**Exhibit 10.13**

 

***Execution Version***

 

**AMENDED AND RESTATED LOAN**

 

**AND**

 

**SECURITY AGREEMENT**

 

**PNC BANK, NATIONAL ASSOCIATION**

(AS LENDER AND AS AGENT)

 

WITH

 

**BIO-REFERENCE LABORATORIES, INC.**

 

AND

 

**One or more Subsidiary Parties**

(BORROWERS)

 

As of September 30, 2004

 

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**AMENDED AND RESTATED LOAN**

**ANDSECURITY AGREEMENT**

 

This Amended and Restated Loan and Security Agreement (this “Agreement”)is dated as of September 30`, 2004 and is by and among **BIO-REFERENCELABORATORIES, INC.**(“BRLI”), a New Jersey corporation, having itsprincipal place of business at 481 Edward H. Ross Drive, Elmwood Park, NewJersey 07407 and its Subsidiaries which now or hereafter become a party hereto(the “Subsidiary Parties”) (BRLI and the Subsidiary Parties hereinafter each a “Borrower”and, collectively, “Borrowers”) the financial institutions which are now orwhich hereafter become a party hereto (collectively, the “Lenders” andindividually a “Lender”) and **PNC BANK, NATIONALASSOCIATION** (“PNC”), as agent for Lenders (PNC, in such capacity,the “Agent”).

 

**WITNESSETH:**

 

**WHEREAS,** PNC andBorrowers are engaged in a continuing commercial lending relationship governedand secured by the Existing Loan Agreement (as hereinafter defined); and

 

**WHEREAS,** PNC andBorrowers have negotiated certain amendments to the terms of their agreementsto, among other things, extend the term and increase the amount of Borrowers’revolving line of credit; and

 

**WHEREAS,** PNC andBorrowers have determined that it is both necessary and appropriate to amendand restate the Existing Loan Agreement in its entirety; and

 

**WHEREAS,** PNC andBorrowers wish to memorialize such amendment and restatement by this writing,

 

**NOW THEREFORE,** inconsideration of the mutual covenants and undertakings herein contained and forother good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, Borrowers, Lenders and Agent hereby agree as follows:

 

I.                                         DEFINITIONS

 

1.1.                              AccountingTerms.  As used in this Agreement orany certificate, report or other document made or delivered pursuant to thisAgreement, accounting terms not defined in Section 1.2 or elsewhere in thisAgreement and accounting terms partly defined in Section 1.2 to the extent notdefined, shall have the respective meanings given to them under GAAP.

 

1.2.                              GeneralTerms.  For purposes of thisAgreement the following terms shall have the following meanings:

 

“Accountants” shall have the meaning set forth in Section 9.7hereof.

 

“Acquisition Subline” shall mean the Revolving Advances utilizedto make Permitted Acquisitions in accordance with Section 2.1(c).

 

“Advances” shall mean and include all Revolving Advances.

 

“Advance Rate” shall have the meaning set forth in Section2.1(a) hereof.

 

“Affiliate” of any Person shall mean (a) any Person which,directly or indirectly, is in control of, is controlled by, or is under commoncontrol with such Person, or (b) any Person who is a director or officer (i) ofsuch Person, (ii) of any Subsidiary of such Person or (iii) of any Persondescribed in clause (a) above.  Forpurposes of this definition, control of a Person shall mean the power, director indirect, (x) to vote 5% or more of the securities having ordinary votingpower for the election of directors of such Person, or (y) to direct or causethe direction of the management and policies of such Person whether by contractor otherwise.

 

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“Agent” shall have the meaning set forth in the preamble to thisAgreement and shall include its successors and assigns.

 

“Alternate Base Rate” shall mean, for any day, a rate per annumequal to the higher of (i) the Base Rate in effect on such day and (ii) theFederal Funds Open Rate in effect on such day plus 1/2 of 1%.

 

“Anti-Terrorism Laws” shall mean any statute or regulationrelating to terrorism or money laundering, including Executive Order No. 13224,the USA Patriot Act, the Laws comprising or implementing the Bank Secrecy Act,and those administered by the United States Treasury Department’s Office ofForeign Asset Control (as any of the foregoing may from time to time beamended, renewed, extended, or replaced).

 

“Applicable Margin” shall mean, with respect to the periodicadjustment of the interest rate upon the Revolving Loan, the applicable marginin excess of the Alternate Base Rate or Euro-Rate, as applicable, calculatedperiodically based upon the Fixed Charge Coverage Ratio as set forth in thefollowing table:

 
| **Fixed Charge Coverage** | ** ** | **Alternate Base Rate** | ** ** | **Euro-Rate** | ** ** | **Level** | *** *** |
|---------------------------|------------|-------------------------|------------|---------------|------------|-----------|--------------|
| < 1.25:1.0             |       | + 1.00                  | %          | N/A           |       | A         |         |
|                      |       |                    |       |          |       |      |         |
| 1.25 £  1.50:1.0     |       | + 0.75                  | %          | + 2.25        | %          | B         |         |
|                      |       |                    |       |          |       |      |         |
| 1.50 £  1.75:1.0     |       | + 0.50                  | %          | + 2.00        | %          | C         |         |
|                      |       |                    |       |          |       |      |         |
| 1.75£  2.00:1.0      |       | + 0.25                  | %          | + 1.75        | %          | D         |         |
|                      |       |                    |       |          |       |      |         |
| >2.00:1.0              |       | + 0                     | %          | + 1.50        | %          | E         |         |

 

Such interest rate adjustments shall be available quarterly.  If available, each such adjustment shallbecome effective prospectively on and after the first day of the calendar monthfollowing the calendar month of the date of delivery of the applicablefinancial statements to Agent.  In theevent Borrowers fail to timely deliver any such financial statement, inaddition to any other remedy provided for in this Agreement, the ApplicableMargin shall be deemed to be equal to the highest level set forth in thepreceding table, until the first day of the first calendar month following thedelivery of such financial statements, at which time the Applicable Marginshall be determined, prospectively, in accordance with the terms hereof.  If an Event of Default exists at the time anyreduction in the Applicable Margin is to be implemented, such reduction shallnot occur until the first day of the first calendar month following the date onwhich such Event of Default is waived or cured, to the satisfaction of Agentand, if required hereunder, by the Required Lenders.  It is understood and agreed that, as of theClosing Date, the Applicable Margin in effect is that for Level E.

 

“Authority” shall have the meaning set forth in Section 4.19(d).

 

“Base Rate” shall mean the base commercial lending rate of PNCas publicly announced to be in effect from time to time, such rate to beadjusted automatically, without notice, on the effective date of any change insuch rate.  This rate of interest isdetermined from time to time by PNC as a means of pricing some loans to itscustomers and is neither tied to any external rate of interest or index nordoes it necessarily reflect the lowest rate of interest actually charged by PNCto any particular class or category of customers of PNC.

 

“Blocked Accounts” shall have the meaning set forth in Section4.15(h).

 

“Blocked Person” shall have the meaning assigned to such term inSection 5.23(b).

 

“Borrower” or “Borrowers” shall have the meaning setforth in the preamble to this Agreement and shall extend to all permittedsuccessors and assigns of such Persons.

 

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“Borrowing Base Certificate” shall mean a certificate dulyexecuted by an officer of Borrowing Agent appropriately completed and insubstantially the form of Exhibit A hereto.

 

“Borrowers’ Account” shall have the meaning set forth in Section2.7.

 

“Borrowing Agent” shall mean BRLI.

 

“BRLI” shall have the meaning set forth in the preamble to thisAgreement.

 

“Business Day” shall mean any day other than Saturday or Sundayor a legal holiday on which commercial banks are authorized or required by lawto be closed for business in East Brunswick, New Jersey and, if the applicableBusiness Day relates to any Euro-Rate Loans, such day must also be a day onwhich dealings are carried on in the London interbank market.

 

“CERCLA” shall mean the Comprehensive Environmental Response,Compensation and Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.

 

“Charges” shall mean all taxes, charges, fees, imposts, leviesor other assessments, including, without limitation, all net income, grossincome, gross receipts, sales, use, ad valorem, value added, transfer,franchise, profits, inventory, capital stock, license, withholding, payroll,employment, social security, unemployment, excise, severance, stamp, occupationand property taxes, custom duties, fees, assessments, liens, claims and chargesof any kind whatsoever, together with any interest and any penalties, additionsto tax or additional amounts, imposed by any taxing or other authority,domestic or foreign (including, without limitation, the Pension BenefitGuaranty Corporation or any environmental agency or superfund), upon theCollateral, any Borrower or any of its Affiliates.

 

“Closing Date” shall mean September 30, 2004 or such other dateas may be agreed to by the parties hereto.

 

“Code” shall mean the Internal Revenue Code of 1986, as amendedfrom time to time and the regulations promulgated thereunder.

 

“Collateral” shall mean and include:

 

(a)                                  allReceivables;

 

(b)                                 allEquipment;

 

(c)                                  allGeneral Intangibles;

 

(d)                                 allInventory;

 

(e)                                  allInvestment Property;

 

(f)                                    allof each Borrower’s right, title and interest in and to (i) its respective goodsand other property including, but not limited to, all merchandise returned orrejected by Customers, relating to or securing any of the Receivables;(ii) all of each Borrower’s rights as a consignor, a consignee, an unpaidvendor, mechanic, artisan, or other lienor, including stoppage in transit,setoff, detinue, replevin, reclamation and repurchase; (iii) alladditional amounts due to any Borrower from any Customer relating to theReceivables; (iv) other property, including warranty claims, relating toany goods securing this Agreement; (v) all of each Borrower’s contract rights,rights of payment which have been earned under a contract right, instruments(including promissory notes), documents, chattel paper (including electronicchattel paper), warehouse receipts, deposit accounts, letters of credit, andmoney; (vi) all commercial tort claims (whether now existing or hereafterarising); (vii) if and when obtained by any Borrower, all real and personalproperty of third parties in which such Borrower has been granted a lien orsecurity interest as security for the payment or enforcement of Receivables;and (viii) any other goods, personal property or real property now ownedor hereafter

 

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acquired in which any Borrower has expressly granted a securityinterest or may in the future grant a security interest to Agent hereunder, orin any amendment or supplement hereto or thereto, or under any other agreementbetween Agent and any Borrower;

 

(g)                                 allof each Borrower’s ledger sheets, ledger cards, files, correspondence, records,books of account, business papers, computers, computer software (owned by anyBorrower or in which it has an interest), computer programs, tapes, disks anddocuments relating to (a), (b), (c), (d), (e), or (f) of this Paragraph; and

 

(h)                                 allproceeds and products of (a), (b), (c), (d), (e), (f) and (g) in whatever form,including, but not limited to:  cash,deposit accounts (whether or not comprised solely of proceeds), certificates ofdeposit, insurance proceeds (including hazard, flood and credit insurance),negotiable instruments and other instruments for the payment of money, chattelpaper, security agreements, documents, eminent domain proceeds, condemnationproceeds and tort claim proceeds.

 

“Commitment Percentage” of any Lender shall mean the percentageset forth below such Lender’s name on the signature page hereof as same may beadjusted upon any assignment by a Lender pursuant to Section 16.3(c) hereof.

 

“Commitment Transfer Supplement” shall mean a document properlycompleted and otherwise in form and substance satisfactory to Agent by whichthe Purchasing Lender purchases and assumes a portion of the obligation ofLenders to make Advances under this Agreement.

 

“Consents” shall mean all filings and all licenses, permits,consents, approvals, authorizations, qualifications and orders of governmentalauthorities and other third parties, domestic or foreign, necessary to carry onany Borrower’s business, including, without limitation, any Consents requiredunder all applicable federal, state or other applicable law.

 

“Contract Rate” shall have the meaning set forth in Section 3.1.

 

“Controlled Group” shall mean all members of a controlled groupof corporations and all trades or businesses (whether or not incorporated)under common control which, together with any Borrower, are treated as a singleemployer under Section 414 of the Code.

 

“Customer” shall mean and include the account debtor withrespect to any Receivable and/or the prospective purchaser of goods, servicesor both with respect to any contract or contract right, and/or any party whoenters into or proposes to enter into any contract or other arrangement withany Borrower, pursuant to which such Borrower is to deliver any personalproperty or perform any services.

 

“Default” shall mean an event which, with the giving of noticeor passage of time or both, would constitute an Event of Default.

 

“Default Rate” shall have the meaning set forth in Section 3.1hereof.

 

“Defaulting Lender” shall have the meaning set forth in Section2.12(a) hereof.

 

“Depository Accounts” shall have the meaning set forth inSection 4.15(h) hereof.

 

“Documents” shall have the meaning set forth in Section 8.1(c)hereof.

 

“Dollar” and the sign “$” shall mean lawful money of the UnitedStates of America.

 

“Domestic Rate Loan” shall mean any Advance that bears interestbased upon the Alternate Base Rate.

 

“Early Termination Date” shall have the meaning set forth inSection 13.1 hereof.

 

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“Eligible Receivables” shall mean and include with respect toeach Borrower, each Receivable of such Borrower arising in the ordinary courseof such Borrower’s business and which Agent, in its sole credit judgmentexercised in a commercially reasonable manner, shall deem to be an Eligible Receivable,based on such considerations as Agent may from time to time deemappropriate.  A Receivable shall not bedeemed eligible unless such Receivable is subject to Agent’s first priorityperfected security interest and no other Lien (other than PermittedEncumbrances), and is evidenced by an invoice or other documentary evidencesatisfactory to Agent.  In addition, noReceivable shall be an Eligible Receivable if:

 

(a)                                  itarises out of a sale made by any Borrower to an Affiliate of any Borrower or toa Person controlled by an Affiliate of any Borrower;

 

(b)                                 itis due or unpaid more than one hundred fifty (150) days after the originalinvoice date;

 

(c)                                  fiftypercent (50%) or more of the Receivables from such Customer are not deemedEligible Receivables hereunder.  Suchpercentage may, in Agent’s sole discretion exercised in a commerciallyreasonable manner, be increased or decreased from time to time;

 

(d)                                 anycovenant, representation or warranty contained in this Agreement with respectto such Receivable has been breached;

 

(e)                                  theCustomer shall (i) apply for, suffer, or consent to the appointment of, or thetaking of possession by, a receiver, custodian, trustee or liquidator of itselfor of all or a substantial part of its property or call a meeting of itscreditors, (ii) admit in writing its inability, or be generally unable, to payits debts as they become due or cease operations of its present business, (iii)make a general assignment for the benefit of creditors, (iv) commence avoluntary case under any state or federal bankruptcy laws (as now or hereafterin effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petitionseeking to take advantage of any other law providing for the relief of debtors,(vii) acquiesce to, or fail to have dismissed, any petition which is filedagainst it in any involuntary case under such bankruptcy laws, or (viii) takeany action for the purpose of effecting any of the foregoing;

 

(f)                                    thesale is to a Customer outside the continental United States of America, unlessthe sale is on letter of credit, guaranty or acceptance terms, in each caseacceptable to Agent in its sole discretion exercised in a commerciallyreasonable manner;

 

(g)                                 thesale to the Customer is on a bill-and-hold, guaranteed sale, sale-and-return,sale on approval, consignment or any other repurchase or return basis or isevidenced by chattel paper;

 

(h)                                 Agentbelieves, in its sole judgment exercised in a commercially reasonable manner,that collection of such Receivable is insecure or that such Receivable may notbe paid by reason of the Customer’s financial inability to pay;

 

(i)                                     theCustomer, except in the instance of Medicare or Medicaid, is the United Statesof America, any state or any department, agency or instrumentality of any ofthem, unless the applicable Borrower assigns its right to payment of suchReceivable to Agent pursuant to the Assignment of Claims Act of 1940, asamended (31 U.S.C. Sub-Section 3727 etseq. and 41 U.S.C.Sub-Section 15 etseq.) or has otherwise complied with otherapplicable statutes or ordinances;

 

(j)                                     thegoods giving rise to such Receivable have not been shipped to the Customer orthe services giving rise to such Receivable have not been performed by theapplicable Borrower or the Receivable otherwise does not represent a finalsale;

 

(k)                                  theaggregate Receivables of the Customer (excluding Payors) included incalculating the Formula Amount do not exceed twenty percent (20%) of Borrowers’total Eligible Receivables;

 

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(l)                                     theReceivable is subject to any offset, deduction, defense, dispute, orcounterclaim, the Customer is also a creditor or supplier of a Borrower or theReceivable is contingent in any respect or for any reason;

 

(m)                               theapplicable Borrower has made any agreement with any Customer for any deductiontherefrom, except for discounts or allowances made in the ordinary course ofbusiness for prompt payment, all of which discounts or allowances are reflectedin the calculation of the face value of each respective invoice relatedthereto;

 

(n)                                 anyreturn, rejection or repossession of the merchandise has occurred or therendition of services has been disputed;

 

(o)                                 suchReceivable is not payable to a Borrower; or

 

(p)                                 suchReceivable is not otherwise satisfactory to Agent as determined in good faithby Agent in the exercise of its discretion in a commercially reasonable manner.

 

“Environmental Complaint” shall have the meaning set forth inSection 4.19(d) hereof.

 

“Environmental Laws” shall mean all federal, state and localenvironmental, land use, zoning, health, chemical use, safety and sanitationlaws, statutes, ordinances and codes relating to the protection of theenvironment and/or governing the use, storage, treatment, generation,transportation, processing, handling, production or disposal of HazardousSubstances and the rules, regulations, policies, guidelines, interpretations,decisions, orders and directives of federal, state and local governmentalagencies and authorities with respect thereto.

 

“Equipment” shall mean and include as to each Borrower all ofsuch Borrower’s goods (other than Inventory) whether now owned or hereafteracquired and wherever located including, without limitation, all equipment,machinery, apparatus, motor vehicles, fittings, furniture, furnishings,fixtures, parts, accessories and all replacements and substitutions therefor oraccessions thereto.

 

“ERISA” shall mean the Employee Retirement Income Security Actof 1974, as amended from time to time and the rules and regulations promulgatedthereunder.

 

“Euro-Rate”shall mean, with respect to Euro-Rate Loans for any Interest Period, theinterest rate per annum determined by Agent by dividing (the resulting quotientrounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) therate of interest determined by Agent in accordance with its usual procedures(which determination shall be conclusive absent manifest error) to be theaverage of the London interbank offered rates for U.S. Dollars quoted by theBritish Bankers’ Association as set forth on Moneyline Telerate (or appropriatesuccessor or, if the British Bankers’ Association or its successor ceases toprovide such quotes, a comparable replacement determined by Agent) display page3750 (or such other display page on the Moneyline Telerate service as mayreplace display page 3750) two (2) Business Days prior to the first day of suchInterest Period for an amount comparable to such Euro-Rate Loan and having aborrowing date and a maturity comparable to such Interest Period by (ii) anumber equal to 1.00 minus the Euro-Rate Reserve Percentage. The Euro-Rate mayalso be expressed by the following formula:

 
| Euro Rate= |   | Average of  London interbank offered rates quoted by BBA or appropriate successor as  shown on Moneyline Telerate Service display page 3750 |
|------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
|       |   | 1.00 –  Euro-Rate Reserve Percentage                                                                                                   |

 

The Euro-Rate shall be adjustedwith respect to any Loan to which the Euro-Rate Option applies that isoutstanding on the effective date of any change in the Euro-Rate ReservePercentage as of such effective date. Agent shall give prompt notice to theBorrower of the Euro-Rate as determined or adjusted in accordance herewith,which determination shall be conclusive absent manifest error.

 

“Euro-RateReserve Percentage” shall mean as of any day the maximum percentage ineffect on such

 

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day, as prescribed by the Boardof Governors of the Federal Reserve System (or any successor) for determiningthe reserve requirements (including supplemental, marginal and emergencyreserve requirements) with respect to eurocurrency funding (currently referredto as “Eurocurrency Liabilities”).

 

“Euro-Rate Loan” shall mean an Advance at any time that bearsinterest based on the Euro-Rate.

 

“Event of Default” shall mean the occurrence of any of theevents set forth in Article X hereof.

 

“Executive Order No. 13224” shall mean the Executive Order No.13224 on Terrorist Financing, effective September 24, 2001, as the same hasbeen, or shall hereafter be, renewed, extended, amended or replaced.

 

“Existing Loan Agreement” shall mean the Loan and SecurityAgreement dated March 28, 1995, between BRLI and PNC, as amended by the FirstAmendment to Loan Agreement dated June 12, 1995, the Second Amendment to LoanAgreement dated February 14, 1996, the Third Amendment to Loan Agreement datedJuly 2, 1996, the Fourth Amendment to Loan Agreement dated as of December 23,1996, the Fifth Amendment to Loan Agreement dated as of February 4, 1997, theSixth Amendment to Loan Agreement dated March 28, 1997, the Seventh Amendmentto Loan Agreement dated April 9, 1998, the Eighth Amendment to Loan Documentseffective as of January 2, 2001, the Ninth Amendment to Loan Documentseffective as of January 30, 2001, the Tenth Amendment to Loan Documentseffective as of March 2, 2001, the Eleventh Amendment to Loan Documents datedSeptember 28, 2001, the Twelfth Amendment to Loan and Security Agreementexecuted on or about January 29, 2002, the Thirteenth Amendment to Loan Documentsdated November 26, 2002, and the Fourteenth Amendment to Loan Documents datedSeptember 29, 2003.

 

“FederalFunds Effective Rate”  shall mean,for any day, the rate per annum (based on a year of 360 days and actual dayselapsed and rounded upward to the nearest 1/100 of 1%) announced by the FederalReserve Bank of New York (or any successor) on such day as being the weightedaverage of the rates on overnight federal funds transactions arranged byfederal funds brokers on the previous trading day, as computed and announced bysuch Federal Reserve Bank (or any successor) in substantially the same manneras such Federal Reserve Bank computes and announces the weighted average itrefers to as the “Federal Funds Effective Rate” as of the date of thisAgreement; provided, if such Federal Reserve Bank (or its successor)does not announce such rate on any day, the “Federal Funds Effective Rate’ forsuch day shall be the Federal Funds Effective Rate for the last day on whichsuch rate was announced.

 

“FederalFunds Open Rate”  shall mean, for anyday, the rate per annum determined by Agent in accordance with its usualprocedures (which determination shall be conclusive absent manifest error) tobe the “open” rate for federal funds transactions as of the opening of businessfor federal funds transactions among members of the Federal Reserve Systemarranged by federal funds brokers on such day, as quoted by Garvin Guybutler,any successor entity thereto, or any other broker selected by the Bank, as setforth on the applicable Telerate display page; provided, however; that if suchday is not a Business Day, the Federal Funds Open Rate for such day shall bethe “open” rate on the immediately preceding Business Day, or if no such rateshall be quoted by a Federal funds broker at such time, such other rate asdetermined by Agent in accordance with its usual procedures.

 

“Fixed Charge Coverage” shall mean the following calculation, tobe tested quarterly, as of the end of each fiscal quarter on a rollingfour-quarter basis, in accordance with GAAP on a consolidated basis: (a)Borrowers’ consolidated earnings before interest, taxes, depreciation andamortization less the total of unfinanced capital expenditures, cashtaxes paid, shareholder distributions made and dividends paid to shareholders dividedby (b) the sum of interest and principal payments made on all senior andsubordinated indebtedness of Borrowers for borrowed money (but, for thepurposes of this Agreement, excluding principal payments made with respect tothe Revolving Loan) or the deferred purchase price of property.

 

“Formula Amount” shall have the meaning set forth in Section2.1(a).

 

“GAAP” shall mean generally accepted accounting principles inthe United States of America in effect from time to time.

