertaking and
propose to take with respect thereto;

 

(c) except as noted on Schedule 2 attached hereto, the Credit Agreement contains
a complete and accurate list of all business locations of Borrowers and all
names under which Borrowers currently conduct business, and Schedule 2
specifically notes any changes in the names under which Borrowers conduct
business;

 

(d) except as noted on Schedule 3 attached hereto, (i) the undersigned has no
knowledge of any federal or state tax liens having been filed against the
Borrowers or any Collateral, and (ii) the undersigned has no knowledge of any
failure of the Borrowers to make required payments of withholding or other tax
obligations of the Borrowers during the accounting period to which the attached
statements pertain or any subsequent period;

 

(e) except as noted on Schedule 4 attached hereto, Schedule 5.14 attached to the
Credit Agreement contains a complete and accurate statement of all deposit or
investment accounts maintained by Borrowers;

 

(f) except as described in the Credit Agreement or in Schedule 5 attached
hereto, the undersigned has no knowledge of any current (i) pending or
threatened (in writing) litigation in excess of $100,000 against the Borrowers
or Guarantors; (ii) proceedings concerning the business affairs, practices,
licensing or reimbursement entitlements of Borrowers; or (iii) default by
Borrowers under any Material Contract;

 

 

 

 

(g) except as noted on Schedule 6 attached hereto, no Borrower has acquired, by
purchase or otherwise, any Chattel Paper, Letter of Credit Rights, Instruments,
Documents or Investment Property that has not previously been reported to Agent
on any Schedule 6 to any previous Compliance Certificate delivered by Borrower
Representative to Agent;

 

(h) except as noted on Schedule 7 attached hereto, no Borrower is aware of any
commercial tort claim that has not previously been reported to Agent on any
Schedule 7 to any previous Compliance Certificate delivered by Borrower
Representative to Agent;

 

(i) except as noted on Schedule 8 attached hereto, Schedule 3.17 attached to the
Credit Agreement contains a complete and accurate list of all Material Contracts
(other than agreements that are disclosed on Forms 10-K, 10-Q and 8-K, as filed
with the SEC);

 

(j) except as disclosed on Schedule 9 attached hereto, Schedule 3.18 attached to
the Credit Agreement contains a complete and accurate list of all disclosures
required pursuant to Section 3.18 of the Credit Agreement regarding compliance
with Environmental Requirements and/ Hazardous Materials;

 

(k) except as disclosed on Schedule 10 attached hereto, Schedule 3.19 attached
to the Credit Agreement contains a complete and accurate list of all disclosures
required pursuant to Section 3.19 of the Credit Agreement regarding Borrower’s
Material Intellectual Property;

 

(l) except as disclosed on Schedule 11 attached hereto, Schedule 3.24 attached
to the Credit Agreement contains a complete and accurate list of all disclosures
required pursuant to Section 3.24 and Section 4.12 of the Credit Agreement
regarding Borrower’s New Products and/or Required Permits; and

 

(l) Borrowers are in compliance with the covenants contained in Section 6.1 of
the Credit Agreement, as demonstrated by the calculation of Net Revenues
attached. Such calculations and the certifications contained therein are true,
correct and complete.

 

The foregoing certifications and computations are made as of ________________,
201__ (end of month) and as of _____________, 201__.

 

 

 

 

Sincerely,

 

Bacterin International, Inc.,

as Borrower Representative

 

 

By:                                                                    

Name:                                                               

Title:                                                                 

 

 

 

 

 

Exhibit B to Credit Agreement (Form of Notice of Borrowing)

 

 

NOTICE OF BORROWING

 

This Notice of Borrowing is given by _____________________, a Responsible
Officer of Bacterin International, Inc. (“Borrower Representative”), pursuant to
that certain Credit and Security Agreement dated as of April 23, 2012 among the
Borrower Representative, Bacterin International Holdings, Inc., MidCap
Financial, LLC, individually as a Lender and as Agent, Silicon Valley Bank, as a
Lender, and the financial institutions or other entities from time to time
parties hereto, each as a Lender (as such agreement may have been amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”). Capitalized terms used herein without definition shall have the
meanings set forth in the Credit Agreement.

 

The undersigned Responsible Officer hereby gives notice to Agent of Borrower
Representative’s request to on _______________, 201__ borrow $_______________ of
Revolving Loans. Attached is a Borrowing Base Certificate complying in all
respects with the Credit Agreement and confirming that, after giving effect to
the requested advance, the Revolving Loan Outstandings will not exceed the
Revolving Loan Limit.

 

The undersigned officer hereby certifies that, both before and after giving
effect to the request above (a) each of the conditions precedent set forth in
Section 7.2 have been satisfied, (b) all of the representations and warranties
contained in the Credit Agreement and the other Financing Documents are true,
correct and complete as of the date hereof, except to the extent such
representation or warranty relates to a specific date, in which case such
representation or warranty is true, correct and complete as of such earlier
date, and (c) no Default or Event of Default has occurred and is continuing on
the date hereof.

 

IN WITNESS WHEREOF, the undersigned officer has executed and delivered this
Notice of Borrowing this ____ day of ___________, 201__.

 

 

Sincerely,

 

Bacterin International, Inc.,

as Borrower Representative

 

 

By:                                                                              

Name:                                                                 

Title:                                                                   

 

 

 

 

 

Schedule 7.4 – Post Closing Requirements

 

Borrowers shall satisfy and complete each of the following obligations, or
provide Agent each of the items listed below, as applicable, on or before the
date indicated below, all to the satisfaction of Agent in its sole and absolute
discretion:

 

1.On or before May 2, 2012, Borrower shall deliver a fully executed Landlord’s
consent for the Borrower’s leased premises located at 732 Cruiser Lane,
Belgrade, Montana 59714.

 

2.On or before May 11, 2012, Borrower shall deliver evidence that the
assignments in favor of Harborview Advisors LLC and Venture Lending and Leasing
VI, INC. have been terminated.

 

Borrower’s failure to complete and satisfy any of the above obligations on or
before the date indicated above, or Borrower’s failure to deliver any of the
above listed items on or before the date indicated above, shall constitute an
immediate an automatic Event of Default.

 

 

 

 

Schedule 9.1 – Collateral

 

 

The Collateral consists of all of Borrower’s assets, including without
limitation, all of Borrower’s right, title and interest in and to the following,
whether now owned or hereafter created, acquired or arising:

 

(a)all goods, Accounts (including health-care insurance 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, securities accounts, fixtures,
letter 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;

 

(b)all of Borrowers’ books and records relating to any of the foregoing; and

 

(c)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.

 

 

1410547.9