 

“General Intangibles” shall mean and include as to each Borrowerall of such Borrower’s general intangibles, whether now owned or hereafteracquired including, without limitation, all payment intangibles, choses in

 

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action, causes of action, corporate or other business records,inventions, designs, patents, patent applications, equipment formulations,manufacturing procedures, quality control procedures, trademarks, servicemarks, trade secrets, goodwill, copyrights, design rights, software, computerinformation, source codes, codes, records and dates, registrations, licenses,franchises, customer lists, tax refunds, tax refund claims, computer programs,all claims under guaranties, security interests or other security held by orgranted to such Borrower to secure payment of any of the Receivables by aCustomer (other than to the extent covered by Receivables) all rights ofindemnification and all other intangible property of every kind and nature(other than Receivables).

 

“Governmental Body” shall mean any nation or government, anystate or other political subdivision thereof or any entity exercising thelegislative, judicial, regulatory or administrative functions of or pertainingto a government.

 

“Guarantor” shall mean CareEvolve.com, Inc. and any other Personwho may hereafter guarantee payment or performance of the whole or any part ofthe Obligations and “Guarantors” means collectively all such Persons.

 

“Guarantor Security Agreement” shall mean any Security Agreementexecuted by any Guarantor in favor of Agent securing the Guaranty of suchGuarantor.

 

“Guaranty” shall mean any guaranty of the obligations ofBorrowers executed by a Guarantor in favor of Agent for its benefit and for theratable benefit of Lenders.

 

“Hazardous Discharge” shall have the meaning set forth inSection 4.19(d) hereof.

 

“Hazardous Substance” shall mean, without limitation, anyflammable explosives, radon, radioactive materials, asbestos, urea formaldehydefoam insulation, polychlorinated biphenyls, petroleum and petroleum products,methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substancesor related materials as defined in CERCLA, the Hazardous MaterialsTransportation Act, as amended (49 U.S.C. Sections 1801, et  seq.), RCRA, Articles 15 and 27 of theNew York State Environmental Conservation Law or any other applicableEnvironmental Law and in the regulations adopted pursuant thereto.

 

“Hazardous Wastes” shall mean all waste materials subject toregulation under CERCLA, RCRA or applicable state law, and any other applicableFederal and state laws now in force or hereafter enacted relating to hazardouswaste disposal.

 

“Indebtedness” of a Person at a particular date shall mean allobligations of such Person which in accordance with GAAP would be classifiedupon a balance sheet as liabilities (except capital stock and surplus earned orotherwise) and in any event, without limitation by reason of enumeration, shallinclude all indebtedness, debt and other similar monetary obligations of suchPerson whether direct or guaranteed, and all premiums, if any, due at therequired prepayment dates of such indebtedness, and  all indebtedness secured by a Lien on assetsowned by such Person, whether or not such indebtedness actually shall have beencreated, assumed or incurred by such Person. Any indebtedness of such Person resulting from the acquisition by suchPerson of any assets subject to any Lien shall be deemed, for the purposeshereof, to be the equivalent of the creation, assumption and incurring of theindebtedness secured thereby, whether or not actually so created, assumed orincurred.

 

“Ineligible Security” shall mean any security which may not beunderwritten or dealt in by member banks of the Federal Reserve System underSection 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), asamended.

 

“Interest Period” shall mean the period provided for anyEuro-Rate Loan pursuant to Section 2.2(b).

 

“Inventory” shall mean and include as to each Borrower all ofsuch Borrower’s now owned or hereafter acquired goods, merchandise and otherpersonal property, wherever located, to be furnished under any consignmentarrangement, contract of service or held for sale or lease, all raw materials,work in process, finished goods and materials

 

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and supplies of any kind, nature or description which are or might beused or consumed in such Borrower’s business or used in selling or furnishingsuch goods, merchandise and other personal property, and all documents of titleor other documents representing them.

 

“Investment Property” shall mean and include as to eachBorrower, all of such Borrower’s now owned or hereafter acquired securities(whether certificated or uncertificated), securities entitlements, securitiesaccounts, commodities contracts and commodities accounts.

 

“Lender” and “Lenders” shall have the meaning ascribed tosuch term in the preamble to this Agreement and shall include each Person whichbecomes a transferee, successor or assign of any Lender.

 

“Lien” shall mean any mortgage, deed of trust, pledge,hypothecation, assignment, security interest, lien (whether statutory orotherwise), Charge, claim or encumbrance, or preference, priority or othersecurity agreement or preferential arrangement held or asserted in respect ofany asset of any kind or nature whatsoever including, without limitation, anyconditional sale or other title retention agreement, any lease havingsubstantially the same economic effect as any of the foregoing, and the filingof, or agreement to give, any financing statement under the Uniform CommercialCode or comparable law of any jurisdiction.

 

“Material Adverse Effect” shall mean a material adverse effectwith respect to:  (a) the condition,operations, assets, business or prospects of the applicable Person or Persons,(b) any Borrower’s ability to pay the Obligations in accordance with the termsthereof, (c) the value of the Collateral, or Agent’s Liens on the Collateral orthe priority of any such Lien or (d) the practical realization of the benefitsof Agent’s and each Lender’s rights and remedies under this Agreement and theOther Documents.

 

“Maximum Revolving Advance Amount” shall mean Thirty MillionDollars ($30,000,000.00).

 

“Monthly Advances” shall have the meaning set forth in Section3.1 hereof.

 

“Multiemployer Plan” shall mean a “multiemployer plan” asdefined in Sections 3(37) and 4001(a)(3) of ERISA.

 

“Note” shall mean collectively, the Revolving Credit Note, andany other promissory note executed and delivered by Borrowers from time to timein order to evidence all or any of the Obligations.

 

“Obligations” shall mean and include any and all loans,advances, debts, liabilities, obligations, covenants and duties owing byBorrowers to Lenders or Agent or to any other direct or indirect subsidiary oraffiliate of Agent or any Lender of any kind or nature, present or future(including, without limitation, any interest accruing thereon after maturity,or after the filing of any petition in bankruptcy, or the commencement of anyinsolvency, reorganization or like proceeding relating to any Borrower, whetheror not a claim for post-filing or post-petition interest is allowed in suchproceeding), whether or not evidenced by any note, guaranty or otherinstrument, whether arising under any agreement, instrument or document,(including, without limitation, this Agreement and the Other Documents) whetheror not for the payment of money, whether arising by reason of an extension ofcredit, opening of a letter of credit, loan, equipment lease or guarantee,under any interest or currency swap, future, option or other similar agreement,or in any other manner, whether arising out of overdrafts or deposit or otheraccounts or electronic funds transfers (whether through automated clearinghouses or otherwise) or out of Agent’s or any Lenders non-receipt of orinability to collect funds or otherwise not being made whole in connection withdepository transfer check or other similar arrangements, whether direct orindirect (including those acquired by assignment or participation), absolute orcontingent, joint or several, due or to become due, now existing or hereafterarising, contractual or tortious, liquidated or unliquidated, regardless of howsuch indebtedness or liabilities arise or by what agreement or instrument theymay be evidenced or whether evidenced by any agreement or instrument,including, but not limited to, any and all of any Borrower’s Indebtednessand/or liabilities under this Agreement, the Other Documents or under any otheragreement between Agent or Lenders and any Borrower and any amendments,extensions, renewals or increases and all costs and expenses of Agent and anyLender incurred in the documentation, negotiation, modification, enforcement,collection or otherwise in connection with any of the foregoing,

 

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including but not limited to reasonable attorneys’ fees and expensesand all obligations of any Borrower to Agent or Lenders to perform acts orrefrain from taking any action.

 

“Other Documents” shall mean the Note, any Guaranty, anyGuarantor Security Agreement and any and all other agreements, instruments anddocuments, including, without limitation, guaranties, pledges, powers of attorney,consents, and all other writings heretofore, now or hereafter executed by anyBorrower or any Guarantor and/or delivered to Agent or any Lender in respect ofthe transactions contemplated by this Agreement.

 

“Parent” of any Person shall mean a corporation or other entityowning, directly or indirectly at least 50% of the shares of stock or otherownership interests having ordinary voting power to elect a majority of thedirectors of the Person, or other Persons performing similar functions for anysuch Person.

 

“Participant” shall mean each Person who shall be granted theright by any Lender to participate in any of the Advances and who shall haveentered into a participation agreement in form and substance satisfactory tosuch Lender.

 

“Payment Office” shall mean initially Two Tower CenterBoulevard, East Brunswick, New Jersey 08816; thereafter, such other office ofAgent, if any, which it may designate by notice to Borrowing Agent and to eachLender to be the Payment Office.

 

“Payor” or “Payors” shall mean any Person or Persons whopays claims on behalf of third parties, including for example, but not limited,to Medicare, Medicaid and insurance companies.

 

“PBGC” shall mean the Pension Benefit Guaranty Corporation.

 

“Permitted Acquisition” shall mean and include:  (a) the acquisition by any Borrower ofcustomer lists, at a cost not greater than One Million Dollars ($1,000,000.00)per list and Three Million Dollars ($3,000,000.00) per year, in the aggregate;(b) any acquisition for which the sole consideration paid by any Borrowerconsists of the capital stock of such Borrower; and (c) the acquisition, theconsideration for which is not solely capital stock of a Borrower, of all orsubstantially all of the assets or capital stock of a Person engaged in a business,or having a product line, similar to the business or product line of Borrowersas of the Closing Date at such time as the following conditions are satisfied:

 

(i)                                     NoDefault or Event of Default shall have occurred and be continuing, nor would aDefault or Event of Default occur after giving effect to such acquisition;

 

(ii)                                  atrue and complete copy of the applicable acquisition agreement shall have beenprovided to Agent;

 

(iii)                               financialinformation regarding the business or product line that the applicable Borrowerproposes to acquire shall be provided to Agent, so as to enable Agent todetermine whether the price to be paid by such Borrower is a fair market price;

 

(iv)                              evidencethat the assets to be acquired are free and clear of all Liens except PermittedEncumbrances;

 

(v)                                 inthe case of the acquisitions of a business, financial projections and acertificate to the effect that the representations set forth in Article 5 willbe true after giving effect to the acquisition;

 

(vi)                              aftergiving effect to the acquisition, Undrawn Availability shall not be less thanTwo Million Dollars ($2,000,000.00).

 

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(vii)                           Anynew Subsidiary of such Borrower resulting from such acquisition, as Agent inits discretion shall elect, shall either: (x) expressly join in this Agreementas a Borrower and become jointly and severally liable for the Obligations ofBorrowers hereunder and under any other Agreement between Borrowers and Lender;or (y) become a Guarantor and shall execute and deliver a Guaranty and, ifformed under the laws of a United States jurisdiction, a Guarantor’s SecurityAgreement, in form and substance acceptable to Agent in its discretion and, ineither case Agent shall have received all documents, including legal opinions,it may reasonably require to establish compliance with each of the foregoingconditions;

 

(viii)                        Aftergiving effect to such acquisition, not more than Ten Million Dollars($10,000,000.00) of Revolving Advances in the aggregate shall have beenadvanced under the Acquisition Subline; and

 

(ix)                                Agentmay exercise its reasonable discretion in determining whether to make aRevolving Advance under the Acquisition Subline after an examination of thedocuments and information required hereunder or under Section 2.1(c)(ii).

 

“Permitted Encumbrances” shall mean (a) Liens in favor of Agentfor the benefit of Agent and Lenders; (b) Liens for taxes, assessments or othergovernmental charges not delinquent or being contested in good faith and by appropriateproceedings and with respect to which proper reserves have been taken byBorrowers; provided, that, the Lien shall have no effect on thepriority of the Liens in favor of Agent or the value of the assets in whichAgent has such a Lien and a stay of enforcement of any such Lien shall be ineffect; (c) Liens disclosed in the financial statements referred to in Section5.5, the existence of which Agent has consented to in writing; (d) deposits orpledges to secure obligations under worker’s compensation, social security orsimilar laws, or under unemployment insurance; (e) deposits or pledges tosecure bids, tenders, contracts (other than contracts for the payment ofmoney), leases, statutory obligations, surety and appeal bonds and otherobligations of like nature arising in the ordinary course of any Borrower’sbusiness; (f) judgment Liens that have been stayed or bonded and mechanics’,workers’, materialmen’s or other like Liens arising in the ordinary course ofany Borrower’s business with respect to obligations which are not due or whichare being contested in good faith by the applicable Borrower; (g) Liens placedupon fixed assets hereafter acquired to secure a portion of the purchase pricethereof, provided that (x) any such lien shall not encumber any other propertyof Borrowers and (y) the aggregate amount of Indebtedness secured by such Liensincurred as a result of such purchases during any fiscal year shall not exceedthe amount provided for in Section 7.6; and (h) Liens disclosed on Schedule1.2.

 

“Person” shall mean any individual, sole proprietorship,partnership, corporation, business trust, joint stock company, trust,unincorporated organization, association, limited liability company,institution, public benefit corporation, joint venture, entity or government(whether Federal, state, county, city, municipal or otherwise, including anyinstrumentality, division, agency, body or department thereof).

 

“Plan” shall mean any employee benefit plan within the meaningof Section 3(3) of ERISA, maintained for employees of Borrowers or any memberof the Controlled Group or any such Plan to which any Borrower or any member ofthe Controlled Group is required to contribute on behalf of any of itsemployees.

 

 “Purchasing Lender” shallhave the meaning set forth in Section 16.3(c) hereof.

 

“RCRA” shall mean the Resource Conservation and Recovery Act, 42U.S.C. §§ 6901 et seq., as same may be amended from time to time.

 

“Real Property” shall mean all real property owned or leased byany Borrower.

 

“Receivables” shall mean and include, as to each Borrower, allof such Borrower’s accounts, contract rights, instruments (including thoseevidencing indebtedness owed to Borrowers by their Affiliates), documents,chattel paper (including electronic chattel paper), general intangiblesrelating to accounts, drafts and acceptances, healthcare receivables, creditcard receivables, and all other forms of obligations owing to such Borrowerarising out of or in connection with the sale or lease of Inventory or the renditionof services, all supporting obligations, guarantees and other

 

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security therefor, whether secured or unsecured, now existing orhereafter created, and whether or not specifically sold or assigned to Agenthereunder.

 

“Release” shall have the meaning set forth in Section 5.7(c)(i)hereof.

 

“Reportable Event” shall mean a reportable event described inSection 4043(b) of ERISA or the regulations promulgated thereunder.

 

“Required Lenders” shall mean Lenders holding at least fifty-onepercent (51%) of the Advances and, if no Advances are outstanding, shall meanLenders holding fifty-one percent (51%) of the Commitment Percentages.

 

“Reserve Percentage” shall mean the maximum effective percentagein effect on any day as prescribed by the Board of Governors of the FederalReserve System (or any successor) for determining the reserve requirements(including, without limitation, supplemental, marginal and emergency reserverequirements) with respect to eurocurrency funding.

 

“Revolving Advances” shall mean any Advances made under thisAgreement.

 

“Revolving Credit Note” shall mean that certain Seventh Amendedand Restated Revolving Loan Note to be executed contemporaneously herewith,made by Borrowers and payable to PNC, in the face amount of Thirty MillionDollars ($30,000,000.00), a copy of which is attached hereto as Exhibit B,as such note may be amended, modified, extended, renewed, restated orsubstituted from time to time.

 

“Revolving Interest Rate” shall mean an interest rate per annumequal to (a) the sum of the Alternate Base Rate plus the Applicable Margin withrespect to Domestic Rate Loans, and (b) the sum of the Euro-Rate plus theApplicable Margin with respect to Euro-Rate Loans.

 

“Section 20 Subsidiary” shall mean the Subsidiary of the bankholding company controlling PNC, which Subsidiary has been granted authority bythe Federal Reserve Board to underwrite and deal in certain IneligibleSecurities.

 

“Settlement Date” shall mean the Closing Date and thereafterWednesday of each week unless such day is not a Business Day in which case itshall be the next succeeding Business Day.

 

“Subsidiary” shall mean a corporation or other entity of whoseshares of stock or other ownership interests having ordinary voting power(other than stock or other ownership interests having such power only by reasonof the happening of a contingency) to elect a majority of the directors of suchcorporation, or other Persons performing similar functions for such entity, areowned, directly or indirectly, by such Person.

 

“Term” shall have the meaning set forth in Section 13.1 hereof.

 

“Termination Event” shall mean (i) a Reportable Event withrespect to any Plan or Multiemployer Plan; (ii) the withdrawal of any Borroweror any member of the Controlled Group from a Plan or Multiemployer Plan duringa plan year in which such entity was a “substantial employer” as defined inSection 4001(a)(2) of ERISA; (iii) the providing of notice of intent toterminate a Plan in a distress termination described in Section 4041(c) ofERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan orMultiemployer Plan; (v) any event or condition (a) which might constitutegrounds under Section 4042 of ERISA for the termination of, or the appointmentof a trustee to administer, any Plan or Multiemployer Plan, or (b) that mayresult in termination of a Multiemployer Plan pursuant to Section 4041A ofERISA; or (vi) the partial or complete withdrawal within the meaning ofSections 4203 and 4205 of ERISA, of any Borrower or any member of theControlled Group from a Multiemployer Plan.

 

“Toxic Substance” shall mean and include any material present onthe Real Property or the Leasehold Interests which has been shown to havesignificant adverse effect on human health or which is subject to regulationunder the Toxic Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq.,applicable state law, or any other applicable

 

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Federal or state laws now in force or hereafter enacted relating totoxic substances.  “Toxic Substance”includes but is not limited to asbestos, polychlorinated biphenyls (PCBs) andlead-based paints.

 

“Transferee” shall have the meaning set forth in Section 16.3(b)hereof.

 

“Undrawn Availability” at a particular date shall mean an amountequal to (a) the lesser of (i) the Formula Amount or (ii) the Maximum RevolvingAdvance Amount, minus (b) the sum of (i) the outstanding amount ofAdvances plus (ii) all amounts due and owing to Borrowers’ tradecreditors which are outstanding beyond normal trade terms.

 

“USA Patriot Act” shall mean the Uniting and StrengtheningAmerica by Providing Appropriate Tools Required to Intercept and ObstructTerrorism Act of 2001, Public Law 107-56, as the same has been, or shallhereafter be, renewed, extended, amended or replaced.

 

“Week” shall mean the time period commencing with the opening ofbusiness on a Wednesday and ending on the end of business the followingTuesday.

 

1.3.                              UniformCommercial Code Terms.  All termsused herein and defined in the Uniform Commercial Code as adopted in the Stateof New Jersey from time to time shall have the meaning given therein unlessotherwise defined herein.  To the extentthe definition of any category or type of Collateral is expanded by anyamendment, modification or revision to the Uniform Commercial Code, suchexpanded definition will apply automatically as of the date of such amendment,modification or revision.

 

1.4.                              CertainMatters of Construction. The terms “herein”, “hereof” and “hereunder” andother words of similar import refer to this Agreement as a whole and not to anyparticular section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders.  Wherever appropriate in the context, termsused herein in the singular also include the plural and viceversa.  All references to statutes and relatedregulations shall include any amendments of same and any successor statutes andregulations.  Unless otherwise provided,all references to any instruments or agreements to which Agent is a party,including, without limitation, references to any of the Other Documents, shallinclude any and all modifications or amendments thereto and any and allextensions or renewals thereof.

 

II.                                     ADVANCES,PAYMENTS

 

2.1.                              (a)                                  RevolvingAdvances. Subject to the terms and conditions set forth in this Agreementincluding, without limitation, Section 2.1(b), each Lender, severally and notjointly, will make Revolving Advances to Borrowers in aggregate amountsoutstanding at any time equal to such Lender’s Commitment Percentage of thelesser of (x) the Maximum Revolving Advance Amount minus the principal amountoutstanding under the Acquisition Subline or (y) an amount equal to the sum of:

 

(i)                                                                                     Fifty(50%) percent, subject to the provisions of Section 2.1(b) hereof (the “AdvanceRate”) of the face amount of the Eligible Receivables; minus

 

(ii)                                                                                  suchreserves as Agent may reasonably deem proper and necessary from time to time.

 

The amount derived from the sum of (x) Sections 2.1(a)(y)(i) minus(y) Section 2.1(a)(y)(ii) at any time and from time to time shall be referredto as the “Formula Amount”.  TheRevolving Advances shall be evidenced by the Revolving Credit Note.  In the event that the aggregate principal amountof outstanding Revolving Advances exceeds the Formula Amount at any time, suchexcess shall nevertheless be:  (x)secured by the Collateral, (y) subject to the terms of this Agreement, and (z)due and payable immediately upon Agent’s demand, anything contained herein tothe contrary notwithstanding.

 

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(b)                                 DiscretionaryRights.  The Advance Rates may beincreased or decreased by Agent at any time and from time to time in theexercise of its reasonable discretion. Each Borrower consents to any such increases or decreases andacknowledges that decreasing the Advance Rates or increasing the reserves maylimit or restrict Advances requested by Borrowing Agent.

 

(c)                                  AcquisitionSubline.  (i) There is herebyestablished a subline within the Advance Limit for Borrowers’ use in making oneor more Permitted Acquisitions (the “Acquisition Subline”).  Upon the terms and conditions of this Section2.1(c) until the maturity date of this Agreement, Borrowers shall be entitledto apply for one or more Advances under the Acquisition Subline which shall notbe less than One Hundred Thousand Dollars ($100,000.00) as to each such Advanceand which shall not, when aggregated with all other Advances made, under theAcquisition Subline at any time exceed an aggregate principal amount of TenMillion Dollars ($10,000,000.00).  EachAdvance made for Permitted Acquisitions shall permanently reduce theavailability under the Acquisition Subline and shall reduce the Maximum RevolvingAdvance Amount by a corresponding amount. Any repayment, in full or in part, shall not restore any availabilityunder the Acquisition Subline; however, the amount of each repayment willresult in a corresponding increase in the Maximum Advance Amount.  Borrowers and Agent hereby acknowledge that,as of the Closing Date:  (x) an aggregateof Two Million Five Hundred Forty Six Thousand One Hundred Seventeen and 21/100Dollars ($2,546,117.21) has been advanced under the Acquisition Subline, (y) upto the sum of Seven Million Four Hundred fifty Three Thousand Eight HundredEighty Two and 79/100 Dollars ($7,453,882.79), in the aggregate, may beadvanced under the Acquisition Subline in the future, and (z) as of the closeof business on October 4, 2004 the outstanding principal balance of theAcquisition Subline equals Two Million Three Hundred Thirty Three Thousand NineHundred Forty and 71/100 Dollars ($2,333,940.71).  For the purposes of interest calculations anddetermining availability under the Maximum Revolving Advance Amount, eachAdvance under the Acquisition Subline shall be treated as a Revolving Advance.

 

(ii)                                  Eachrequest for a Advance under the Acquisition Subline shall be made in writing asearly as practicable, but in no event less than ten (10) Business Days inadvance of the anticipated closing date of the Permitted Acquisition and shallconstitute a representation by Borrowers that the conditions set forth in thedefinition of Permitted Acquisitions have been satisfied on the date of suchrequest, and shall be accompanied by the information and documents requiredunder the definition of Permitted Acquisitions.

 

(iii)                               Borrowersshall provide Agent such additional information in respect of the proposedacquisition as Agent shall reasonably request in order to perform due diligenceregarding the proposed acquisition, including without limitation, theopportunity for Agent or its agents or representatives, to perform a fieldexamination with respect to the business or assets acquired prior to approvingthe inclusion of such assets as Collateral which is eligible to be the basisfor Advances.

 

(iv)                              Agentmay exercise its reasonable discretion in determining whether to make Advancesfor the purpose of a Permitted Acquisition.

 

(v)                                 EachAdvance made under the Acquisition Subline shall convert into a term loan onthe first day of the month following the month in which such Advance was madeand shall be payable in monthly installments of principal equal to onethirty-sixth (1/36th) of the original amount of each such Advance,plus accrued interest.  Principalpayments with respect to each such Advance shall commence on the first day ofthe second month following the month in which such Advance was made and shallcontinue on the first day of each successive month thereafter until the earlierof thirty-six (36) months from and including the date of the first payment, orend of the Term, when the remaining principal balance and accrued and unpaidinterest shall be due and payable, in full. Borrowers shall have the right to prepay the principal balanceoutstanding under the Acquisition Subline in whole or in part at any time orfrom time to time in increments of $50,000, provided, that there shall be addedto any prepayment of a Euro-Rate Loan a breakage fee calculated by Agent usingthe same method utilized for calculating the breakage fee for Euro-Ratetransactions generally.  Any prepaymentsshall be applied to the remaining installments due on any Advance underAcquisition Subline in the inverse order of their maturities.

 

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2.2.                              Procedurefor Borrowing Advances.

 

(a)                                  BorrowingAgent on behalf of any Borrower may notify Agent prior to 11:00 a.m. on aBusiness Day of a Borrower’s request to incur, on that day, a Revolving Advancehereunder.  Should any amount required tobe paid as interest hereunder, or as fees or other charges under this Agreementor any other agreement with Agent or Lenders, or with respect to any other Obligation,become due, same shall be deemed a request for a Revolving Advance as of thedate such payment is due, in the amount required to pay in full such interest,fee, charge or Obligation under this Agreement or any other agreement withAgent or Lenders, and such request shall be irrevocable.

 

(b)                                 Notwithstandingthe provisions of (a) above, in the event any Borrower desires to obtain aEuro-Rate Loan, Borrowing Agent shall give Agent at least three (3) BusinessDays’ prior written notice, specifying (i) the date of the proposed borrowing(which shall be a Business Day), (ii) the type of borrowing and the amount onthe date of such Advance to be borrowed, which amount shall be in a minimumamount of $100,000.00 and in integral multiples of $100,000.00 thereafter, and(iii) the duration of the first Interest Period therefor.  Interest Periods for Euro-Rate Loans shall befor one, two, three or six months; provided, if an Interest Period wouldend on a day that is not a Business Day, it shall end on the next succeedingBusiness Day unless such day falls in the next succeeding calendar month inwhich case the Interest Period shall end on the next preceding BusinessDay.  No Euro-Rate Loan shall be madeavailable to Borrower during the continuance of a Default or an Event ofDefault.

 

(c)                                  EachInterest Period of a Euro-Rate Loan shall commence on the date such Euro-RateLoan is made and shall end on such date as Borrowing Agent may elect as setforth in subsection (b)(iii) above provided that the exact length of eachInterest Period shall be determined in accordance with the practice of theinterbank market for offshore Dollar deposits and no Interest Period shall endafter the last day of the Term.

 

Borrowing Agent shall elect the initial Interest Period applicable to aEuro-Rate Loan by its notice of borrowing given to Agent pursuant to Section2.2(b) or by its notice of conversion given to Agent pursuant to Section2.2(d), as the case may be.  BorrowingAgent shall elect the duration of each succeeding Interest Period by givingirrevocable written notice to Agent of such duration not less than three (3)Business Days prior to the last day of the then current Interest Periodapplicable to such Euro-Rate Loan.  IfAgent  does not receive timely notice ofthe Interest Period elected by Borrowing Agent, Borrowers shall be deemed tohave elected to convert to a Domestic Rate Loan subject to Section 2.2(d)hereinbelow.

 

(d)                                 Providedthat no Event of Default shall have occurred and be continuing, any Borrowermay, on the last Business Day of the then current Interest Period applicable toany outstanding Euro-Rate Loan, or on any Business Day with respect to DomesticRate Loans, convert any such loan into a loan of another type in the sameaggregate principal amount provided that any conversion of a Euro-Rate Loanshall be made only on the last Business Day of the then current Interest Periodapplicable to such Euro-Rate Loan.  If aBorrower desires to convert a loan, Borrowing Agent shall give Agent not lessthan three (3) Business Days’ prior written notice to convert from a DomesticRate Loan to a Euro-Rate Loan or one (1) Business Day’s prior written notice toconvert from a Euro-Rate Loan to a Domestic Rate Loan, specifying the date ofsuch conversion, the loans to be converted and if the conversion is from aDomestic Rate Loan to any other type of loan, the duration of the firstInterest Period therefor.  After givingeffect to each such conversion, there shall not be outstanding more than five(5) Euro-Rate Loans, in the aggregate.

 

(e)                                  Atits option and upon three (3) Business Days’ prior written notice, any Borrowermay prepay the Euro-Rate Loans in whole at any time or in part from time totime, without premium or penalty, but with accrued interest on the principalbeing prepaid to the date of such repayment. Such Borrower shall specify the date of prepayment of Advances which areEuro-Rate Loans and the amount of such prepayment.  In the event that any prepayment of a Euro-RateLoan is required or permitted on a date other than the last Business Day of thethen current Interest Period with respect thereto, such Borrower shallindemnify Agent and Lenders therefor in accordance with Section 2.2(f) hereof.

 

(f)                                    EachBorrower shall indemnify Agent and Lenders and hold Agent and Lenders harmlessfrom and against any and all losses or expenses that Agent and Lenders maysustain or incur as a consequence of any prepayment, conversion of or anydefault by any Borrower in the payment of the principal of or interest on any

 

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Euro-Rate Loan or failure by any Borrower to complete a borrowing of, aprepayment of or conversion of or to a Euro-Rate Loan after notice thereof hasbeen given, including, but not limited to, any interest payable by Agent orLenders to lenders of funds obtained by it in order to make or maintain itsEuro-Rate Loans hereunder.  A certificateas to any additional amounts payable pursuant to the foregoing sentencesubmitted by Agent or any Lender to Borrowing Agent shall be conclusive absentmanifest error.

 

(g)                                 Notwithstandingany other provision hereof, if any applicable law, treaty, regulation ordirective, or any change therein or in the interpretation or applicationthereof, shall make it unlawful for any Lender (for purposes of this subsection(g), the term “Lender” shall include any Lender and the office or branch whereany Lender or any corporation or bank controlling such Lender makes ormaintains any Euro-Rate Loans ) to make or maintain its Euro-Rate Loans, theobligation of Lenders to make Euro-Rate Loans hereunder shall forthwith becancelled and Borrowers shall, if any affected Euro-Rate Loans are thenoutstanding, promptly upon request from Agent, either pay all such affectedEuro-Rate Loans or convert such affected Euro-Rate Loans into loans of anothertype.  If any such payment or conversionof any Euro-Rate Loan is made on a day that is not the last day of the InterestPeriod applicable to such Euro-Rate Loan, Borrowers shall pay Agent, upon Agent’srequest, such amount or amounts as may be necessary to compensate Lenders forany loss or expense sustained or incurred by Lenders in respect of suchEuro-Rate Loan as a result of such payment or conversion, including (but notlimited to) any interest or other amounts payable by Lenders to lenders offunds obtained by Lenders in order to make or maintain such Euro-RateLoan.  A certificate as to any additionalamounts payable pursuant to the foregoing sentence submitted by Lenders toBorrowing Agent shall be conclusive absent manifest error.

 

2.3.                              Disbursementof Advance Proceeds.  All Advancesshall be disbursed from whichever office or other place Agent may designatefrom time to time and, together with any and all other Obligations of Borrowersto Agent or Lenders, shall be charged to Borrowers’ Account on Agent’sbooks.  During the Term, Borrowers mayuse the Revolving Advances by borrowing, prepaying and reborrowing, all inaccordance with the terms and conditions hereof.  The proceeds of each Revolving Advancerequested by Borrowers or deemed to have been requested by Borrowers underSection 2.2(a) hereof shall, with respect to requested Revolving Advances tothe extent Lenders make such Revolving Advances, be made available to theapplicable Borrower on the day so requested by way of credit to such Borrower’soperating account at PNC, or such other bank as Borrowing Agent may designatefollowing notification to Agent, in immediately available federal funds orother immediately available funds or, with respect to Revolving Advances deemedto have been requested by any Borrower, be disbursed to Agent to be applied tothe outstanding Obligations giving rise to such deemed request.

 

2.4.                              MaximumAdvances.  The aggregate balance ofRevolving Advances outstanding at any time shall not exceed the lesser of (a)Maximum Revolving Advance Amount or (b) the Formula Amount.

 

2.5.                              Repaymentof Advances.

 

(a)                                  TheRevolving Advances shall be due and payable in full on the last day of the Termsubject to earlier prepayment as herein provided.

 

(b)                                 EachBorrower recognizes that the amounts evidenced by checks, notes, drafts or anyother items of payment relating to and/or proceeds of Collateral may not becollectible by Agent on the date received. In consideration of Agent’s agreement to conditionally credit Borrowers’Account as of the Business Day on which Agent receives those items of payment,each Borrower agrees that, in computing the charges under this Agreement, allitems of payment shall be deemed applied by Agent on account of the Obligationsone (1) Business Day after the Business Day Agent receives such payments viawire transfer or electronic depository check. Agent is not, however, required to credit Borrowers’ Account for theamount of any item of payment which is unsatisfactory to Agent and Agent maycharge Borrowers’ Account for the amount of any item of payment which isreturned to Agent unpaid.

 

(c)                                  Allpayments of principal, interest and other amounts payable hereunder, or underany of the Other Documents shall be made to Agent at the Payment Office notlater than 1:00 P.M. (eastern time) on the due date therefor in lawful money ofthe United States of America in federal funds or other funds immediatelyavailable to Agent.

 

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Agent shall have the right to effectuate payment on any and allObligations due and owing hereunder by charging Borrowers’ Account or by makingAdvances as provided in Section 2.2 hereof.

 

(d)                                 Borrowersshall pay principal, interest, and all other amounts payable hereunder, orunder any related agreement, without any deduction whatsoever, including, butnot limited to, any deduction for any setoff or counterclaim.

 

2.6.                              Repaymentof Excess Advances.  The aggregatebalance of Advances outstanding at any time in excess of the maximum amount ofAdvances permitted hereunder shall be immediately due and payable without thenecessity of any demand, at the Payment Office, whether or not a Default orEvent of Default has occurred.

 

2.7.                              Statementof Account.  Agent shall maintain, inaccordance with its customary procedures, a loan account (“Borrowers’ Account”)in the name of Borrowers in which shall be recorded the date and amount of eachAdvance made by Agent and the date and amount of each payment in respectthereof; provided, however, the failure by Agent to record thedate and amount of any Advance shall not adversely affect Agent or anyLender.  Each month, Agent shall send toBorrowing Agent a statement showing the accounting for the Advances made,payments made or credited in respect thereof, and other transactions betweenAgent and Borrowers, during such month. The monthly statements shall be deemed correct and binding uponBorrowers in the absence of manifest error and shall constitute an accountstated between Lenders and Borrowers unless Agent receives a written statementof Borrowers’ specific exceptions thereto within thirty (30) days after suchstatement is received by Borrowing Agent. The records of Agent with respect to the loan account shall beconclusive evidence absent manifest error of the amounts of Advances and othercharges thereto and of payments applicable thereto.

 

2.8.                              AdditionalPayments.  Any sums expended by Agentor any Lender due to any Borrower’s failure to perform or comply with itsobligations under this Agreement or any Other Document including, withoutlimitation, any Borrower’s obligations under Sections 4.2, 4.4, 4.12, 4.13,4.14 and 6.1 hereof, may be charged to Borrowers’ Account as a RevolvingAdvance and added to the Obligations.

 

2.9.                              Mannerof Borrowing and Payment.

 

(a)                                  Eachborrowing of Revolving Advances shall be advanced according to the applicableCommitment Percentages of Lenders.

 

(b)                                 Eachpayment (including each prepayment) by Borrowers on account of the principal ofand interest on the Revolving Advances, shall be applied to the RevolvingAdvances pro rata according to the applicable Commitment Percentages ofLenders.  Except as expressly providedherein, all payments (including prepayments) to be made by any Borrower onaccount of principal, interest and fees shall be made without set off orcounterclaim and shall be made to Agent on behalf of Lenders to the PaymentOffice, in each case on or prior to 1:00 P.M., eastern time, in Dollars and inimmediately available funds.

 

(c)                                  (i)                                     Notwithstandinganything to the contrary contained in Sections 2.12(a) and (b) hereof,commencing with the first Business Day following the Closing Date, eachborrowing of Revolving Advances shall be advanced by Agent and each payment byany Borrower on account of Revolving Advances shall be applied first to thoseRevolving Advances advanced by Agent.  Onor before 1:00 P.M., eastern time, on each Settlement Date commencing with thefirst Settlement Date following the Closing Date, Agent and Lenders shall makecertain payments as follows: (I) if the aggregate amount of new RevolvingAdvances made by Agent during the preceding Week (if any) exceeds the aggregateamount of repayments applied to outstanding Revolving Advances during suchpreceding Week, then each Lender shall provide Agent with funds in an amountequal to its applicable Commitment Percentage of the difference between (w)such Revolving Advances and (x) such repayments and (II) if the aggregateamount of repayments applied to outstanding Revolving Advances during such Weekexceeds the aggregate amount of new Revolving Advances made during such Week,then Agent shall provide each Lender with funds in an amount equal to itsapplicable Commitment Percentage of the difference between (y) such repaymentsand (z) such Revolving Advances.

 

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(ii)                                  EachLender shall be entitled to earn interest at the applicable Contract Rate onoutstanding Advances which it has funded.

 

(iii)                               Promptlyfollowing each Settlement Date, Agent shall submit to each Lender a certificatewith respect to payments received and Advances made during the Week immediatelypreceding such Settlement Date.  Suchcertificate of Agent shall be conclusive in the absence of manifest error.

 

(d)                                 Ifany Lender or Participant (a “benefited Lender”) shall at any time receive anypayment of all or part of its Advances, or interest thereon, or receive anyCollateral in respect thereof (whether voluntarily or involuntarily or byset-off) in a greater proportion than any such payment to and Collateralreceived by any other Lender, if any, in respect of such other Lender’sAdvances, or interest thereon, and such greater proportionate payment orreceipt of Collateral is not expressly permitted hereunder, such benefitedLender shall purchase for cash from the other Lenders a participation in suchportion of each such other Lender’s Advances, or shall provide such otherLender with the benefits of any such Collateral, or the proceeds thereof, asshall be necessary to cause such benefited Lender to share the excess paymentor benefits of such Collateral or proceeds ratably with each of the otherLenders; provided, however, that if all or any portion of suchexcess payment or benefits is thereafter recovered from such benefited Lender,such purchase shall be rescinded, and the purchase price and benefits returned,to the extent of such recovery, but without interest.  Each Lender so purchasing a portion ofanother Lender’s Advances may exercise all rights of payment (including,without limitation, rights of set-off) with respect to such portion as fully asif such Lender were the direct holder of such portion.

 

(e)                                  UnlessAgent shall have been notified by telephone, confirmed in writing, by anyLender that such Lender will not make the amount which would constitute itsapplicable Commitment Percentage of the Advances available to Agent, Agent may(but shall not be obligated to) assume that such Lender shall make such amountavailable to Agent on the next Settlement Date and, in reliance upon suchassumption, make available to Borrowers a corresponding amount.  Agent will promptly notify Borrowers of itsreceipt of any such notice from a Lender. If such amount is made available to Agent on a date after such next SettlementDate, such Lender shall pay to Agent on demand an amount equal to the productof (i) the daily average Federal Funds Effective Rate (computed on the basis ofa year of 360 days) during such period as quoted by Agent, times (ii) suchamount, times (iii) the number of days from and including such Settlement Dateto the date on which such amount becomes immediately available to Agent.  A certificate of Agent submitted to anyLender with respect to any amounts owing under this paragraph (e) shall be conclusive,in the absence of manifest error.  Ifsuch amount is not in fact made available to Agent by such Lender within three(3) Business Days after such Settlement Date, Agent shall be entitled torecover such an amount, with interest thereon at the rate per annum thenapplicable to such Revolving Advances hereunder, on demand from Borrowers; provided,however, that Agent’s right to such recovery shall not prejudice orotherwise adversely affect Borrowers’ rights (if any) against such Lender.

 

2.10.                        MandatoryPrepayments.  Subject to Section 4.3hereof, when any Borrower sells or otherwise disposes of any Collateral otherthan Inventory in the ordinary course of business, Borrowers shall repay theAdvances in an amount equal to the net proceeds of such sale (i.e., grossproceeds less the reasonable costs of such sales or other dispositions), suchrepayments to be made promptly but in no event more than one (1) Business Dayfollowing receipt of such net proceeds, and until the date of payment, suchproceeds shall be held in trust for Agent. The foregoing shall not be deemed to be implied consent to any such saleotherwise prohibited by the terms and conditions hereof.  Such repayments shall be applied to theoutstanding Advances in such order as Agent may determine, subject to Borrower’sability to reborrow Revolving Advances in accordance with the terms hereof

 

2.11.                        Use ofProceeds.  Borrowers shall apply theproceeds of Advances to provide for their working capital needs.

 

2.12.                        DefaultingLender.

 

(a)                                  Notwithstandinganything to the contrary contained herein, in the event any Lender (x) hasrefused (which refusal constitutes a breach by such Lender of its obligationsunder this Agreement) to make available its portion of any Advance or (y)notifies either Agent or Borrowing Agent that it does not intend to makeavailable its portion of any Advance (if the actual refusal would constitute abreach by such Lender of its obligations under this

 

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Agreement) (each, a “Lender Default”), all rights and obligationshereunder of such Lender (a “Defaulting Lender”) as to which a Lender Defaultis in effect and of the other parties hereto shall be modified to the extent ofthe express provisions of this Section 2.12 while such Lender Default remainsin effect.

 

(b)                                 Advancesshall be incurred pro rata from Lenders (the “Non-Defaulting Lenders”) whichare not Defaulting Lenders based on their respective Commitment Percentages,and no Commitment Percentage of any Lender or any pro rata share of anyAdvances required to be advanced by any Lender shall be increased as a resultof such Lender Default.  Amounts receivedin respect of principal of any type of Advances shall be applied to reduce theapplicable Advances of each Lender pro rata based on the aggregate of theoutstanding Advances of that type of all Lenders at the time of suchapplication; provided, that, such amount shall not be applied to any Advancesof a Defaulting Lender at any time when, and to the extent that, the aggregateamount of Advances of any Non-Defaulting Lender exceeds such Non-DefaultingLender’s Commitment Percentage of all Advances then outstanding.

 

(c)                                  ADefaulting Lender shall not be entitled to give instructions to Agent or toapprove, disapprove, consent to or vote on any matters relating to thisAgreement and the Other Documents.  Allamendments, waivers and other modifications of this Agreement and the OtherDocuments may be made without regard to a Defaulting Lender and, for purposesof the definition of “Required Lenders”, a Defaulting Lender shall be deemednot to be a Lender and not to have Advances outstanding.

 

(d)                                 Otherthan as expressly set forth in this Section 2.12, the rights and obligations ofa Defaulting Lender (including the obligation to indemnify Agent) and the otherparties hereto shall remain unchanged. Nothing in this Section 2.12 shall be deemed to release any DefaultingLender from its obligations under this Agreement and the Other Documents, shallalter such obligations, shall operate as a waiver of any default by suchDefaulting Lender hereunder, or shall prejudice any rights which any Borrower,Agent or any Lender may have against any Defaulting Lender as a result of anydefault by such Defaulting Lender hereunder.

 

(e)                                  Inthe event a Defaulting Lender retroactively cures to the satisfaction of Agentthe breach which caused a Lender to become a Defaulting Lender, such DefaultingLender shall no longer be a Defaulting Lender and shall be treated as a Lenderunder this Agreement.

 

III.                                 INTERESTAND FEES.

 

3.1.                              Interest.  Interest on Advances shall be payable inarrears on the first day of each month with respect to Domestic Rate Loans and,with respect to Euro-Rate Loans, at the end of each Interest Period or, forEuro-Rate Loans  with an Interest Periodin excess of three months, at the earlier of (a) each three months on theanniversary date of the commencement of such Euro-Rate Loan or (b) the end ofthe Interest Period.  Interest chargesshall be computed on the actual principal amount of Advances outstanding duringthe month (the “Monthly Advances”) at a rate per annum equal to, with respectto Revolving Advances, the Revolving Interest Rate (from time to time herein,the “Contract Rate”).  Whenever,subsequent to the date of this Agreement, the Alternate Base Rate is increasedor decreased, the applicable Contract Rate for Domestic Rate Loans shall besimilarly changed without notice or demand of any kind by an amount equal tothe amount of such change in the Alternate Base Rate during the time suchchange or changes remain in effect.  TheEuro-Rate shall be adjusted with respect to Euro-Rate Loans without notice ordemand of any kind on the effective date of any change in the ReservePercentage as of such effective date.  Uponand after the occurrence of an Event of Default, and during the continuationthereof, the Obligations shall bear interest at the applicable Contract Rateplus two percent (2%) per annum (the “Default Rate”).

 

3.2.                              FacilityFee.  If, for any month during theTerm, the average daily unpaid balance of the Revolving Advances for each dayof such month does not equal the Maximum Revolving Advance Amount, thenBorrowers shall pay to Agent for the ratable benefit of Lenders a fee at a rateequal to one-quarter of one percent (0.25%) per annum on the amount by whichthe Maximum Revolving Advance Amount exceeds such average daily unpaidbalance.  Such fee shall be payable toAgent in arrears on the last day of each quarter.

 

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3.3.                              Computationof Interest and Fees.  Interest andfees hereunder shall be computed on the basis of a year of 360 days and for theactual number of days elapsed.  If anypayment to be made hereunder becomes due and payable on a day other than aBusiness Day, the due date thereof shall be extended to the next succeedingBusiness Day and interest thereon shall be payable at the applicable ContractRate during such extension.

 

3.4.                              MaximumCharges.  In no event whatsoevershall interest and other charges charged hereunder exceed the highest ratepermissible under law. In the event interest and other charges as computedhereunder would otherwise exceed the highest rate permitted under law, suchexcess amount shall be first applied to any unpaid principal balance owed byBorrowers, and if the then remaining excess amount is greater than thepreviously unpaid principal balance, Lenders shall promptly refund such excessamount to Borrowers and the provisions hereof shall be deemed amended to providefor such permissible rate.

 

3.5.                              IncreasedCosts.  In the event that anyapplicable law, treaty or governmental regulation, or any change therein or inthe interpretation or application thereof, or compliance by any Lender (forpurposes of this Section 3.5, the term “Lender” shall include Agent or anyLender and any corporation or bank controlling Agent or any Lender) and theoffice or branch where Agent or any Lender (as so defined) makes or maintainsany Euro-Rate Loans with any request or directive (whether or not having theforce of law) from any central bank or other financial, monetary or otherauthority, shall:

 

(a)                                  subjectAgent or any Lender to any tax of any kind whatsoever with respect to thisAgreement or any Other Document or change the basis of taxation of payments toAgent or any Lender of principal, fees, interest or any other amount payablehereunder or under any Other Documents (except for changes in the rate of taxon the overall net income of Agent or any Lender by the jurisdiction in whichit maintains its principal office);

 

(b)                                 impose,modify or hold applicable any reserve, special deposit, assessment or similarrequirement against assets held by, or deposits in or for the account of,advances or loans by, or other credit extended by, any office of Agent or anyLender, including (without limitation) pursuant to Regulation D of the Board ofGovernors of the Federal Reserve System; or

 

(c)                                  imposeon Agent or any Lender or the London interbank Eurodollar market any othercondition with respect to this Agreement or any Other Document;

 

and the result of any of the foregoing is to increase the cost to Agentor any Lender of making, renewing or maintaining its Advances hereunder by anamount that Agent or such Lender deems to be material or to reduce the amountof any payment (whether of principal, interest or otherwise) in respect of anyof the Advances by an amount that Agent or such Lender deems to be material,then, in any case Borrowers shall promptly pay Agent or such Lender, upon itsdemand, such additional amount as will compensate Agent or such Lender for suchadditional cost or such reduction, as the case may be, provided that theforegoing shall not apply to increased costs which are reflected in theEuro-Rate.  Agent or such Lender shallcertify the amount of such additional cost or reduced amount to Borrowers, andsuch certification shall be conclusive absent manifest error.

 

3.6.                              BasisFor Determining Interest Rate Inadequate or Unfair.  In the event that Agent or any Lender shallhave determined that:

 

(a)                                  reasonablemeans do not exist for ascertaining the Euro-Rate applicable pursuant toSection 2.2 hereof for any Interest Period; or

 

(b)                                 Dollardeposits in the relevant amount and for the relevant maturity are not availablein the London interbank Eurodollar market, with respect to an outstandingEuro-Rate Loan, a proposed Euro-Rate Loan, or a proposed conversion of aDomestic Rate Loan into a Euro-Rate Loan,

 

then Agent shall give Borrowing Agent prompt written, telephonic ortelegraphic notice of such determination. If such notice is given, (i) any such requested Euro-Rate Loan shall bemade as a Domestic Rate Loan, unless Borrowing Agent shall notify Agent nolater than 10:00 a.m. (eastern time) two (2) Business Days prior to the date ofsuch proposed borrowing, that its request for such borrowing shall be cancelledor made as an unaffected type of Euro-Rate Loan,

 

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(ii) any Domestic Rate Loan or Euro-Rate Loan which was to have beenconverted to an affected type of Euro-Rate Loan shall be continued as orconverted into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent,no later than 10:00 a.m. (eastern time) two (2) Business Days prior to theproposed conversion, shall be maintained as an unaffected type of Euro-RateLoan, and (iii) any outstanding affected Euro-Rate Loans shall be convertedinto a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent, no laterthan 10:00 a.m. (eastern time) two (2) Business Days prior to the last BusinessDay of the then current Interest Period applicable to such affected Euro-RateLoan, shall be converted into an unaffected type of Euro-Rate Loan on the lastBusiness Day of the then current Interest Period for such affected Euro-RateLoans.  Until such notice has beenwithdrawn, Lenders shall have no obligation to make an affected type ofEuro-Rate Loan or maintain outstanding affected Euro-Rate Loans and no Borrowershall have the right to convert a Domestic Rate Loan or an unaffected type ofEuro-Rate Loan into an affected type of Euro-Rate Loan.

 

3.7.                              CapitalAdequacy.

 

(a)                                  Inthe event that Agent or any Lender shall have determined that any applicablelaw, rule, regulation or guideline regarding capital adequacy, or any changetherein, or any change in the interpretation or administration thereof by anygovernmental authority, central bank or comparable agency charged with theinterpretation or administration thereof, or compliance by Agent or any Lender(for purposes of this Section 3.7, the term “Lender” shall include Agent or anyLender and any corporation or bank controlling Agent or any Lender) and theoffice or branch where Agent or any Lender (as so defined) makes or maintainsany Euro-Rate Loans with any request or directive regarding capital adequacy(whether or not having the force of law) of any such authority, central bank orcomparable agency, has or would have the effect of reducing the rate of returnon Agent or any Lender’s capital as a consequence of its obligations hereunderto a level below that which Agent or such Lender could have achieved but forsuch adoption, change or compliance (taking into consideration Agent’s and eachLender’s policies with respect to capital adequacy) by an amount deemed byAgent or any Lender to be material, then, from time to time, Borrowers shallpay upon demand to Agent or such Lender such additional amount or amounts aswill compensate Agent or such Lender for such reduction.  In determining such amount or amounts, Agentor such Lender may use any reasonable averaging or attribution methods.  The protection of this Section 3.7 shall beavailable to Agent and each Lender regardless of any possible contention ofinvalidity or inapplicability with respect to the applicable law, regulation orcondition.

 

(b)                                 Acertificate of Agent or such Lender setting forth such amount or amounts asshall be necessary to compensate Agent or such Lender with respect to Section3.7(a) hereof when delivered to Borrowers shall be conclusive absent manifesterror.

 

3.8.                              MitigationObligations; Replacement of Lenders. (a) If any Lender requests compensation under either of Sections 3.5 or3.7, or if Borrowers are required to pay any additional amount to any Lender orany Governmental Authority for the account of any Lender pursuant to Section3.8, then such Lender shall use reasonable efforts to designate a differentlending office for funding or booking its Advances hereunder or to assign itsrights and obligations hereunder to another of its offices, branches oraffiliates, if, in the judgment of such Lender, such designation or assignment(i) would eliminate or reduce amounts payable pursuant to Section 3.5 or 3.7,as the case may be, in the future and (ii) would not subject such Lender to anyunreimbursed cost or expense and would not otherwise be disadvantageous to suchLender.  Borrowers hereby agree to payall reasonable costs and expenses incurred by any Lender in connection with anysuch designation or assignment.

 

(b)                                 Ifany Lender requests compensation under either Sections 3.5 or 3.7, or ifBorrowers are required to pay any additional amount to any Lender or anyGovernmental Authority for the account of any Lender pursuant to Section 3.8,or if any Lender defaults in its obligation to fund Advances hereunder, thenBorrowers may, at their sole expense and effort, upon notice to such Lender andAgent, require such Lender to assign and delegate, without recourse (inaccordance with and subject to the restrictions contained in Section 16.3), allits interests, rights and obligations under this Agreement to an assignee thatshall assume such obligations (which assignee may be another Lender, if aLender accepts such assignment); provided that (i) Borrowers shall havereceived the prior written consent of Agent, (ii) such Lender shall havereceived payment of an amount equal to the outstanding principal of itsAdvances, accrued interest thereon, accrued fees and all other amounts payableto it hereunder, from the assignee (to the extent of such outstanding principaland accrued interest and fees) or Borrowers (in the case of all other amounts)and (iii) in the case of any such assignment resulting from a claim forcompensation under Section 3.5 or 3.7, such assignment will result

 

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in a material reduction in such compensation or payments.  A Lender shall not be required to make anysuch assignment and delegation if, prior thereto, as a result of a waiver bysuch Lender or otherwise, the circumstances entitling Borrowers to require suchassignment and delegation cease to apply.

 

IV.                                 COLLATERAL;GENERAL TERMS

 

4.1.                              SecurityInterest in the Collateral.  Tosecure the prompt payment and performance to Agent and each Lender of theObligations, each Borrower hereby reaffirms, reiterates and restates theexisting, continuing and uninterrupted assignment, pledge and grant of asecurity interest in and to the Collateral to PNC as is set forth in theExisting Loan Agreement and hereby assigns, pledges and grants to PNC in itscapacity Agent for its benefit and for the ratable benefit of each Lender acontinuing security interest in and to all of the Collateral, whether now ownedor existing or hereafter acquired or arising and wheresoever located.  Each Borrower shall mark its books andrecords as may be necessary or appropriate to evidence, protect and perfectAgent’s security interest and shall cause its financial statements to reflectsuch security interest.  Each Borrowershall promptly provide Agent with written notice of all commercial tort claims,such notice to contain the case title together with the applicable court and abrief description of the claim(s).  Upondelivery of each such notice, such Borrower shall be deemed to hereby grant toAgent a security interest and lien in and to such commercial tort claims andall proceeds thereof.  Borrower herebynotifies Agent of the pending commercial tort claims disclosed on Schedule4.1.

 

4.2.                              Perfectionof Security Interest.  Each Borrowershall take all action that may be necessary or desirable, or that Agent mayrequest, so as at all times to maintain the validity, perfection,enforceability and priority of Agent’s security interest in the Collateral orto enable Agent to protect, exercise or enforce its rights hereunder and in theCollateral, including, but not limited to, (i) immediately discharging allLiens other than Permitted Encumbrances, (ii) obtaining landlords’ ormortgagees’ lien waivers, (iii) delivering to Agent, endorsed or accompanied bysuch instruments of assignment as Agent may specify, and stamping or marking,in such manner as Agent may specify, any and all chattel paper, instruments,letters of credits and advices thereof and documents evidencing or forming apart of the Collateral, (iv) entering into warehousing, lockbox and othercustodial arrangements satisfactory to Agent, and (v) executing and deliveringfinancing statements, control agreements, instruments of pledge, mortgages,notices and assignments, in each case in form and substance satisfactory toAgent, relating to the creation, validity, perfection, maintenance orcontinuation of Agent’s security interest under the Uniform Commercial Code orother applicable law.  Agent is herebyauthorized to file financing statements signed by Agent instead of Borrower inaccordance with the Uniform Commercial Code as adopted in the State of New Yorkfrom time to time. By its signature hereto, each Borrower hereby authorizesAgent to file against such Borrower, one or more financing, continuation, or amendmentstatements pursuant to the Uniform Commercial Code in form and substancesatisfactory to Agent (which statements may have a description of collateralwhich is broader than that set forth herein). All charges, expenses and fees Agent may incur in doing any of theforegoing, and any local taxes relating thereto, shall be charged to Borrowers’Account as a Revolving Advance of a Domestic Rate Loan and added to theObligations, or, at Agent’s option, shall be paid to Agent for the ratablebenefit of Lenders immediately upon demand.

 

4.3.                              Dispositionof Collateral.  Each Borrower willsafeguard and protect all Collateral for Agent’s general account and make nodisposition thereof whether by sale, lease or otherwise except (a) the sale ofInventory in the ordinary course of business and (b) the disposition ortransfer of obsolete and worn-out Equipment in the ordinary course of businessduring any fiscal year having an aggregate fair market value of not more than$100,000.00 and only to the extent that (i) the proceeds of any suchdisposition are used to acquire replacement Equipment which is subject to Agent’sfirst priority security interest or (ii) the proceeds of which are remitted toAgent to be applied to the Obligations.

 

4.4.                              Preservationof Collateral.  Following theoccurrence of a Default or Event of Default in addition to the rights andremedies set forth in Section 11.1 hereof, Agent: (a) may at any time take suchsteps as Agent deems necessary to protect Agent’s interest in and to preservethe Collateral, including the hiring of such security guards or the placing ofother security protection measures as Agent may deem appropriate; (b) mayemploy and maintain at any of any Borrower’s premises a custodian who shallhave full authority to do all acts necessary to protect Agent’s interests inthe Collateral; (c) may lease warehouse facilities to which Agent may move allor part of the Collateral; (d) may use any Borrower’s owned or leased lifts,hoists, trucks and other facilities or equipment for handling or removing theCollateral; and (e) shall have, and is hereby granted, a right of ingress andegress to the places where the Collateral is located, and

 

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mayproceed over and through any of Borrower’s owned or leased property.  Each Borrower shall cooperate fully with allof Agent’s efforts to preserve the Collateral and will take such actions topreserve the Collateral as Agent may direct. All of Agent’s expenses of preserving the Collateral, including anyexpenses relating to the bonding of a custodian, shall be charged to Borrowers’Account as a Revolving Advance of a Domestic Rate Loan and added to theObligations.

 

4.5.                              Ownership of Collateral.  Withrespect to the Collateral, at the time the Collateral becomes subject toAgent’s security interest:  (a) eachBorrower shall be the sole owner of and fully authorized and able to sell,transfer, pledge and/or grant a first priority security interest in each andevery item of the its respective Collateral to Agent; and, except for PermittedEncumbrances the Collateral shall be free and clear of all Liens andencumbrances whatsoever; (b) each document and agreement executed by eachBorrower or delivered to Agent or any Lender in connection with this Agreementshall be true and correct in all respects; (c) all signatures andendorsements of each Borrower that appear on such documents and agreementsshall be genuine and each Borrower shall have full capacity to execute same;and (d) each Borrower’s Equipment and Inventory shall be located as setforth on Schedule 4.5 and shall not be removed from suchlocation(s) without the prior written consent of Agent except with respect tothe sale of Inventory in the ordinary course of business and Equipment to theextent permitted in Section 4.3 hereof.

 

4.6.                              Defense of Agent’s and Lenders’ Interests. Until (a) payment and performance in full of all of the Obligations and(b) termination of this Agreement, Agent’s interests in the Collateral shallcontinue in full force and effect. During such period no Borrower shall, without Agent’s prior writtenconsent, pledge, sell (except Inventory in the ordinary course of business andEquipment to the extent permitted in Section 4.3 hereof), assign, transfer,create or suffer to exist a Lien upon or encumber or allow or suffer to beencumbered in any way except for Permitted Encumbrances, any part of theCollateral.  Each Borrower shall defendAgent’s interests in the Collateral against any and all Personswhatsoever.  At any time following demandby Agent for payment of all Obligations, Agent shall have the right to takepossession of the indicia of the Collateral and the Collateral in whateverphysical form contained, including without limitation:  labels, stationery, documents, instrumentsand advertising materials.  If Agentexercises this right to take possession of the Collateral, Borrowers shall,upon demand, assemble it in the best manner possible and make it available toAgent at a place reasonably convenient to Agent.  In addition, with respect to all Collateral,Agent and Lenders shall be entitled to all of the rights and remedies set forthherein and further provided by the Uniform Commercial Code or other applicablelaw.  Each Borrower shall, and Agent may,at its option, instruct all suppliers, carriers, forwarders, warehousers orothers receiving or holding cash, checks, Inventory, documents or instrumentsin which Agent holds a security interest to deliver same to Agent and/orsubject to Agent’s order and if they shall come into any Borrower’s possession,they, and each of them, shall be held by such Borrower in trust as Agent’strustee, and such Borrower will immediately deliver them to Agent in theiroriginal form together with any necessary endorsement.

 

4.7.                              Books and Records.  EachBorrower shall (a) keep proper books of record and account in which full, trueand correct entries will be made of all dealings or transactions of or inrelation to its business and affairs; (b) set up on its books accruals withrespect to all taxes, assessments, charges, levies and claims; and (c) on areasonably current basis set up on its books, from its earnings, allowancesagainst doubtful Receivables, advances and investments and all other properaccruals (including without limitation by reason of enumeration, accruals forpremiums, if any, due on required payments and accruals for depreciation,obsolescence, or amortization of properties), which should be set aside fromsuch earnings in connection with its business. All determinations pursuant to this subsection shall be made inaccordance with, or as required by, GAAP consistently applied in the opinion ofsuch independent public accountant as shall then be regularly engaged by Borrowers.

 

4.8.                              Financial Disclosure.  EachBorrower hereby irrevocably authorizes and directs all accountants and auditorsemployed by such Borrower at any time during the Term to exhibit and deliver toAgent and each Lender copies of any of any Borrower’s financial statements,trial balances or other accounting records of any sort in the accountant’s orauditor’s possession, and to disclose to Agent and each Lender any informationsuch accountants may have concerning such Borrower’s financial status and businessoperations.  Each Borrower herebyauthorizes all federal, state and municipal authorities to furnish to Agent andeach Lender copies of reports or examinations relating to such Borrower,whether made by such Borrower or otherwise; however, Agent and each Lender willattempt to obtain such information or materials directly from such Borrowerprior to obtaining such information or materials from such accountants or suchauthorities.

 

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4.9.                              Compliance with Laws.  EachBorrower shall comply in all material respects with all acts, rules,regulations and orders of any legislative, administrative or judicial body orofficial applicable to its respective Collateral or any part thereof or to theoperation of such Borrower’s business the non-compliance with which couldreasonably be expected to have a Material Adverse Effect on such Borrower.  Each Borrower may, however, contest ordispute any acts, rules, regulations, orders and directions of those bodies orofficials in any reasonable manner, provided that any related Lien is inchoateor stayed and sufficient reserves are established to the reasonablesatisfaction of Agent to protect Agent’s Lien on or security interest in theCollateral.  The assets of Borrowers atall times shall be maintained in accordance with the requirements of allinsurance carriers which provide insurance with respect to the assets ofBorrowers so that such insurance shall remain in full force and effect.

 

4.10.                        Inspection of Premises.  Atall reasonable times Agent and each Lender shall have full access to and theright to audit, check, inspect and make abstracts and copies from eachBorrower’s books, records, audits, correspondence and all other papers relatingto the Collateral and the operation of each Borrower’s business.  Agent, any Lender and their agents may enterupon any of each Borrower’s premises at any time during business hours and atany other reasonable time, and from time to time, for the purpose of inspectingthe Collateral and any and all records pertaining thereto and the operation ofsuch Borrower’s business.

 

4.11.                        Insurance.  Each Borrower shall bear thefull risk of any loss of any nature whatsoever with respect to theCollateral.  At each Borrower’s own costand expense in amounts and with carriers acceptable to Agent, each Borrowershall (a) keep all its insurable properties and properties in which eachBorrower has an interest insured against the hazards of fire, flood, sprinklerleakage, those hazards covered by extended coverage insurance and such otherhazards, and for such amounts, as is customary in the case of companies engagedin businesses similar to such Borrower’s including, without limitation,business interruption insurance; (b) maintain a bond in such amounts as iscustomary in the case of companies engaged in businesses similar to suchBorrower insuring against larceny, embezzlement or other criminalmisappropriation of insured’s officers and employees who may either singly orjointly with others at any time have access to the assets or funds of suchBorrower either directly or through authority to draw upon such funds or todirect generally the disposition of such assets; (c) [Intentionally omitted.];(d) maintain public and product liability insurance against claims for personalinjury, death or property damage suffered by others; (e) maintain all suchworker’s compensation or similar insurance as may be required under the laws ofany state or jurisdiction in which such Borrower is engaged in business; and(f) furnish Agent with (i) evidence of the maintenance of such policies by therenewal thereof at least thirty (30) days before any expiration date and, ifrequired by Agent at any time, copies of any one or more of such policies, and(ii) appropriate loss payable endorsements in form and substance satisfactoryto Agent, naming Agent as a co-insured and loss payee as its interests mayappear with respect to all insurance coverage referred to in clauses (a) and(d) above, and providing (A) that all proceeds thereunder shall be payable toAgent, (B) no such insurance shall be affected by any act or neglect of theinsured or owner of the property described in such policy, and (C) that suchpolicy and loss payable clauses may not be cancelled, amended or terminatedunless at least thirty (30) days’ prior written notice is given to Agent.  In the event of any loss thereunder, thecarriers named therein hereby are directed by Agent and the applicable Borrowerto make payment for such loss to Agent and not to such Borrower and Agentjointly.  If any insurance losses arepaid by check, draft or other instrument payable to any Borrower and Agentjointly, Agent may endorse such Borrower’s name thereon and do such otherthings as Agent may deem advisable to reduce the same to cash.  Agent is hereby authorized to adjust andcompromise claims under insurance coverage referred to in clauses (a) and (b)above.  All loss recoveries received byAgent upon any such insurance may be applied to the Obligations, in such orderas Agent in its sole discretion shall determine.  Any surplus shall be paid by Agent toBorrowers or applied as may be otherwise required by law.  Any deficiency thereon shall be paid byBorrowers to Agent, on demand.

 

4.12.                        Failure to Pay Insurance.  Ifany Borrower fails to obtain insurance as hereinabove provided, or to keep thesame in force, Agent, if Agent so elects, may obtain such insurance and pay thepremium therefor on behalf of such Borrower, and charge Borrowers’ Accounttherefor as a Revolving Advance of a Domestic Rate Loan and such expenses sopaid shall be part of the Obligations.

 

4.13.                        Payment of Taxes.  EachBorrower will pay, when due, all taxes, assessments and other Charges lawfullylevied or assessed upon such Borrower or any of the Collateral including,without limitation, real and personal property taxes, assessments and chargesand all franchise, income, employment, social security benefits, withholding,and sales taxes.  If any tax by any governmentalauthority is or may be imposed on or as a result of any transaction between

 

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anyBorrower and Agent or any Lender which Agent or any Lender may be required towithhold or pay or if any taxes, assessments, or other Charges remain unpaidafter the date fixed for their payment, or if any claim shall be made which, inAgent’s or any Lender’s opinion, may possibly create a valid Lien on theCollateral, Agent may without notice to Borrowers pay the taxes, assessments orother Charges and each Borrower hereby indemnifies and holds Agent and eachLender harmless in respect thereof. Agent will not pay any taxes, assessments or Charges to the extent thatany Borrower has contested or disputed those taxes, assessments or Charges ingood faith, by expeditious protest, administrative or judicial appeal orsimilar proceeding provided that any related tax lien is stayed and sufficientreserves are established to the reasonable satisfaction of Agent to protectAgent’s security interest in or Lien on the Collateral.  The amount of any payment by Agent under thisSection 4.13 shall be charged to Borrowers’ Account as a Revolving Advance of aDomestic Rate Loan and added to the Obligations and, until Borrowers shall furnishAgent with an indemnity therefor (or supply Agent with evidence satisfactory toAgent that due provision for the payment thereof has been made), Agent may holdwithout interest any balance standing to Borrowers’ credit and Agent shallretain its security interest in any and all Collateral held by Agent.

 

4.14                           Payment of Leasehold Obligations.  EachBorrower shall at all times pay, when and as due, its rental obligations underall leases under which it is a tenant, and shall otherwise comply, in allmaterial respects, with all other terms of such leases and keep them in fullforce and effect and, at Agent’s request will provide evidence of having doneso.

 

4.15.                        Receivables

 

(a)                                  Nature of Receivables.  Eachof the Receivables shall be a bona fide and valid account representing a bonafide indebtedness incurred by the Customer therein named, for a fixed sum asset forth in the invoice relating thereto (provided immaterial or unintentionalinvoice errors shall not be deemed to be a breach hereof) with respect to anabsolute sale or lease and delivery of goods upon stated terms of a Borrower,or work, labor or services theretofore rendered by a Borrower as of the dateeach Receivable is created.  Same shallbe due and owing in accordance with the applicable Borrower’s standard terms ofsale without dispute, setoff or counterclaim except as may be stated on theaccounts receivable schedules delivered by Borrowers to Agent.

 

(b)                                 Solvency of Customers.  EachCustomer, to the best of each Borrower’s knowledge, as of the date eachReceivable is created, is and will be solvent and able to pay all Receivableson which the Customer is obligated in full when due or with respect to suchCustomers of any Borrower who are not solvent such Borrower has set up on itsbooks and in its financial records bad debt reserves adequate to cover suchReceivables.

 

(c)                                  Locations of Borrower.  EachBorrower’s chief executive office is located at the addresses set forth on Schedule4.15(c) hereto.  Until written noticeis given to Agent by Borrowing Agent of any other office at which any Borrowerkeeps its records pertaining to Receivables, all such records shall be kept atsuch executive office.

 

(d)                                 Collection of Receivables Until any Borrower’s authority to do so isterminated by Agent (which notice Agent may give at any time following theoccurrence of an Event of Default or a Default or when Agent in its solediscretion exercised in a commercially reasonable manner deems it to be inLenders’ best interest to do so), each Borrower will, at such Borrower’s solecost and expense, but on Agent’s behalf and for Agent’s account, collect asAgent’s property and in trust for Agent all amounts received on Receivables,and shall not commingle such collections with any Borrower’s funds or use thesame except to pay Obligations.  EachBorrower shall, upon request, deliver to Agent, or deposit in the BlockedAccount, in original form and on the date of receipt thereof, all checks,drafts, notes, money orders, acceptances, cash and other evidences ofIndebtedness.

 

(e)                                  Notification of Assignment of Receivables.  Atany time following the occurrence of an Event of Default or a Default, Agentshall have the right to send notice of the assignment of, and Agent’s securityinterest in, the Receivables to any and all Customers or any third partyholding or otherwise concerned with any of the Collateral.  Thereafter, Agent shall have the sole rightto collect the Receivables, take possession of the Collateral, or both.  Agent’s actual collection expenses,including, but not limited to, stationery and postage, telephone and telegraph,secretarial and clerical expenses and the salaries of any collection personnelused for collection, may be charged to Borrowers’ Account and added to theObligations.

 

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(f)                                    Power of Agent to Act on Borrowers’ Behalf. Agent shall have the right to receive, endorse, assign  and/or deliver in the name of Agent or anyBorrower any and all checks, drafts and other instruments for the payment ofmoney relating to the Receivables, and each Borrower hereby waives notice ofpresentment, protest and non-payment of any instrument so endorsed.  Each Borrower hereby constitutes Agent orAgent’s designee as such Borrower’s attorney with power (i) to endorse suchBorrower’s name upon any notes, acceptances, checks, drafts, money orders orother evidences of payment or Collateral; (ii) to sign such Borrower’s name onany invoice or bill of lading relating to any of the Receivables, draftsagainst Customers, assignments and verifications of Receivables; (iii) to sendverifications of Receivables to any Customer; (iv) to sign such Borrower’s nameon all financing statements or any other documents or instruments deemednecessary or appropriate by Agent to preserve, protect, or perfect Agent’sinterest in the Collateral and to file same; (v) to demand payment of theReceivables; (vi) to enforce payment of the Receivables by legal proceedings orotherwise; (vii) to exercise all of Borrowers’ rights and remedies with respectto the collection of the Receivables and any other Collateral; (viii) tosettle, adjust, compromise, extend or renew the Receivables; (ix) to settle,adjust or compromise any legal proceedings brought to collect Receivables; (x)to prepare, file and sign such Borrower’s name on a proof of claim inbankruptcy or similar document against any Customer; (xi) to prepare, file andsign such Borrower’s name on any notice of Lien, assignment or satisfaction ofLien or similar document in connection with the Receivables; and (xii) to doall other acts and things necessary to carry out this Agreement.  Provided also however, and anything containedherein to the contrary notwithstanding, although fully vested hereby asBorrowers’ attorney-in-fact, Agent shall refrain from exercising the powergranted under clauses (ii), (v), (vi), (vii), (viii), (ix), (x) and (xi) unlessand until Default or Event of Default shall have occurred.  All acts of said attorney or designee arehereby ratified and approved, and said attorney or designee shall not be liablefor any acts of omission or commission nor for any error of judgment or mistakeof fact or of law, unless done maliciously or with gross (not mere) negligence;this power being coupled with an interest is irrevocable while any of theObligations remain unpaid.  Agent shallhave the right at any time following the occurrence of an Event of Default orDefault, to change the address for delivery of mail addressed to any Borrowerto such address as Agent may designate and to receive, open and dispose of allmail addressed to any Borrower.

 

(g)                                 No Liability. Neither Agent nor any Lender shall, under any circumstances or in anyevent whatsoever, have any liability for any error or omission or delay of anykind occurring in the settlement, collection or payment of any of theReceivables or any instrument received in payment thereof, or for any damageresulting therefrom.  Following theoccurrence of an Event of Default or Default Agent may, without notice or consentfrom any Borrower, sue upon or otherwise collect, extend the time of paymentof, compromise or settle for cash, credit or upon any terms any of theReceivables or any other securities, instruments or insurance applicablethereto and/or release any obligor thereof. Agent is authorized and empowered to accept, following the occurrence ofan Event of Default or Default, the return of the goods represented by any ofthe Receivables, without notice to or consent by any Borrower, all withoutdischarging or in any way affecting any Borrower’s liability hereunder.

 

(h)                                 Establishment of a Lockbox Account, DominionAccount.  All proceeds of Collateral shall, at thedirection of Agent, be deposited by Borrowers into a lockbox account, dominionaccount or such other “blocked account” (“Blocked Accounts”) as Agent mayrequire pursuant to an arrangement with such bank as may be selected byBorrowers and be acceptable to Agent. Borrowers shall issue to any such bank, an irrevocable letter ofinstruction directing said bank to transfer such funds so deposited to Agent,either to any account maintained by Agent at said bank or by wire transfer toappropriate account(s) of Agent.  Allfunds deposited in such Blocked Account shall immediately become the propertyof Agent and Borrowers shall obtain the agreement by such bank to waive anyoffset rights against the funds so deposited. Neither Agent nor any Lender assumes any responsibility for such blockedaccount arrangement, including without limitation, any claim of accord andsatisfaction or release with respect to deposits accepted by any bankthereunder.  Alternatively, Agent mayestablish depository accounts (“Depository Accounts”) in the name of Agent at abank or banks for the deposit of such funds and Borrowers shall deposit allproceeds of Collateral or cause same to be deposited, in kind, in suchDepository Accounts of Agent in lieu of depositing same to the BlockedAccounts.

 

(i)                                     Adjustments.  No Borrower will, withoutAgent’s consent, compromise or adjust any material amount of the Receivablesother than adjustments to Receivables due from Payors which are made in theordinary course of Borrowers’ business and which are in accordance with thecustoms and standards of Borrowers’ industry, or extend the time for paymentthereof, or accept any material returns of merchandise or grant any additionaldiscounts, allowances or

 

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creditsthereon except for those compromises, adjustments, returns, discounts, creditsand allowances as have been heretofore customary in the business of suchBorrower.

 

4.16.                        Inventory.  To the extent Inventory heldfor sale or lease has been produced by any Borrower, it has been and will beproduced by such Borrower in accordance with the Federal Fair Labor StandardsAct of 1938, as amended, and all rules, regulations and orders thereunder.

 

4.17.                        Maintenance of Equipment.  TheEquipment shall be maintained in good operating condition and repair(reasonable wear and tear excepted) and all necessary replacements of andrepairs thereto shall be made so that the value and operating efficiency of theEquipment shall be maintained and preserved. No Borrower shall use or operate the Equipment in violation of any law,statute, ordinance, code, rule or regulation. Each Borrower shall have the right to sell Equipment to the extent setforth in Section 4.3 hereof.

 

4.18.                        Exculpation of Liability. Nothing herein contained shall be construed to constitute Agent or anyLender as any Borrower’s agent for any purpose whatsoever, nor shall Agent orany Lender be responsible or liable for any shortage, discrepancy, damage, lossor destruction of any part of the Collateral wherever the same may be locatedand regardless of the cause thereof. Neither Agent nor any Lender, whether by anything herein or in anyassignment or otherwise, assume any of any Borrower’s obligations under anycontract or agreement assigned to Agent or such Lender, and neither Agent norany Lender shall be responsible in any way for the performance by any Borrowerof any of the terms and conditions thereof.

 

4.19.                        Environmental Matters.  (a) Borrowers shall ensure that the RealProperty remains in compliance with all Environmental Laws and they shall notplace or permit to be placed any Hazardous Substances on any Real Propertyexcept as permitted by applicable law or appropriate governmental authorities.

 

(b)                                 Borrowers shall establish and maintain asystem to assure and monitor continued compliance with all applicableEnvironmental Laws which system shall include periodic reviews of suchcompliance.

 

(c)                                  Borrowers shall (i) employ in connection withthe use of the Real Property appropriate technology necessary to maintaincompliance with any applicable Environmental Laws and (ii) dispose of any andall Hazardous Waste generated at the Real Property only at facilities and withcarriers that maintain valid permits under RCRA and any other applicableEnvironmental Laws.  Borrowers shall usetheir best efforts to obtain certificates of disposal, such as hazardous wastemanifest receipts, from all treatment, transport, storage or disposalfacilities or operators employed by Borrowers in connection with the transportor disposal of any Hazardous Waste generated at the Real Property.

 

(d)                                 In the event any Borrower obtains, gives orreceives notice of any Release or threat of Release of a reportable quantity ofany Hazardous Substances at the Real Property (any such event being hereinafterreferred to as a “Hazardous Discharge”) or receives any notice of violation,request for information or notification that it is potentially responsible forinvestigation or cleanup of environmental conditions at the Real Property,demand letter or complaint, order, citation, or other written notice withregard to any Hazardous Discharge or violation of Environmental Laws affectingthe Real Property or any Borrower’s interest therein (any of the foregoing isreferred to herein as an “Environmental Complaint”) from any Person, includingany state agency responsible in whole or in part for environmental matters in thestate in which the Real Property is located or the United States EnvironmentalProtection Agency (any such person or entity hereinafter the “Authority”), thenBorrowing Agent shall, within five (5) Business Days, give written notice ofsame to Agent detailing facts and circumstances of which any Borrower is awaregiving rise to the Hazardous Discharge or Environmental Complaint.  Such information is to be provided to allowAgent to protect its security interest in the Real Property and the Collateraland is not intended to create nor shall it create any obligation upon Agent orany Lender with respect thereto.

 

(e)                                  Borrowers shall promptly forward to Agentcopies of any request for information, notification of potential liability,demand letter relating to potential responsibility with respect to theinvestigation or cleanup of Hazardous Substances at any other site owned,operated or used by any Borrower to dispose of Hazardous Substances and shallcontinue to forward copies of correspondence between any Borrower and theAuthority regarding such claims to

 

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Agentuntil the claim is settled.  Borrowersshall promptly forward to Agent copies of all documents and reports concerninga Hazardous Discharge at the Real Property that any Borrower is required tofile under any Environmental Laws.  Suchinformation is to be provided solely to allow Agent to protect Agent’s securityinterest in the Real Property and the Collateral.

 

(f)                                    Borrowers shall respond promptly to anyHazardous Discharge or Environmental Complaint and take all necessary action inorder to safeguard the health of any Person and to avoid subjecting theCollateral or Real Property to any Lien. If any Borrower shall fail to respond promptly to any HazardousDischarge or Environmental Complaint or any Borrower shall fail to comply withany of the requirements of any Environmental Laws, Agent on behalf of Lendersmay, but without the obligation to do so, for the sole purpose of protectingAgent’s interest in Collateral:  (A) givesuch notices or (B) enter onto the Real Property (or authorize third parties toenter onto the Real Property) and take such actions as Agent (or such thirdparties as directed by Agent) deem reasonably necessary or advisable, to cleanup, remove, mitigate or otherwise deal with any such Hazardous Discharge orEnvironmental Complaint.  All reasonablecosts and expenses incurred by Agent and Lenders (or such third parties) in theexercise of any such rights, including any sums paid in connection with anyjudicial or administrative investigation or proceedings, fines and penalties,together with interest thereon from the date expended at the Default Rate forDomestic Rate Loans constituting Revolving Advances shall be paid upon demandby Borrowers, and until paid shall be added to and become a part of theObligations secured by the Liens created by the terms of this Agreement or anyother agreement between Agent, any Lender and any Borrower.

 

(g)                                 Promptly upon the written request of Agentfrom time to time, Borrowers shall provide Agent, at Borrowers’ expense, withan environmental site assessment or environmental audit report prepared by anenvironmental engineering firm acceptable in the reasonable opinion of Agent,to assess with a reasonable degree of certainty the existence of a HazardousDischarge and the potential costs in connection with abatement, cleanup andremoval of any Hazardous Substances found on, under, at or within the RealProperty.  Any report or investigation ofsuch Hazardous Discharge proposed and acceptable to an appropriate Authoritythat is charged to oversee the clean-up of such Hazardous Discharge shall beacceptable to Agent.  If such estimates,individually or in the aggregate, exceed $100,000, Agent shall have the rightto require Borrowers to post a bond, letter of credit or other securityreasonably satisfactory to Agent to secure payment of these costs and expenses.

 

(h)                                 Borrowers shall defend and indemnify Agentand Lenders and hold Agent, Lenders and their respective employees, agents,directors and officers harmless from and against all loss, liability, damageand expense, claims, costs, fines and penalties, including attorney’s fees,suffered or incurred by Agent or Lenders under or on account of anyEnvironmental Laws, including, without limitation, the assertion of any Lienthereunder, with respect to any Hazardous Discharge, the presence of anyHazardous Substances affecting the Real Property, whether or not the sameoriginates or emerges from the Real Property or any contiguous real estate,including any loss of value of the Real Property as a result of the foregoingexcept to the extent such loss, liability, damage and expense is attributableto any Hazardous Discharge resulting from actions on the part of Agent or anyLender.  Borrowers’ obligations underthis Section 4.19 shall arise upon the discovery of the presence of anyHazardous Substances at the Real Property, whether or not any federal, state,or local environmental agency has taken or threatened any action in connectionwith the presence of any Hazardous Substances. Borrowers’ obligation and the indemnifications hereunder shall survivethe termination of this Agreement.

 

(i)                                     For purposes of Sections 4.19 and 5.7, allreferences to Real Property shall be deemed to include all of Borrowers’ right,title and interest in and to its owned and leased premises.

 

4.20.                        Financing Statements. Except as respects the financing statements filed by Agent and thefinancing statements described on Schedule 1.2, no financing statementcovering any of the Collateral or any proceeds thereof is on file in any publicoffice.

 

V.                                     REPRESENTATIONS AND WARRANTIES.

 

EachBorrower represents and warrants as follows:

 

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5.1.                              Authority.  Each Borrower has full power,authority and legal right to enter into this Agreement and the Other Documentsand to perform all its respective Obligations hereunder and thereunder.  This Agreement and the Other Documentsconstitute the legal, valid and binding obligation of such Borrower enforceablein accordance with their terms, except as such enforceability may be limited byany applicable bankruptcy, insolvency, moratorium or similar laws affectingcreditors’ rights generally.  Theexecution, delivery and performance of this Agreement and of the OtherDocuments (a) are within such Borrower’s corporate powers, have been dulyauthorized, are not in contravention of law or the terms of such Borrower’sby-laws, certificate of incorporation or other applicable documents relating tosuch Borrower’s formation or to the conduct of such Borrower’s business or ofany material agreement or undertaking to which such Borrower is a party or bywhich such Borrower is bound, and (b) will not conflict with nor result in anybreach in any of the provisions of or constitute a default under or result inthe creation of any Lien except Permitted Encumbrances upon any asset of suchBorrower under the provisions of any agreement, charter document, instrument,by-law, or other instrument to which such Borrower is a party or by which it orits property may be bound.

 

5.2.                              Formation and Qualification.  (a) Each Borrower is duly incorporated and ingood standing under the laws of the state listed on Schedule 5.2(a), hasthe organizational number set forth on Schedule 5.2(a) and is qualifiedto do business and is in good standing in the states listed on Schedule 5.2(a)which constitute all states in which qualification and good standing arenecessary for such Borrower to conduct its business and own its property andwhere the failure to so qualify could reasonably be expected to have a MaterialAdverse Effect on such Borrower.  EachBorrower has delivered to Agent true and complete copies of its certificate ofincorporation and by-laws and will promptly notify Agent of any amendment orchanges thereto.

 

(b)                                 The only Subsidiaries of each Borrower arelisted on Schedule 5.2(b).

 

5.3.                              Survival of Representations and Warranties.  Allrepresentations and warranties of such Borrower contained in this Agreement andthe Other Documents shall be true at the time of such Borrower’s execution ofthis Agreement and the Other Documents, and shall survive the execution,delivery and acceptance thereof by the parties thereto and the closing of thetransactions described therein or related thereto.

 

5.4.                              Tax Returns.  Each Borrower’s federal taxidentification number is set forth on Schedule 5.4.  Each Borrower has filed all federal, stateand local tax returns and other reports each is required by law to file and haspaid all taxes, assessments, fees and other governmental charges that are dueand payable.  The provision for taxes onthe books of each Borrower are adequate for all years not closed by applicablestatutes, and for its current fiscal year, and no Borrower has any knowledge ofany deficiency or additional assessment in connection therewith not providedfor on its books.

 

5.5.                              Financial Statements. Since September 30, 2003 there has been no change in the condition,financial or otherwise, of Borrowers as shown on the consolidated balance sheetas of such date and no change in the aggregate value of machinery, equipmentand Real Property owned by Borrowers, except changes in the ordinary course ofbusiness, none of which individually or in the aggregate has been materiallyadverse.

 

5.6.                              Corporate Name. Except as set forth on Schedule 5.6:  no Borrower has been known by any othercorporate name in the past five (5) years, nor has any Borrower been thesurviving corporation of a merger or consolidation or acquired all orsubstantially all of the assets of any Person during the past five (5) years.

 

5.7.                              O.S.H.A. and Environmental Compliance. Except as disclosed on Schedule 5.7,

 

(a)                                  Each Borrower has duly complied with, and itsfacilities, business, assets, property, leaseholds and Equipment are incompliance in all material respects with, the provisions of the FederalOccupational Safety and Health Act, the Environmental Protection Act, RCRA andall other Environmental Laws; there have been no outstanding citations, noticesor orders of non-compliance issued to any Borrower or relating to its business,assets, property, leaseholds or Equipment under any such laws, rules orregulations.

 

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(b)                                 To the best of Borrowers’ knowledge, eachBorrower has been issued all required federal, state and local licenses,certificates or permits relating to all applicable Environmental Laws.

 

(c)                                  (i) There are no visible signs of releases,spills, discharges, leaks or disposal (collectively referred to as “Releases”)of Hazardous Substances at, upon, under or within any Real Property; (ii) tothe best of Borrowers’ knowledge, there are no underground storage tanks orpolychlorinated biphenyls on the Real Property; (iii) to the best of Borrowers’knowledge, the Real Property has not been used as a treatment, storage ordisposal facility of Hazardous Waste; and (iv) to the best of Borrowers’knowledge, no Hazardous Substances are present on the Real Property, exceptingsuch quantities as are handled in accordance with all applicable manufacturer’sinstructions and governmental regulations and in proper storage containers andas are necessary for the operation of the commercial business of any Borrower.

 

5.8.                              Solvency; No Litigation, Violation,Indebtedness or Default.

 

(a)                                  Borrowers are solvent, able to pay theirdebts as they mature, have capital sufficient to carry on their business andall businesses in which they are about to engage, and the fair present saleablevalue of their assets, calculated on a going concern basis, are now and willcontinue to be in excess of the amount of their liabilities.

 

(b)                                 Except as disclosed in Schedule 5.8(b),no Borrower has (i) any litigation, arbitration, actions or proceedings,either pending or, to the best of Borrowers’ knowledge, threatened whichinvolve the possibility of having a Material Adverse Effect on such Borrower,and (ii) any liabilities nor indebtedness for borrowed money other thanthe Obligations.

 

(c)                                  No Borrower is in violation of any applicablestatute, regulation or ordinance in any respect which could reasonably beexpected to have a Material Adverse Effect on such Borrower, nor is anyBorrower in violation of any order of any court, governmental authority orarbitration board or tribunal.

 

(d)                                 No Borrower nor any member of the ControlledGroup maintains or contributes to any Plan other than those listed on Schedule5.8(d) hereto.  Except as set forthin Schedule 5.8(d), (i) no Plan has incurred any “accumulated fundingdeficiency,” as defined in Section 302(a)(2) of ERISA and Section 412(a) of theCode, whether or not waived, and each Borrower and each member of theControlled Group has met all applicable minimum funding requirements under Section302 of ERISA in respect of each Plan, (ii) each Plan which is intended to be aqualified plan under Section 401(a) of the Code as currently in effect has beendetermined by the Internal Revenue Service to be qualified under Section 401(a)of the Code and the trust related thereto is exempt from federal income taxunder Section 501(a) of the Code, (iii) no Borrower nor any member of theControlled Group has incurred any liability to the PBGC other than for thepayment of premiums, and there are no premium payments which have become duewhich are unpaid, (iv) no Plan has been terminated by the plan administratorthereof nor by the PBGC, and there is no occurrence which would cause the PBGCto institute proceedings under Title IV of ERISA to terminate any Plan, (v) atthis time, the current value of the assets of each Plan exceeds the presentvalue of the accrued benefits and other liabilities of such Plan and noBorrower nor any member of the Controlled Group knows of any facts orcircumstances which would materially change the value of such assets andaccrued benefits and other liabilities, (vi) no Borrower nor any member of theControlled Group has breached any of the responsibilities, obligations orduties imposed on it by ERISA with respect to any Plan, (vii) no Borrower norany member of a Controlled Group has incurred any liability for any excise taxarising under Section 4972 or 4980B of the Code, and no fact exists which couldgive rise to any such liability, (viii) no Borrower nor any member of theControlled Group nor any fiduciary of, nor any trustee to, any Plan, hasengaged in a “prohibited transaction” described in Section 406 of the ERISA orSection 4975 of the Code nor taken any action which would constitute or resultin a Termination Event with respect to any such Plan which is subject to ERISA,(ix) each Borrower and each member of the Controlled Group has made allcontributions due and payable with respect to each Plan, (x) there exists noevent described in Section 4043(b) of ERISA, for which the thirty (30) daynotice period contained in 29 CFR §2615.3 has not been waived, (xi) no Borrowernor any member of the Controlled Group has any fiduciary responsibility forinvestments with respect to any plan existing for the benefit of persons otherthan employees or former employees of any Borrower and any member of theControlled Group, and (xii) no Borrower nor any member of the Controlled Grouphas withdrawn, completely or partially, from any Multiemployer Plan so as toincur liability under the Multiemployer Pension Plan Amendments Act of 1980.

 

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5.9.                              Patents, Trademarks, Copyrights and Licenses.  Allpatents, patent applications, trademarks, trademark applications, servicemarks, service mark applications, copyrights, copyright applications, designrights, tradenames, assumed names, trade secrets and  licenses owned or utilized by any Borrowerare set forth on Schedule 5.9, are valid and have been duly registeredor filed with all appropriate governmental authorities and constitute all ofthe intellectual property rights which are necessary for the operation of itsbusiness; there is no objection to or pending challenge to the validity of anysuch patent, trademark, copyright, design right, trade name, trade secret orlicense and no Borrower is aware of any grounds for any challenge, except asset forth in Schedule 5.9 hereto. Each patent, patent application, patent license, trademark, trademarkapplication, trademark license, service mark, service mark application, servicemark license, design right, copyright, copyright application and copyrightlicense owned or held by any Borrower and all trade secrets used by anyBorrower consist of original material or property developed by such Borrower orwas lawfully acquired by such Borrower from the proper and lawful ownerthereof.  Each of such items has beenmaintained so as to preserve the value thereof from the date of creation oracquisition thereof.  With respect to allsoftware used by any Borrower, such Borrower is in possession of all source andobject codes related to each piece of software or is the beneficiary of asource code escrow agreement, each such source code escrow agreement beinglisted on Schedule 5.9 hereto.

 

5.10.                        Licenses and Permits. Except as set forth in Schedule 5.10, each Borrower (a) is incompliance with and (b) has procured and is now in possession of, all materiallicenses or permits required by any applicable federal, state, or local law orregulation for the operation of its business in each jurisdiction wherein it isnow conducting or proposes to conduct business and where the failure to procuresuch licenses or permits could have a Material Adverse Effect on such Borrower.

 

5.11.                        Default of Indebtedness.  NoBorrower is in default in the payment of the principal of or interest on anyIndebtedness or under any instrument or agreement under or subject to which anyIndebtedness has been issued and, to the best of Borrowers’ knowledge, no eventhas occurred under the provisions of any such instrument or agreement whichwith or without the lapse of time or the giving of notice, or both, constitutesor would constitute an event of default thereunder.

 

5.12.                        No Default.  No Borrower is in default inthe payment or, to the best of Borrowers’ knowledge, in the performance of anyof its contractual obligations and no Default has occurred.

 

5.13.                        No Burdensome Restrictions.  NoBorrower is party to any contract or agreement the performance of which couldhave a Material Adverse Effect on such Borrower.  No Borrower has agreed or consented to causeor permit in the future (upon the happening of a contingency or otherwise) anyof its property, whether now owned or hereafter acquired, to be subject to aLien which is not a Permitted Encumbrance.

 

5.14.                        No Labor Disputes.  NoBorrower is involved in any labor dispute; there are no strikes or walkouts orunion organization of any Borrower’s employees threatened or in existence andno labor contract is scheduled to expire during the Term other than as setforth on Schedule 5.14 hereto.

 

5.15.                        Margin Regulations.  NoBorrower is engaged, nor will it engage, principally or as one of its importantactivities, in the business of extending credit for the purpose of “purchasing”or “carrying” any “margin stock” within the respective meanings of each of thequoted terms under Regulation U of the Board of Governors of the FederalReserve System as now and from time to time hereafter in effect.  No part of the proceeds of any Advance willbe used for “purchasing” or “carrying” “margin stock” as defined in RegulationU of such Board of Governors.

 

5.16.                        Investment Company Act.  NoBorrower is an “investment company” registered or required to be registeredunder the Investment Company Act of 1940, as amended, nor is it controlled bysuch a company.

 

5.17.                        Disclosure.  No representation or warrantymade by any Borrower in this Agreement or in any financial statement, report,certificate or any other document furnished in connection herewith contains, tothe best of Borrowers’ knowledge, any untrue statement of a material fact oromits to state any material fact necessary to make the statements herein ortherein not misleading.  There is no factknown to Borrowers or which reasonably should be known to

 

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Borrowerswhich Borrowers have not disclosed to Agent in writing with respect to thetransactions contemplated by this Agreement which could reasonably be expectedto have a Material Adverse Effect on any Borrower.

 

5.18.                        Swaps.  No Borrower is a party to, norwill it be a party to, any swap agreement whereby such Borrower has agreed orwill agree to swap interest rates or currencies unless same provides thatdamages upon termination following an event of default thereunder are payableon an unlimited “two-way basis” without regard to fault on the part of eitherparty.

 

5.19.                        Conflicting Agreements.  Tothe best of Borrowers’ knowledge, no provision of any mortgage, indenture,contract, agreement, judgment, decree or order binding on any Borrower oraffecting the Collateral conflicts with, or requires any Consent which has notalready been obtained to, or would in any way prevent the execution, deliveryor performance of, the terms of this Agreement or the Other Documents.

 

5.20                           Business of Borrowers.  Uponand after the Closing Date, Borrowers do not propose to engage in any businessother than operating a clinical testing laboratory and activities necessary toconduct the foregoing.  On the ClosingDate, each Borrower will own all the property and possess all of the rights andConsents necessary for the conduct of the business of such Borrower.

 

5.21.                        Application of Certain Laws and Regulations.  NoBorrower nor any Affiliate of any Borrower is subject to any statute, rule orregulation which regulates the incurrence of any Indebtedness, includingwithout limitation, statutes or regulations relative to common or interstatecarriers or to the sale of electricity, gas, steam, water, telephone, telegraphor other public utility services.

 

5.22.                        Section 20 Subsidiaries. Borrowers do not intend to use and shall not use any portion of theproceeds of the Advances, directly or indirectly, to purchase during theunderwriting period, or for 30 days thereafter, Ineligible Securities beingunderwritten by a Section 20 Subsidiary.

 

5.23                           Anti-Terrorism Laws.

 

(a)                                  General.  Neither Borrowers nor or anyAffiliate of a Borrower, is are in violation of any Anti-Terrorism Law orengaging in or conspiring to engage in any transaction that evades or avoids,or has the purpose of evading or avoiding, or attempting to violate, any of theprohibitions set forth in any Anti-Terrorism Law.

 

(b)                                 Executive Order No. 13224. Neither Borrowers, nor any Affiliate of Borrowers, nor their respectiveagents acting or benefiting in any capacity in connection with the RevolvingLoans or other accommodations hereunder, is any of the following (each a“Blocked Person”):

 

(i)                                     a Person that is listed in the annex to, oris otherwise subject to the provisions of, the Executive Order No. 13224;

 

(ii)                                  a Person owned or controlled by, or actingfor or on behalf of, any Person that is listed in the annex to, or is otherwisesubject to the provisions of, the Executive Order No. 13224;

 

(iii)                               a Person or entity with which any bank orother financial institution is prohibited from dealing or otherwise engaging inany transaction by any Anti-Terrorism Law;

 

(iv)                              a Person or entity that commits, threatens orconspires to commit or supports “terrorism” as defined in the Executive OrderNo. 13224;

 

(v)                                 a Person or entity that is named as a“specially designated national” on the most current list published by the U.S.Treasury Department Office of Foreign Asset Control at its official website orany replacement website or other replacement official publication of such list,or

 

(vi)                              a person or entity who is affiliated orassociated with a person or entity listed above.

 

(b)                                 No Borrower or to the knowledge of Borrowers,any of their agents acting in any

 

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capacity in connection with the RevolvingLoans or other accommodations hereunder thereunder (i) conducts any business orengages in making or receiving any contribution of funds, goods or services toor for the benefit of any Blocked Person, or (ii) deals in, or otherwiseengages in any transaction relating to, any property or interests in propertyblocked pursuant to the Executive Order No. 13224.

 

VI.                                 AFFIRMATIVE COVENANTS

 

EachBorrower shall, until payment in full of the Obligations and termination ofthis Agreement:

 

6.1.                              Payment of Fees.  Payto Agent on demand all usual and customary fees and expenses which Agent incursin connection with (a) the forwarding of Advance proceeds and (b) theestablishment and maintenance of any Blocked Accounts or Depository Accounts asprovided for in Section 4.15(h).  Agentmay, without making demand, charge Borrowers’ Account for all such fees andexpenses.

 

6.2.                              Conduct of Business and Maintenance ofExistence and Assets.  (a) Conduct continuously and operate activelyits business according to good business practices and maintain all of itsproperties useful or necessary in its business in good working order andcondition (reasonable wear and tear excepted and except as may be disposed ofin accordance with the terms of this Agreement), including, without limitation,all licenses, patents, copyrights, design rights, tradenames, trade secrets andtrademarks and take all actions necessary to enforce and protect the validityof any intellectual property right or other right included in the Collateral;(b) keep in full force and effect its existence and comply in all materialrespects with the laws and regulations governing the conduct of its businesswhere the failure to do so could reasonably be expected to have a MaterialAdverse Effect on such Borrower; and (c) make all such reports and pay all suchfranchise and other taxes and license fees and do all such other acts andthings as may be lawfully required to maintain its rights, licenses, leases,powers and franchises under the laws of the United States or any politicalsubdivision thereof where the failure to do so could reasonably be expected tohave a Material Adverse Effect on such Borrower.

 

6.3.                              Violations.  Promptly notify Agent inwriting of any violation of any law, statute, regulation or ordinance of anyGovernmental Body, or of any agency thereof, applicable to any Borrower whichcould reasonably be expected to have a Material Adverse Effect on any Borrower.

 

6.4.                              Government Receivables.  Takeall steps necessary to protect Agent’s interest in the Collateral under theFederal Assignment of Claims Act or other applicable state or local statutes orordinances and deliver to Agent appropriately endorsed, any instrument orchattel paper connected with any Receivable arising out of contracts betweenany Borrower and the United States, any state or any department, agency orinstrumentality of any of them.

 

6.5.                              Execution of Supplemental Instruments. Execute and deliver to Agent from time to time, upon demand, suchsupplemental agreements, statements, assignments and transfers, or instructionsor documents relating to the Collateral, and such other instruments as Agentmay request, in order that the full intent of this Agreement may be carriedinto effect.

 

6.6.                              Payment of Indebtedness.  Pay,discharge or otherwise satisfy at or before maturity (subject, whereapplicable, to specified grace periods and, in the case of the trade payables,to normal payment practices) all its obligations and liabilities of whatevernature, except when the failure to do so could not reasonably be expected tohave a Material Adverse Effect or when the amount or validity thereof iscurrently being contested in good faith by appropriate proceedings and each Borrowershall have provided for such reserves as Agent may reasonably deem proper andnecessary, subject at all times to any applicable subordination arrangement infavor of Lenders.

 

6.7.                              Standards of Financial Statements. Cause all financial statements referred to in Sections 9.7, 9.8, 9.9,9.10, 9.11, 9.12, 9.13 and 9.14 as to which GAAP is applicable to be completeand correct in all material respects (subject, in the case of interim financialstatements, to normal year-end audit adjustments) and to be prepared inreasonable detail and in accordance with GAAP applied consistently throughoutthe periods reflected therein (except as concurred in by such reportingaccountants or officer, as the case may be, and disclosed therein).

 

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VII.                             NEGATIVE COVENANTS.

 

NoBorrower shall, until satisfaction in full of the Obligations and terminationof this Agreement:

 

7.1.                              Merger, Consolidation, Acquisition and Saleof Assets

 

(a)                                  Consolidate with, merge with, or acquire thestock or assets of any Person, firm, joint venture, partnership, corporation,or other entity, whether by merger, consolidation, purchase of stock orotherwise, except for Permitted Acquisitions.

 

(b)                                 Sell, lease, transfer or otherwise dispose ofany of its properties or assets, except in the ordinary course of its businessand except as provided in Section 4.3.

 

7.2.                              Creation of Liens. Create or suffer to exist any Lien or transfer upon or against any ofits property or assets now owned or hereafter acquired, except PermittedEncumbrances.

 

7.3.                              Guarantees.  Become liable upon theobligations of any Person by assumption, endorsement or guaranty thereof orotherwise (other than to Lenders) except the endorsement of checks in theordinary course of business.

 

7.4.                              Investments.  Purchase or acquireobligations or stock of, or any other interest in, any Person, except (a)obligations issued or guaranteed by the United States of America or any agencythereof, (b) commercial paper with maturities of not more than 180 days and apublished rating of not less than A-1 or P-1 (or the equivalent rating), (c)certificates of time deposit and bankers’ acceptances having maturities of notmore than 180 days and repurchase agreements backed by United States governmentsecurities of a commercial bank if (i) such bank has a combined capital andsurplus of at least $500,000,000, or (ii) its debt obligations, or those of aholding company of which it is a Subsidiary, are rated not less than A (or theequivalent rating) by a nationally recognized investment rating agency, and (d)U.S. money market funds that invest solely in obligations issued or guaranteedby the United States of America or an agency thereof.

 

7.5.                              Loans.  Make loans to any Personexcept loans to officers, employees and Subsidiaries which shall not exceed TwoMillion Dollars ($2,000,000.00) in the aggregate, outstanding at any time.

 

7.6.                              Capital Expenditures. Enter into any agreements to purchase or pay for or become obligated topay for capital expenditures, long term leases, capital leases and/or salelease-backs, during any fiscal year in an amount aggregating in excess of FiveMillion Dollars ($5,000,000.00) during any fiscal year.

 

7.7.                              Dividends.  Declare, pay or make anydividend or distribution on any shares of the common stock or preferred stockof any Borrower (other than dividends or distributions payable in its stock, orsplit-ups or reclassifications of its stock) or apply any of its funds,property or assets to the purchase, redemption or other retirement of anycommon or preferred stock, or of any options to purchase or acquire any suchshares of common or preferred stock of any Borrower, provided however that,anything contained herein to the contrary notwithstanding, so long as, after givingeffect to such purchase no Default or Event of Default shall have occurred andbe continuing, from the Closing Date through October 31, 2005, Bio-Referencemay repurchase up to four hundred seventy thousand (470,000) shares of itsissued and outstanding common stock..

 

7.8.                              Indebtedness. Create, incur, assume or suffer to exist any Indebtedness (exclusive oftrade debt) except in respect of (i)Indebtedness to Lenders; and (ii)Indebtedness incurred for capital expenditures permitted under Section 7.6hereof.

 

7.9.                              Nature of Business. Substantially change the nature of the business in which it is presentlyengaged, nor except as specifically permitted hereby purchase or invest,directly or indirectly, in any assets or property other than in the ordinarycourse of business for assets or property which are useful in, necessary forand are to be used in its business as presently conducted.

 

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7.10.                        Transactions with Affiliates. Directly or indirectly, purchase, acquire or lease any property from, orsell, transfer or lease any property to, or otherwise deal with, any Affiliate,except transactions in the ordinary course of business, on an arm’s-lengthbasis on terms no less favorable than terms which would have been obtainablefrom a Person other than an Affiliate.

 

7.11.                        Subsidiaries

 

(a)                                  Form any Subsidiary except: (i) as a resultof a Permitted Acquisition, or (ii) the formation of a limited liabilitycompany for the purpose of providing employment services to Borrowers, providedthat such limited liability company Subsidiary shall otherwise comply with allthe requirements of a Permitted Acquisition enumerated in the definition ofsuch term.

 

(b)                                 Enter into any partnership, joint venture orsimilar arrangement, except those presently existing which were entered into inthe ordinary course of Borrowers’ business.

 

7.12.                        Fiscal Year and Accounting Changes. Change its fiscal year end from October 31 or make any change(i) in accounting treatment and reporting practices except as required byGAAP or (ii) in tax reporting treatment except as required by law.

 

7.13.                        Pledge of Credit.  Nowor hereafter pledge Agent’s or any Lender’s credit on any purchases or for anypurpose whatsoever or use any portion of any Advance in or for any businessother than such Borrower’s business as conducted on the date of this Agreement.

 

7.14.                        Amendment of Articles of Incorporation,By-Laws.  Amend, modify or waive any term or materialprovision of its Articles of Incorporation or By-Laws without Agent’s priorwritten consent, unless required by law.

 

7.15.                        Compliance with ERISA.  (i)(x) Maintain, or permit any member of the Controlled Group to maintain, or (y)become obligated to contribute, or permit any member of the Controlled Group tobecome obligated to contribute, to any Plan, other than those Plans disclosedon Schedule 5.8(d), (ii) engage, or permit any member of the ControlledGroup to engage, in any non-exempt “prohibited transaction”, as that term isdefined in section 406 of ERISA and Section 4975 of the Code, (iii) incur, orpermit any member of the Controlled Group to incur, any “accumulated fundingdeficiency”, as that term is defined in Section 302 of ERISA or Section 412 ofthe Code, (iv) terminate, or permit any member of the Controlled Group toterminate, any Plan where such event could result in any liability of anyBorrower or any member of the Controlled Group or the imposition of a lien onthe property of any Borrower or any member of the Controlled Group pursuant toSection 4068 of ERISA, (v) assume, or permit any member of the Controlled Groupto assume, any obligation to contribute to any Multiemployer Plan not disclosedon Schedule 5.8(d), (vi) incur, or permit any member of the ControlledGroup to incur, any withdrawal liability to any Multiemployer Plan; (vii) failpromptly to notify Agent of the occurrence of any Termination Event, (viii)fail to comply, or permit a member of the Controlled Group to fail to comply,with the requirements of ERISA or the Code or other applicable laws in respectof any Plan, (ix) fail to meet, or permit any member of the Controlled Group tofail to meet, all minimum funding requirements under ERISA or the Code orpostpone or delay or allow any member of the Controlled Group to postpone ordelay any funding requirement with respect of any Plan.

 

7.16.                        Prepayment of Indebtedness.  Atany time, directly or indirectly, prepay any Indebtedness (other than toLenders), or repurchase, redeem, retire or otherwise acquire any Indebtednessof any Borrower.

 

7.17.                        Fixed Charge Coverage. Cause, suffer or permit Fixed Charge Coverage to be less than 1.2 to 1.0at any time of the determination thereof.

 

7.18                           Anti-TerrorismLaws. (a) conduct any business or engage in any transaction or dealing withany Blocked Person, including the making or receiving any contribution offunds, goods or services to or for the benefit of any Blocked Person, (b) dealin, or otherwise engage in any transaction relating to, any property orinterests in property blocked pursuant to the Executive Order No. 13224; (c)engage in or conspire to engage in any transaction that evades or

 

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avoids,or has the purpose of evading or avoiding, or attempts to violate, any of theprohibitions set forth in the Executive Order No. 13224, the USA Patriot Act orany other Anti-Terrorism Law, or (d) cause, suffer or permit any Affiliate ofBorrowers to do any of the foregoing. Borrowers shall deliver to Agent any certification or other evidencerequested from time to time by any Lender, confirming Borrowers’ compliancewith this Section 7.18.

 

VIII.                         CONDITIONS PRECEDENT.

 

8.1.                              Conditions to the Effectiveness of thisAgreement.  The effectiveness of this Agreement issubject to the satisfaction of the following conditions precedent:

 

(a)                            Note  Agent shall have received theNote duly executed and delivered by an authorized officer of each Borrower;

 

(b)                                 Filings, Registrations and Recordings.  Eachdocument (including, without limitation, any Uniform Commercial Code financingstatement) required by this Agreement, any related agreement or under law orreasonably requested by the Agent to be filed, registered or recorded in orderto create, in favor of Agent, a perfected security interest in or lien upon theCollateral shall have been properly filed, registered or recorded in eachjurisdiction in which the filing, registration or recordation thereof is sorequired or requested, and Agent shall have received an acknowledgment copy, orother evidence satisfactory to it, of each such filing, registration orrecordation and satisfactory evidence of the payment of any necessary fee, taxor expense relating thereto;

 

(c)                                  Corporate Proceedings of Borrowers. Agent shall have received a copy of the resolutions in form andsubstance reasonably satisfactory to Agent, of the Board of Directors of eachBorrower authorizing (i) the execution, delivery and performance of thisAgreement, and any related agreements (collectively the “Documents”) and (ii) thegranting by each Borrower of the security interests in and liens upon theCollateral in each case certified by the Secretary or an Assistant Secretary ofeach Borrower as of the Closing Date; and, such certificate shall state thatthe resolutions thereby certified have not been amended, modified, revoked orrescinded as of the date of such certificate;

 

(b)                                 Incumbency Certificates of Borrowers. Agent shall have received a certificate of the Secretary or an AssistantSecretary of each Borrower, dated the Closing Date, as to the incumbency andsignature of the officers of each Borrower executing this Agreement, anycertificate or other documents to be delivered by it pursuant hereto, togetherwith evidence of the incumbency of such Secretary or Assistant Secretary andhaving attached a copy of the Certificate of Incorporation of each Borrower,and all amendments thereto, certified by the Secretary of State or otherappropriate official of its jurisdiction of incorporation together with copiesof the By-Laws of each Borrower and all agreements of each Borrower’s  shareholders certified as accurate andcomplete by the Secretary of each Borrower;

 

(c)                                  Good Standing Certificates. Agent shall have received good standing certificates for each Borrowerdated not more than thirty (30) days prior to the Closing Date, issued by theSecretary of State or other appropriate official of each Borrower’sjurisdiction of incorporation and each jurisdiction where the conduct of eachBorrower’s business activities or the ownership of its properties necessitatesqualification;

 

(d)                                 Legal Opinion. Agent shall have received the executed legal opinion of Tolins &Lowenfels in form and substance satisfactory to Agent which shall cover suchmatters incident to the transactions contemplated by this Agreement, andrelated agreements as Agent may reasonably require and each Borrower herebyauthorizes and directs such counsel to deliver such opinions to Agent andLenders;

 

(e)                                  No Litigation.  (i) No litigation, investigation or proceedingbefore or by any arbitrator or Governmental Body shall be continuing orthreatened against any Borrower or against the officers or directors of anyBorrower (A) in connection with the Other Documents or any of the transactionscontemplated thereby and which, in the reasonable opinion of Agent, is deemedmaterial or (B) which could, in the reasonable opinion of Agent, have aMaterial Adverse Effect; and (ii) noinjunction, writ, restraining order or other order of any nature materiallyadverse to any Borrower or the conduct of its business or inconsistent with thedue consummation of the Transactions shall have been issued by any GovernmentalBody;

 

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(f)                                    Insurance.  Agent shall have received inform and substance satisfactory to Agent, certified copies of Borrowers’casualty insurance policies, together with loss payable endorsements on Agent’sstandard form of loss payee endorsement naming Agent as loss payee, andcertified copies of Borrowers’ liability insurance policies, together withendorsements naming Agent as a co-insured;

 

(g)                                 No Adverse Material Change.  (i)since September 30, 2003, there shall not have occurred any event, condition orstate of facts which could reasonably be expected to have a Material AdverseEffect and (ii) no representations made or information supplied to Agent shallhave been proven to be inaccurate or misleading in any material respect;

 

(h)                                 Other.  All corporate and otherproceedings, and all documents, instruments and other legal matters inconnection with the Transactions shall be satisfactory in form and substance toAgent and its counsel.

 

8.2.                              Conditions to Each Advance.  Theagreement of Lenders to make any Advance requested to be made on any date issubject to the satisfaction of the following conditions precedent as of thedate such Advance is made:

 

(a)                                  Representations and Warranties.  Eachof the representations and warranties made by any Borrower in or pursuant tothis Agreement and any related agreements to which it is a party, and each ofthe representations and warranties contained in any certificate, document orfinancial or other statement furnished at any time under or in connection withthis Agreement or any related agreement shall be true and correct in all materialrespects on and as of such date as if made on and as of such date;

 

(b)                                 No Default.  No Event of Default or Defaultshall have occurred and be continuing on such date, or would exist after givingeffect to the Advances requested to be made, on such date; provided, howeverthat Agent, in its sole discretion, may continue to make Advancesnotwithstanding the existence of an Event of Default or Default and that anyAdvances so made shall not be deemed a waiver of any such Event of Default orDefault; and

 

(c)                                  Maximum Advances.  Inthe case of any Advances requested to be made, after giving effect thereto, theaggregate Advances shall not exceed the maximum amount of Advances permittedunder Section 2.1 hereof.

 

Eachrequest for an Advance by any Borrower hereunder shall constitute arepresentation and warranty by each Borrower as of the date of such Advancethat the conditions contained in this subsection shall have been satisfied.

 

IX.                                INFORMATION AS TO BORROWERS.

 

EachBorrower shall, until satisfaction in full of the Obligations and thetermination of this Agreement:

 

9.1.                              Disclosure of Material Matters. Immediately upon learning thereof, report to Agent all mattersmaterially affecting the value, enforceability or collectibility of any portionof the Collateral including, without limitation, any Borrower’s reclamation orrepossession of, or the return to any Borrower of, a material amount of goodsor claims or disputes asserted by any Customer or other obligor.

 

9.2.                              Schedules.  Deliver to Agent on or beforethe fifteenth (15th) day of each month as and for the prior month (a) accountsreceivable ageings, (b) a report of sales and collections since the prior suchreport (which, if Agent shall require at any time when Undrawn Availability isless than Five Million Dollars ($5,000,000.00) or an Event of Default hasoccurred and is continuing, shall be delivered weekly or daily as Agent shallelect), and (c) a Borrowing Base Certificate (which shall be calculated as ofthe last day of the prior month and which shall not be binding upon Agent orrestrictive of Agent’s rights under this Agreement).  In addition, each Borrower will deliver toAgent at such intervals as Agent may require: (i) confirmatory assignment schedules, (ii) copies ofCustomer’s invoices, (iii) evidence of shipment or delivery, and(iv) such further schedules, documents and/or information regarding theCollateral as Agent may require including, without limitation, trial balancesand test verifications.  Agent shall havethe right to confirm and verify all Receivables by any manner and through anymedium it considers advisable and do whatever it may deem reasonably necessaryto protect its interests hereunder.  Theitems to be provided under this Section are to be in form satisfactory to Agentand executed by each Borrower and delivered to Agent from time to time solelyfor Agent’s convenience in

 

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maintainingrecords of the Collateral, and any Borrower’s failure to deliver any of suchitems to Agent shall not affect, terminate, modify or otherwise limit Agent’sLien with respect to the Collateral.

 

9.3.                              Environmental Reports. Furnish Agent, concurrently with the delivery of the financialstatements referred to in Sections 9.7 and 9.8, with a certificate signed bythe Chief Financial Officer of each Borrower stating, to the best of hisknowledge, that each Borrower is in compliance in all material respects withall federal, state and local laws relating to environmental protection andcontrol and occupational safety and health. To the extent any Borrower is not in compliance with the foregoing laws,the certificate shall set forth with specificity all areas of non-complianceand the proposed action such Borrower will implement in order to achieve fullcompliance.

 

9.4.                              Litigation.  Promptly notify Agent inwriting of any litigation, suit or administrative proceeding affecting anyBorrower, whether or not the claim is covered by insurance, and of any suit oradministrative proceeding, which in any such case could reasonably be expectedto have a Material Adverse Effect on any Borrower.

 

9.5.                              Material Occurrences. Promptly notify Agent in writing upon the occurrence of (a) any Event ofDefault or Default; (b) any event, development or circumstance whereby anyfinancial statements or other reports furnished to Agent fail in any materialrespect to present fairly, in accordance with GAAP consistently applied, thefinancial condition or operating results of any Borrower as of the date of suchstatements; (c) any accumulated retirement plan funding deficiency which, ifsuch deficiency continued for two plan years and was not corrected as providedin Section 4971 of the Code, could subject any Borrower to a tax imposed bySection 4971 of the Code; (d) each and every default by any Borrower whichmight result in the acceleration of the maturity of any Indebtedness, includingthe names and addresses of the holders of such Indebtedness with respect towhich there is a default existing or with respect to which the maturity hasbeen or could be accelerated, and the amount of such Indebtedness; and (e) anyother development in the business or affairs of any Borrower which couldreasonably be expected to have a Material Adverse Effect; in each casedescribing the nature thereof and the action Borrowers propose to take withrespect thereto.

 

9.6.                              Government Receivables. Notify Agent immediately if any of its Receivables arise out ofcontracts between any Borrower and the United States, any state, or anydepartment, agency or instrumentality of any of them, excepting only Medicareand Medicaid.

 

9.7.                              Annual Financial Statements. Furnish Agent for distribution to the Lender within ninety (90) daysafter the end of each fiscal year of Borrowers, which delivery date may beextended for up to fifteen (15) additional days, in accordance with theregulations promulgated by the Securities and Exchange Commission or theregulations of the stock exchange on which the applicable Borrower is listed,so long as copies of any writing applying for or evidencing such extension hasbeen supplied to Agent, financial statements of Borrowers on a consolidatedand, if requested by Agent, consolidating basis including, but not limited to,statements of income and stockholders’ equity and cash flow from the beginningof the current fiscal year to the end of such fiscal year and the balance sheetas at the end of such fiscal year, all prepared in accordance with GAAP appliedon a basis consistent with prior practices, and in reasonable detail andreported upon without qualification by an independent certified publicaccounting firm selected by Borrowers and satisfactory to Agent (the“Accountants”).  The report of theAccountants shall be accompanied by a statement of the Accountants certifyingthat (i) they have caused the Loan Agreement to be reviewed, (ii) in making theexamination upon which such report was based either no information came totheir attention which to their knowledge constituted an Event of Default or aDefault under this Agreement or any related agreement or, if such informationcame to their attention, specifying any such Default or Event of Default, itsnature, when it occurred and whether it is continuing, and such report shallcontain or have appended thereto calculations which set forth Borrowers’compliance with the requirements or restrictions imposed by Sections 7.5, 7.6and 7.17 hereof.  In addition, thereports shall be accompanied by a certificate of each Borrower’s ChiefFinancial Officer which shall state that, based on an examination sufficient topermit him to make an informed statement, no Default or Event of Defaultexists, or, if such is not the case, specifying such Default or Event ofDefault, its nature, when it occurred, whether it is continuing and the stepsbeing taken by such Borrower with respect to such event, and such certificateshall have appended thereto calculations which set forth Borrowers’ compliancewith the requirements or restrictions imposed by Sections 7.5, 7.6 and 7.17hereof.

 

9.8.                              Quarterly Financial Statements. Furnish Agent for distribution to the Lender within forty-five (45) daysafter the end of each fiscal quarter or such additional time, up to fifteen(15) days, in accordance with the regulations

 

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promulgatedby the Securities and Exchange Commission or the regulations of the stockexchange on which the applicable Borrower is listed, so long as copies of anywriting applying for or evidencing such extension has been supplied to Agent,an unaudited balance sheet of Borrowers on a consolidated and, if requested byAgent, consolidating basis and unaudited statements of income and stockholders’equity and cash flow of Borrowers on a consolidated and consolidating basisreflecting results of operations from the beginning of the fiscal year to theend of such quarter and for such quarter, prepared on a basis consistent withprior practices and complete and correct in all material respects, subject tonormal and recurring year end adjustments that individually and in theaggregate are not material to the business of Borrowers.  The reports shall be accompanied by acertificate signed by the Chief Financial Officer of each Borrower, which shallstate that, to the best of his knowledge, based on an examination sufficient topermit him to make an informed statement, no Default or Event of Defaultexists, or, if such is not the case, specifying such Default or Event ofDefault, its nature, when it occurred, whether it is continuing and the stepsbeing taken by Borrowers with respect to such default and, such certificateshall have appended thereto calculations which set forth Borrowers’ compliancewith the requirements or restrictions imposed by Sections 7.5, 7.6 and 7.17hereof.

 

9.9.                              Monthly Financial Statements. Furnish Agent for distribution to the Lender within thirty (30) daysafter the end of each month, an unaudited income statement of Borrowers on aconsolidated and, if requested by Agent, consolidating basis reflecting resultsof operations from the beginning of the fiscal year to the end of such monthand for such month, prepared on a basis consistent with prior practices andcomplete and correct in all material respects, subject to normal and recurringyear end adjustments that individually and in the aggregate are not material tothe business of Borrowers.  The reportsshall be accompanied by a certificate of each Borrower’s Chief FinancialOfficer, which shall state that, to the best of his knowledge, based on anexamination sufficient to permit him to make an informed statement, no Defaultor Event of Default exists, or, if such is not the case, specifying suchDefault or Event of Default, its nature, when it occurred, whether it iscontinuing and the steps being taken by Borrowers with respect to such eventand, such certificate shall have appended thereto calculations which set forthBorrowers’ compliance with the requirements or restrictions imposed by Sections7.5, 7.6 and 7.17 hereof.

 

9.10.                        Other Reports. Furnish Agent as soon as available, but in any event within ten (10)days after the issuance thereof, with copies of such financial statements,reports and returns as each Borrower shall send to its stockholders.

 

9.11.                        Additional Information. Furnish Agent with such additional information as Agent shall reasonablyrequest in order to enable Agent to determine whether the terms, covenants,provisions and conditions of this Agreement have been complied with byBorrowers including, without limitation and without the necessity of anyrequest by Agent, (a) copies of all environmental audits and reviews, (b) atleast thirty (30) days prior thereto, notice of any Borrower’s opening of anynew office or place of business or any Borrower’s closing of any existingoffice or place of business, and (c) promptly upon any Borrower’s learningthereof, notice of any labor dispute to which any Borrower may become a party,any strikes or walkouts relating to any of its plants or other facilities, andthe expiration of any labor contract to which any Borrower is a party or bywhich any Borrower is bound.

 

9.12.                        Projected Operating Budget. Furnish Agent for distribution to the Lender, no later than thirty (30)days prior to the beginning of each Borrower’s fiscal year commencing with thefiscal year beginning November 1, 2004, a month by month projected operatingbudget of Borrowers on a consolidated and, if requested by Agent, consolidatingbasis for such fiscal year (including an income statement and balance sheet****for each month), such projections to be accompanied by acertificate signed by the President or Chief Financial Officer of each Borrowerto the effect that such projections have been prepared on the basis of soundfinancial planning practice consistent with past budgets and financialstatements and that such officer has no reason to question the reasonablenessof any material assumptions on which such projections were prepared.

 

9.13.                        Variances From Operating Budget. Furnish Agent for distribution to the Lender, concurrently with thedelivery of the financial statements referred to in Section 9.7 and eachmonthly report, a written report summarizing all material variances frombudgets submitted by Borrowers pursuant to Section 9.12 and a discussion andanalysis by management with respect to such variances.

 

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9.14.                        Notice of Suits, Adverse Events. Furnish Agent with prompt notice of (i) any lapse or other terminationof any Consent issued to any Borrower by any Governmental Body or any otherPerson that is material to the operation of any Borrower’s business, (ii) anyrefusal by any Governmental Body or any other Person to renew or extend anysuch Consent; and (iii) copies of any periodic or special reports filed by anyBorrower with any Governmental Body or Person, if such reports indicate anymaterial change in the business, operations, affairs or condition of anyBorrower, or if copies thereof are requested by Lender, and (iv) copies of anymaterial notices and other communications from any Governmental Body or Personwhich specifically relate to any Borrower; including, without limitation, thoseConsents, reports and notices which are related to air emissions, waterdischarge, noise emissions, solid or liquid waste disposal, hazardous waste ormaterials, or any other environmental, health or safety matter.

 

9.15.                        ERISA Notices and Requests. Furnish Agent with immediate written notice in the event that (i) anyBorrower or any member of the Controlled Group knows or has reason to know thata Termination Event has occurred, together with a written statement describingsuch Termination Event and the action, if any, which such Borrower or anymember of the Controlled Group has taken, is taking, or proposes to take withrespect thereto and, when known, any action taken or threatened by the InternalRevenue Service, Department of Labor or PBGC with respect thereto, (ii) anyBorrower or any member of the Controlled Group knows or has reason to know thata prohibited transaction (as defined in Sections 406 of ERISA and 4975 of theCode) has occurred together with a written statement describing suchtransaction and the action which such Borrower or any member of the ControlledGroup has taken, is taking or proposes to take with respect thereto, (iii) afunding waiver request has been filed with respect to any Plan together withall communications received by any Borrower or any member of the ControlledGroup with respect to such request, (iv) any increase in the benefits of anyexisting Plan or the establishment of any new Plan or the commencement ofcontributions to any Plan to which any Borrower or any member of the ControlledGroup was not previously contributing shall occur, (v) any Borrower or anymember of the Controlled Group shall receive from the PBGC a notice ofintention to terminate a Plan or to have a trustee appointed to administer aPlan, together with copies of each such notice, (vi) any Borrower or any memberof the Controlled Group shall receive any favorable or unfavorable determinationletter from the Internal Revenue Service regarding the qualification of a Planunder Section 401(a) of the Code, together with copies of each such letter;(vii) any Borrower or any member of the Controlled Group shall receive a noticeregarding the imposition of withdrawal liability, together with copies of eachsuch notice; (viii) any Borrower or any member of the Controlled Group shallfail to make a required installment or any other required payment under Section412 of the Code on or before the due date for such installment or payment; (ix)any Borrower or any member of the Controlled Group knows that (a) aMultiemployer Plan has been terminated, (b) the administrator or plan sponsorof a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) thePBGC has instituted or will institute proceedings under Section 4042 of ERISAto terminate a Multiemployer Plan.

 

9.16.                        Additional Documents. Execute and deliver to Agent, upon request, such documents andagreements as Agent may, from time to time, reasonably request to carry out thepurposes, terms or conditions of this Agreement.

 

X.                                    EVENTS OF DEFAULT

 

Theoccurrence of any one or more of the following events shall constitute an“Event of Default”:

 

10.1.                        Failure to Pay.  AnyBorrower’s failure to pay, when due, any payment of principal, interest orother charges due and owing to Lender pursuant to any Obligations of Borrowersto Lenders, including, without limitation, those Obligations arising pursuantto this Agreement or any Other Document whether at maturity or by reason ofacceleration pursuant to the terms of this Agreement or by reason of Agent’sdemand made pursuant to Section 2.1(a) or by notice of intention to prepay, orby required prepayment and such default continues for more than ten (10)Business Days after written notice of such default by Agent;

 

10.2.                        Failure to Perform.  AnyBorrower’s failure to perform or observe any covenant, term or condition ofthis Agreement to be performed or observed by Borrowers (excepting those whichresult in a payment default, a lien on Borrowers’ assets or a violation of aninsurance covenant, which shall constitute an immediate Event of Default), andsuch default continues for more than thirty (30) Business Days after writtennotice of such default by Agent;

 

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10.3.                        Cross Default; Default on Other Debt.  Theoccurrence of any default on any other obligation or indebtedness of anyBorrower to any third parties so that the holder of such obligation orindebtedness declares such obligation or indebtedness due prior to its date ofmaturity because of such Borrower’s default thereunder and such defaultcontinues for more than thirty (30) Business Days after written notice of suchdefault by Agent;

 

10.4.                        False Representation or Warranty.  AnyBorrower shall have made any statement, representation or warranty in thisAgreement or in any document or certificate executed by such Borrower incidentto this Agreement, which is at any time found to have been false in anymaterial respect at the time such representation or warranty was made;

 

10.5.                        Petition by or Against Borrowers.  AnyBorrower ceases to do business as a going concern, or there is filed by oragainst any Borrower, any petition with respect to its own financial conditionunder any bankruptcy law or any amendment thereto (including without limitationa petition for reorganization, arrangement or extension) or under any otherinsolvency laws providing for the relief of debtors, provided, however, if suchaction is involuntary, Agent may not declare same to be an Event of Defaultunless Borrower shall have failed to have same dismissed or appealed and stayedin an appropriate forum and for which appeal Borrowers shall have posted abond, in an amount satisfactory to the court and Agent, all within thirty (30)Business Days from the date of filing;

 

10.6.                        Appointment of Receiver.  Areceiver, custodian, trustee, conservator or liquidator is appointed for anyBorrower, or all or a substantial part of its assets, unless same is stayed ordismissed within thirty (30) Business Days; or any Borrower shall beadjudicated bankrupt, insolvent or in need of any relief provided to debtors byany court;

 

10.7.                        Judgments; Levies.  Ifany final judgment or judgments (except those covered by insurance), or anylevy, sequestration, or attachment against any Borrower or its property,remains unpaid, undischarged, unsatisfied, unbonded or undismissed for a periodof thirty (30) Business Days after such Borrower has received notification ofthe entry thereof;

 

10.8.                        Change in Management.  Atany time Marc D. Grodman (“Grodman”) shall not be employed by Borrowers insubstantially the same role as he holds on the Closing Date and no successor,who is acceptable to Agent in its sole discretion, has been retained to act insuch role within the thirty (30) days after Grodman’s ceasing to be employed orwithin such shorter period as is required to avoid the occurrence of a MaterialAdverse Effect;

 

10.9.                        Liquidation or Dissolution.  Theliquidation and/or dissolution of any Borrower;

 

10.10.                  Environmental Complaint.  Atany time Agent determines that an Environmental Complaint will have apotentially material adverse effect on the financial condition of any Borrower;

 

10.11.                  Failure to Notify.  Ifat any time any Borrower fails to provide Agent immediately with the noticesrequired by Section 9.14;

 

10.12                     Financial Reports, Access to Records.  Ifat any time any Borrower fails to (a) furnish financial information when due orwhen requested which is unremedied for a period of fifteen (15) days, or (b)permit the inspection of its books and records by Agent or its employees orrepresentatives;

 

10.13                     Agent’s Liens.  Ifat any time any Lien in favor of Agent created hereunder or provided for herebyor under any Other Document for any reason ceases to be or is not a valid andperfected Lien having a firs priority position;

 

10.14                     Licenses.  If any Governmental Body shall(a) revoke, terminate, suspend or adversely modify any license or permit of anyBorrower, the continuation of which is material to the continuation of suchBorrower’s business, or (b) commence proceedings to suspend, revoke, terminateor adversely modify any such license or permit and such proceeding shall not bedismissed or discharged within sixty (60) days; or

 

10.15                     ERISA.  If an event or conditionspecified in Sections 7.15 or 9.15 shall occur or exist with respect to anyPlan and, as a result of such event or condition, together with all other suchevents or conditions, any Borrower or

 

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anymember of the Controlled Group shall occur, or in the opinion of Agent bereasonable likely to incur, a liability to a Plan or the PBGC (or both) which,in the reasonable judgment of Agent, would have a Material Adverse Effect onsuch Borrower.

 

XI.                                LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT

 

11.1.                        Rights and Remedies.  Uponthe occurrence of (i) an Event of Default pursuant to Sections 10.5 or 10.6 allObligations shall be immediately due and payable and this Agreement and theobligation of Lenders to make Advances shall be deemed terminated; and, (ii)any of the other Events of Default and at any time thereafter (such default nothaving previously been cured), at the option of Required Lenders allObligations shall be immediately due and payable and Lenders shall have theright to terminate this Agreement and to terminate the obligation of Lenders tomake Advances.  Upon the occurrence ofany Event of Default, Agent shall have the right to exercise any and all otherrights and remedies provided for herein, under the Uniform Commercial Code andat law or equity generally, including, without limitation, the right toforeclose the security interests granted herein and to realize upon anyCollateral by any available judicial procedure and/or to take possession of andsell any or all of the Collateral with or without judicial process.  Agent may enter any of any Borrower’spremises or other premises without legal process and without incurringliability to any Borrower therefor, and Agent may thereupon, or at any timethereafter, in its discretion without notice or demand, take the Collateral andremove the same to such place as Agent may deem advisable and Agent may requireBorrowers to make the Collateral available to Agent at a convenient place.  With or without having the Collateral at thetime or place of sale, Agent may sell the Collateral, or any part thereof, atpublic or private sale, at any time or place, in one or more sales, at suchprice or prices, and upon such terms, either for cash, credit or futuredelivery, as Agent may elect.  Except asto that part of the Collateral which is perishable or threatens to declinespeedily in value or is of a type customarily sold on a recognized market,Agent shall give Borrowers reasonable notification of such sale or sales, itbeing agreed that in all events written notice mailed to Borrowers at leastfive (5) days prior to such sale or sales is reasonable notification.  At any public sale Agent or any Lender maybid for and become the purchaser, and Agent, any Lender or any other purchaserat any such sale thereafter shall hold the Collateral sold absolutely free fromany claim or right of whatsoever kind, including any equity of redemption andsuch right and equity are hereby expressly waived and released by eachBorrower.  In connection with theexercise of the foregoing remedies, Agent is granted permission to use all ofeach Borrower’s trademarks, trade styles, trade names, patents, patent applications,licenses, franchises and other proprietary rights which are used in connectionwith (a) Inventory for the purpose of disposing of such Inventory and (b)Equipment for the purpose of completing the manufacture of unfinished goods.  The proceeds realized from the sale of anyCollateral shall be applied as follows: first, to the reasonable costs,expenses and attorneys’ fees and expenses incurred by Agent for collection andfor acquisition, completion, protection, removal, storage, sale and delivery ofthe Collateral; second, to interest due upon any of the Obligations and anyfees payable under this Agreement; and, third, to the principal of theObligations.  If any deficiency shallarise, Borrowers shall remain liable to Agent and Lenders therefor.

 

11.2.                        Agent’s Discretion. Agent shall have the right in its sole discretion to determine whichrights, Liens, security interests or remedies Agent may at any time pursue,relinquish, subordinate, or modify or to take any other action with respect theretoand such determination will not in any way modify or affect any of Agent’s orLenders’ rights hereunder.

 

11.3.                        Setoff.  In addition to any otherrights which Agent or any Lender may have under applicable law, upon theoccurrence of an Event of Default hereunder, Agent and such Lender shall have aright to apply any Borrower’s property held by Agent and such Lender to reducethe Obligations.

 

11.4.                        Rights and Remedies not Exclusive.  Theenumeration of the foregoing rights and remedies is not intended to beexhaustive and the exercise of any right or remedy shall not preclude theexercise of any other right or remedies provided for herein or otherwiseprovided by law, all of which shall be cumulative and not alternative.

 

11.5.                        Allocation of Payments After Event of Default. Notwithstanding any other provisions of this Agreement to the contrary,after the occurrence and during the continuance of an Event of Default, allamounts collected or received by Agent on account of the Obligations or anyother amounts outstanding under any of the Other Documents or in respect of theCollateral may, at Agent’s discretion, be paid over or delivered as follows:

 

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FIRST, to the payment of allreasonable out-of-pocket costs and expenses (including without limitation,reasonable attorneys’ fees) of Agent in connection with enforcing the rights ofLenders under this Agreement and the Other Documents and any protectiveadvances made by Agent with respect to the Collateral under or pursuant to theterms of this Document;

 

SECOND, to payment of anyfees owed to Agent;

 

THIRD, to the payment of allreasonable out-of-pocket costs and expenses (including without limitation,reasonable attorneys’ fees) of each of Lenders in connection with enforcing itsrights under this Agreement and the Other Documents or otherwise with respectto the Obligations owing to such Lender;

 

FOURTH, to the payment ofall of the Obligations consisting of accrued fees and interest;

 

FIFTH, to the payment of theoutstanding principal amount of the Obligations (including the payment or cashcollateralization of the outstanding Letters of Credit);

 

SIXTH, to all otherObligations and other obligations which shall have become due and payable underthe Other Documents or otherwise and not repaid pursuant to clauses “FIRST”through “FIFTH” above;

 

SEVENTH, to the payment ofthe surplus, if any, to whoever may be lawfully entitled to receive suchsurplus.

 

In carrying out the foregoing, (i) amountsreceived shall be applied in the numerical order provided until exhausted priorto application to the next succeeding category; (ii) each of Lenders shallreceive (so long as it is not a Defaulting Lender) an amount equal to its prorata share (based on the proportion that the then outstanding Advances held bysuch Lender bears to the aggregate then outstanding Advances) of amountsavailable to be applied pursuant to clauses “THIRD”, “FOURTH”, “FIFTH” and“SIXTH” above; and (iii) to the extent that any amounts available fordistribution pursuant to clause “FIFTH” above are attributable to the issuedbut undrawn amount of outstanding Letters of Credit, such amounts shall be heldby Agent in a cash collateral account and applied (A) first, to reimburse theIssuer from time to time for any drawings under such Letters of Credit and (B)then, following the expiration of all Letters of Credit, to all otherobligations of the types described in clauses “FIFTH” and “SIXTH” above in themanner provided in this Section 11.5.

 

XII.                            WAIVERS AND JUDICIAL PROCEEDINGS

 

12.1.                        Waiver of Notice.  EachBorrower hereby waives notice of non-payment of any of the Receivables, demand,presentment, protest and notice thereof with respect to any and allinstruments, notice of acceptance hereof, notice of loans or advances made,credit extended, Collateral received or delivered, or any other action taken inreliance hereon, and all other demands and notices of any description, exceptsuch as are expressly provided for herein.

 

12.2.                        Delay.  No delay or omission onAgent’s or any Lender’s part in exercising any right, remedy or option shalloperate as a waiver of such or any other right, remedy or option or of anydefault.

 

12.3.                        Jury Waiver.  EACH PARTY TO THIS AGREEMENTHEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTIONOR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) INANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIESHERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THETRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING ORHEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE ANDEACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OFACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TOTHIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITHANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THEWAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

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XIII.                        EFFECTIVE DATE AND TERMINATION

 

13.1.                        Term.  This Agreement, which shallinure to the benefit of and shall be binding upon the respective successors andpermitted assigns of each Borrower, Agent and each Lender, shall becomeeffective on the date hereof and shall continue in full force and effect untilOctober 31, 2007 (the “Term”) unless sooner terminated as herein provided.

 

13.2                           Termination by Borrowers. Borrowers may terminate the Line of Credit at any time upon not lessthan sixty (60) days’ prior written notice and the date of termination mustfall upon (i) October 31, 2007 or any annual anniversary of such datethereafter or (ii) at any time after Agent or Required Lenders elect todecrease the amount of the Advance Limit or percentage or amounts of Advancepursuant to Section 2.1(b).  Upon givingsuch notice, the Line of Credit shall thereafter terminate upon the said date.

 

13.2.                        Termination.  The termination of theAgreement shall not affect any Borrower’s, Agent’s or any Lender’s rights, orany of the Obligations having their inception prior to the effective date ofsuch termination, and the provisions hereof shall continue to be fullyoperative until all transactions entered into, rights or interests created orObligations have been fully disposed of, concluded or liquidated.  The security interests, Liens and rightsgranted to Agent and Lenders hereunder and the financing statements filedhereunder shall continue in full force and effect, notwithstanding thetermination of this Agreement or the fact that Borrowers’ Account may from timeto time be temporarily in a zero or credit position, until all of theObligations of each Borrower have been paid or performed in full after thetermination of this Agreement or each Borrower has furnished Agent and Lenderswith an indemnification satisfactory to Agent and Lenders with respectthereto.  Accordingly, each Borrowerwaives any rights which it may have under the Uniform Commercial Code to demandthe filing of termination statements with respect to the Collateral, and Agentshall not be required to send such termination statements to each Borrower, orto file them with any filing office, unless and until this Agreement shall havebeen terminated in accordance with its terms and all Obligations paid in fullin immediately available funds.  Allrepresentations, warranties, covenants, waivers and agreements contained hereinshall survive termination hereof until all Obligations are paid or performed infull.

 

XIV.                        REGARDING AGENT

 

14.1.                        Appointment.  Each Lender hereby designatesPNC to act as Agent for such Lender under this Agreement and the OtherDocuments.  Each Lender herebyirrevocably authorizes Agent to take such action on its behalf under theprovisions of this Agreement and the Other Documents and to exercise suchpowers and to perform such duties hereunder and thereunder as are specificallydelegated to or required of Agent by the terms hereof and thereof and suchother powers as are reasonably incidental thereto and Agent shall hold allCollateral, payments of principal and interest, fees, charges and collections(without giving effect to any collection days) received pursuant to thisAgreement, for the ratable benefit of Lenders. Agent may perform any of its duties hereunder by or through its agentsor employees.  As to any matters notexpressly provided for by this Agreement (including without limitation,collection of the Note) Agent shall not be required to exercise any discretionor take any action, but shall be required to act or to refrain from acting (andshall be fully protected in so acting or refraining from acting) upon theinstructions of the Required Lenders, and such instructions shall be binding; provided,however, that Agent shall not be required to take any action whichexposes Agent to liability or which is contrary to this Agreement or the OtherDocuments or applicable law unless Agent is furnished with an indemnificationreasonably satisfactory to Agent with respect thereto.

 

14.2.                        Nature of Duties. Agent shall have no duties or responsibilities except those expresslyset forth in this Agreement and the Other Documents.  Neither Agent nor any of its officers,directors, employees or agents shall be (i) liable for any action taken oromitted by them as such hereunder or in connection herewith, unless caused by theirgross (not mere) negligence or willful misconduct, or (ii) responsible in anymanner for any recitals, statements, representations or warranties made by anyBorrower or any officer thereof contained in this Agreement, or in any of theOther Documents or in any certificate, report, statement or other documentreferred to or provided for in, or received by Agent under or in connectionwith, this Agreement or any of the Other Documents or for the value, validity,effectiveness, genuineness, due execution, enforceability or sufficiency ofthis Agreement, or any of the Other Documents or for any failure of anyBorrower to perform its obligations hereunder. Agent shall not be under any obligation to any Lender to ascertain or toinquire as to the observance or performance of any of the agreements containedin, or conditions of, this Agreement or any of the Other Documents, or toinspect the properties, books or records of any Borrower.  The duties of

 

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Agentas respects the Advances to Borrowers shall be mechanical and administrative innature; Agent shall not have by reason of this Agreement a fiduciaryrelationship in respect of any Lender; and nothing in this Agreement, expressedor implied, is intended to or shall be so construed as to impose upon Agent anyobligations in respect of this Agreement except as expressly set forth herein.

 

14.3.                        Lack of Reliance on Agent and Resignation. Independently and without reliance upon Agent or any other Lender, eachLender has made and shall continue to make (i) its own independentinvestigation of the financial condition and affairs of each Borrower inconnection with the making and the continuance of the Advances hereunder andthe taking or not taking of any action in connection herewith, and (ii) its ownappraisal of the creditworthiness of each Borrower.  Agent shall have no duty or responsibility,either initially or on a continuing basis, to provide any Lender with any creditor other information with respect thereto, whether coming into its possessionbefore making of the Advances or at any time or times thereafter except asshall be provided by any Borrower pursuant to the terms hereof.  Agent shall not be responsible to any Lenderfor any recitals, statements, information, representations or warranties hereinor in any agreement, document, certificate or a statement delivered inconnection with or for the execution, effectiveness, genuineness, validity,enforceability, collectibility or sufficiency of this Agreement or any OtherDocument, or of the financial condition of any Borrower, or be required to makeany inquiry concerning either the performance or observance of any of theterms, provisions or conditions of this Agreement, the Note, the OtherDocuments or the financial condition of any Borrower, or the existence of anyEvent of Default or any Default.

 

Agentmay resign on sixty (60) days’ written notice to each of Lenders and BorrowingAgent and upon such resignation, the Required Lenders will promptly designate asuccessor Agent reasonably satisfactory to Borrowers.

 

Anysuch successor Agent shall succeed to the rights, powers and duties of Agent,and the term “Agent” shall mean such successor agent effective upon itsappointment, and the former Agent’s rights, powers and duties as Agent shall beterminated, without any other or further act or deed on the part of such formerAgent.  After any Agent’s resignation asAgent, the provisions of this Article XIV shall inure to its benefit as to anyactions taken or omitted to be taken by it while it was Agent under thisAgreement.

 

14.4.                        Certain Rights of Agent.  IfAgent shall request instructions from Lenders with respect to any act or action(including failure to act) in connection with this Agreement or any OtherDocument, Agent shall be entitled to refrain from such act or taking suchaction unless and until Agent shall have received instructions from theRequired Lenders; and Agent shall not incur liability to any Person by reasonof so refraining.  Without limiting theforegoing, Lenders shall not have any right of action whatsoever against Agentas a result of its acting or refraining from acting hereunder in accordancewith the instructions of the Required Lenders.

 

14.5.                        Reliance.  Agent shall be entitled torely, and shall be fully protected in relying, upon any note, writing,resolution, notice, statement, certificate, telex, teletype or telecopiermessage, cablegram, order or other document or telephone message believed by itto be genuine and correct and to have been signed, sent or made by the properperson or entity, and, with respect to all legal matters pertaining to thisAgreement and the Other Documents and its duties hereunder, upon advice ofcounsel selected by it.  Agent may employagents and attorneys-in-fact and shall not be liable for the default ormisconduct of any such agents or attorneys-in-fact selected by Agent withreasonable care.

 

14.6.                        Notice of Default. Agent shall not be deemed to have knowledge or notice of the occurrenceof any Default or Event of Default hereunder or under the Other Documents,unless Agent has received notice from a Lender or a Borrower referring to thisAgreement or the Other Documents, describing such Default or Event of Defaultand stating that such notice is a “notice of default”.  In the event that Agent receives such anotice, Agent shall give notice thereof to Lenders.  Agent shall take such action with respect tosuch Default or Event of Default as shall be reasonably directed by theRequired Lenders; provided, that, unless and until Agent shallhave received such directions, Agent may (but shall not be obligated to) takesuch action, or refrain from taking such action, with respect to such Defaultor Event of Default as it shall deem advisable in the best interests ofLenders.

 

14.7.                        Indemnification.  Tothe extent Agent is not reimbursed and indemnified by Borrowers, each Lenderwill reimburse and indemnify Agent in proportion to its respective portion ofthe Advances (or, if no Advances are outstanding, according to its CommitmentPercentage), from and against any and all liabilities, obligations, losses,

 

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damages,penalties, actions, judgments, suits, costs, expenses or disbursements of anykind or nature whatsoever which may be imposed on, incurred by or assertedagainst Agent in performing its duties hereunder, or in any way relating to orarising out of this Agreement or any Other Document; providedthat,Lenders shall not be liable for any portion of such liabilities, obligations,losses, damages, penalties, actions, judgments, suits, costs, expenses ordisbursements resulting from Agent’s gross (not mere) negligence or willfulmisconduct.

 

14.8.                        Agent in its Individual Capacity.  Withrespect to the obligation of Agent to lend under this Agreement, the Advancesmade by it shall have the same rights and powers hereunder as any other Lenderand as if it were not performing the duties as Agent specified herein; and theterm “Lender” or any similar term shall, unless the context clearly otherwiseindicates, include Agent in its individual capacity as a Lender.  Agent may engage in business with anyBorrower as if it were not performing the duties specified herein, and mayaccept fees and other consideration from any Borrower for services inconnection with this Agreement or otherwise without having to account for thesame to Lenders.

 

14.9.                        Delivery of Documents.  Tothe extent Agent receives financial statements required under Sections 9.7,9.8, and 9.9 from any Borrower pursuant to the terms of this Agreement, Agentwill promptly furnish copies of such documents and information to Lenders.

 

14.10.                  Borrowers’ Undertaking to Agent. Without prejudice to their respective obligations to Lenders under theother provisions of this Agreement, each Borrower hereby undertakes with Agentto pay to Agent from time to time on demand all amounts from time to time dueand payable by it for the account of Agent or Lenders or any of them pursuantto this Agreement to the extent not already paid.  Any payment made pursuant to any such demandshall protanto satisfy the relevant Borrower’s obligations tomake payments for the account of Lenders or the relevant one or more of thempursuant to this Agreement.

 

14.11                     USA Patriot Act Certifications From Lendersand Transferees.  Each Lender, Purchasing Lender or Transfereethat is not incorporated under the laws of the United States of America or astate thereof (and is not excepted from the certification requirement containedin Section 313 of the USA Patriot Act and the applicable regulations because itis both (i) an affiliate of a depository institution or foreign bank thatmaintains a physical presence in the United states or foreign county, and (ii)subject to supervision by a banking authority regulating such affiliateddepository institution or foreign bank) shall deliver to Agent thecertification, or, if applicable, recertification, certifying that such Lenderis not a “shell” and certifying to other matters as required by Section 313 ofthe USA Patriot Act and the applicable regulations: (1) within 10 days afterthe execution and delivery of its Commitment Transfer Supplement, and (2) assuch other times as are required under the USA Patriot Act.

 

14.12                     No Reliance on Agent’s CustomerIdentification Program.  Each Lender acknowledges and agrees thatneither such Lender, nor any of its Affiliates, nor any Purchasing Lender orTransferee, may rely on Agent to carry out such Lender’s, Affiliate’s,participant’s or assignee’s customer identification program, or otherobligations required or imposed under or pursuant to the USA Patriot Act or theregulations thereunder, including the regulations contained in 31 CFR 103.121(as hereafter amended or replaced, the “CIP Regulations”), or any otherAnti-Terrorism Law, including any programs involving any of the following itemsrelating to or in connection with any of Borrowers, their Affiliates or theiragents, the Loan Documents or the transactions hereunder or contemplatedhereby: (1) any identity verification procedures, (2) any recordkeeping, (3)comparisons with government lists, applicable (4) customer notices or (5) otherprocedures required under the CIP Regulations or other laws.

 

14.13                     Tax Withholding Clause.  EachLender, Purchasing Lender or Transferee that is not incorporated under the Lawsof the United States of America or a state thereof (and, upon the writtenrequest of the Agent, each other Lender or assignee or participant of a Lender)agrees that it will deliver to Borrowers and to Agent two (2) duly completedappropriate valid Withholding Certificates (as defined under § 1.1441-1 (c)(16) of the Income Tax Regulations (the “Regulations”)) certifying its status(i.e. U.S. or foreign person) and, if appropriate, making a claim of reduced,or exemption from, U.S. withholding tax on the basis of an income tax treaty oran exemption provided by the Internal Revenue Code. The term “WithholdingCertificate” means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W8IMY andthe related statements and certifications as required under § 1.l441-l(e)(2)and/or (3) of the Regulations; a statement described in § 1.871-l4(c)(2)(v) ofthe Regulations; or any other certificates under the Internal Revenue Code orRegulations that certify or establish the status of a payee or beneficial owneras a U.S. or foreign person. Each Lender,

 

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PurchasingLender or Transferee required to deliver a Withholding Certificate to Borrowersand Agent pursuant to the preceding sentence shall deliver such WithholdingCertificate at least five (5)**BusinessDays before the effective date of any assignment or participation.  Each Lender, Purchasing Lender or Transfereewhich so delivers a Withholding Certificate shall deliver to Borrowers andAgent two (2) additional counterpart Withholding Certificates (or a successorform) on or before the date that the existing Withholding Certificate expiresor becomes obsolete or after the occurrence of any event requiring a change inthe most recent Withholding Certificate, and such amendments thereto orextensions or renewals thereof as may be reasonably requested by Borrowers orAgent.  Notwithstanding the submission ofa Withholding Certificate claiming a reduced rate of or exemption from U.S.withholding tax, the Agent shall be entitled to withhold United States federalincome taxes at the full thirty percent (30%) withholding rate if itdetermines, in its reasonable judgment, that it is required to do so under thedue diligence requirements imposed upon a withholding agent under § 1.1441-7(b)of the Regulations. Further, Agent is indemnified under § 1.1461 - 1(e) of theRegulations against any claims and demands of any Lender, Purchasing Lender orTransferee for the amount of any tax it deducts and withholds in accordancewith regulations under § 1441 of the Internal Revenue Code.

 

XV.                            BORROWING AGENCY

 

15.1.                        Borrowing Agency Provisions.

 

(a)                                  Each Borrower hereby irrevocably designatesBorrowing Agent to be its attorney and agent and in such capacity to borrow,sign and endorse notes, and execute and deliver all instruments, documents,writings and further assurances now or hereafter required hereunder, on behalfof such Borrower or Borrowers, and hereby authorizes Agent to pay over orcredit all loan proceeds hereunder in accordance with the request of BorrowingAgent.

 

(b)                                 The handling of this credit facility as aco-borrowing facility with a borrowing agent in the manner set forth in thisAgreement is solely as an accommodation to Borrowers and at their request.  Neither Agent nor any Lender shall incurliability to Borrowers as a result thereof. To induce Agent and Lenders to do so and in consideration thereof, eachBorrower hereby indemnifies Agent and each Lender and holds Agent and eachLender harmless from and against any and all liabilities, expenses, losses,damages and claims of damage or injury asserted against Agent or any Lender byany Person arising from or incurred by reason of the handling of the financingarrangements of Borrowers as provided herein, reliance by Agent or any Lenderon any request or instruction from Borrowing Agent or any other action taken byAgent or any Lender with respect to this Section 15.1 except due to willfulmisconduct or gross (not mere) negligence by the indemnified party.

 

(c)                                  All Obligations shall be joint and several,and each Borrower shall make payment upon the maturity of the Obligations byacceleration or otherwise, and such obligation and liability on the part ofeach Borrower shall in no way be affected by any extensions, renewals andforbearance granted to Agent or any Lender to any Borrower, failure of Agent orany Lender to give any Borrower notice of borrowing or any other notice, anyfailure of Agent or any Lender to pursue or preserve its rights against anyBorrower, the release by Agent or any Lender of any Collateral now orthereafter acquired from any Borrower, and such agreement by each Borrower topay upon any notice issued pursuant thereto is unconditional and unaffected byprior recourse by Agent or any Lender to the other Borrowers or any Collateralfor such Borrower’s Obligations or the lack thereof.  Each Borrower waives all suretyship defenses.

 

15.2.                        Waiver of Subrogation.  EachBorrower expressly waives any and all rights of subrogation, reimbursement,indemnity, exoneration, contribution of any other claim which such Borrower maynow or hereafter have against the other Borrowers or other Person directly orcontingently liable for the Obligations hereunder, or against or with respectto the other Borrowers’ property (including, without limitation, any propertywhich is Collateral for the Obligations), arising from the existence orperformance of this Agreement, until termination of this Agreement andrepayment in full of the Obligations.

 

XVI.                        MISCELLANEOUS

 

16.1.                        Governing Law.  ThisAgreement shall be governed by and construed in accordance with the laws of theState of New Jersey applied to contracts to be performed wholly within theState of New Jersey.  Any judicialproceeding brought by or against any Borrower with respect to any of theObligations, this Agreement or any related

 

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agreementmay be brought in any court of competent jurisdiction in the State of NewJersey, United States of America, and, by execution and delivery of thisAgreement, each Borrower accepts for itself and in connection with itsproperties, generally and unconditionally, the non-exclusive jurisdiction ofthe aforesaid courts, and irrevocably agrees to be bound by any judgmentrendered thereby in connection with this Agreement.  Each Borrower hereby waives personal serviceof any and all process upon it and consents that all such service of processmay be made by registered mail (return receipt requested) directed to BorrowingAgent at its address set forth in Section 16.6 and service so made shall bedeemed completed five (5) days after the same shall have been so deposited inthe mails of the United States of America, or, at Agent’s and/or any Lender’soption, by service upon Borrowing Agent which each Borrower irrevocablyappoints as such Borrower’s Agent for the purpose of accepting service withinthe State of New Jersey.  Nothing hereinshall affect the right to serve process in any manner permitted by law or shalllimit the right of Agent or any Lender to bring proceedings against anyBorrower in the courts of any other jurisdiction.  Each Borrower waives any objection tojurisdiction and venue of any action instituted hereunder and shall not assertany defense based on lack of jurisdiction or venue or based upon forum nonconveniens.  Any judicial proceedingby any Borrower against Agent or any Lender involving, directly or indirectly,any matter or claim in any way arising out of, related to or connected withthis Agreement or any related agreement, shall be brought only in a federal orstate court located in the County of Middlesex, State of New Jersey.

 

16.2.                        Entire Understanding.  (a)       This Agreement and the documents executed concurrentlyherewith contain the entire understanding between each Borrower, Agent and eachLender and supersedes all prior agreements and understandings, if any, relatingto the subject matter hereof.  Anypromises, representations, warranties or guarantees not herein contained andhereinafter made shall have no force and effect unless in writing, signed byeach Borrower’s, Agent’s and each Lender’s respective officers.  Neither this Agreement nor any portion orprovisions hereof may be changed, modified, amended, waived, supplemented,discharged, cancelled or terminated orally or by any course of dealing, or inany manner other than by an agreement in writing, signed by the party to becharged.  Each Borrower acknowledges thatit has been advised by counsel in connection with the execution of thisAgreement and Other Documents and is not relying upon oral representations orstatements inconsistent with the terms and provisions of this Agreement.

 

(b)                                 The Required Lenders, Agent with the consentin writing of the Required Lenders, and Borrowers may, subject to theprovisions of this Section 16.2(b), from time to time enter into writtensupplemental agreements to this Agreement or the Other Documents executed byBorrowers, for the purpose of adding or deleting any provisions or otherwisechanging, varying or waiving in any manner the rights of Lenders, Agent orBorrowers thereunder or the conditions, provisions or terms thereof of waivingany Event of Default thereunder, but only to the extent specified in such writtenagreements; provided, however, that no such supplementalagreement shall, without the consent of all Lenders:

 

(i)                                     increase the Commitment Percentage or maximumdollar commitment of any Lender;

 

(ii)                                  extend the maturity of any Note or the duedate for any amount payable hereunder, or decrease the rate of interest orreduce any fee payable by Borrowers to Lenders pursuant to this Agreement;

 

(iii)                               alter the definition of the term RequiredLenders or alter, amend or modify this Section 16.2(b); and

 

(iv)                              release any Collateral during any calendaryear (other than in accordance with the provisions of this Agreement) having anaggregate value in excess of $1,000,000.00;

 

(v)                                 change the rights and duties of Agent;

 

(vi)                              permit any Revolving Advance to be made ifafter giving effect thereto the total of Revolving Advances outstandinghereunder would exceed the Formula Amount for more than sixty (60) consecutiveBusiness Days or exceed one hundred and ten percent (110%) of the FormulaAmount;

 

(vii)                           increase the Advance Rates above the AdvanceRates in effect on the Closing Date.

 

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Anysuch supplemental agreement shall apply equally to each Lender and shall bebinding upon Borrowers, Lenders and Agent and all future holders of theObligations.  In the case of any waiver,Borrowers, Agent and Lenders shall be restored to their former positions andrights, and any Event of Default waived shall be deemed to be cured and not continuing,but no waiver of a specific Event of Default shall extend to any subsequentEvent of Default (whether or not the subsequent Event of Default is the same asthe Event of Default which was waived), or impair any right consequent thereon.

 

Inthe event that Agent requests the consent of a Lender pursuant to this Section16.2 and such Lender shall not respond or reply to Agent in writing within ten(10) days of delivery of such request, such Lender shall be deemed to haveconsented to matter that was the subject of the request.  In the event that Agent requests the consentof a Lender pursuant to this Section 16.2 and such consent is denied, then PNCmay, at its option, require such Lender to assign its interest in the Advancesto PNC or to another Lender or to any other Person designated by Agent (the“Designated Lender”), for a price equal to the then outstanding principalamount thereof plus accrued and unpaid interest and fees due such Lender, whichinterest and fees shall be paid when collected from Borrowers.  In the event PNC elects to require any Lenderto assign its interest to PNC or to the Designated Lender, PNC will so notifysuch Lender in writing within forty five (45) days following such Lender’sdenial, and such Lender will assign its interest to PNC or the Designated Lenderno later than five (5) days following receipt of such notice pursuant to aCommitment Transfer Supplement executed by such Lender, PNC or the DesignatedLender, as appropriate, and Agent.

 

Notwithstanding(a) the existence of a Default or an Event of Default, (b) that any of theother applicable conditions precedent set forth in Section 8.2 hereof have notbeen satisfied or (c) any other provision of this Loan Agreement, Agent may atits discretion and without the consent of the Required Lenders, voluntarilypermit the outstanding Revolving Advances at any time to exceed the FormulaAmount by up to one hundred and ten percent (110%) of the Formula Amount for upto thirty (30) consecutive Business Days. For purposes of the preceding sentence, the discretion granted to Agenthereunder shall not preclude involuntary overadvances that may result from timeto time due to the fact that the Formula Amount was unintentionally exceededfor any reason, including, but not limited to, Collateral previously deemed tobe either “Eligible Receivables” or “Eligible Inventory”, as applicable,becomes ineligible, collections of Receivables applied to reduce outstandingRevolving Advances are thereafter returned for insufficient funds oroveradvances are made to protect or preserve the Collateral.  In the event Agent involuntarily permits theoutstanding Revolving Advances to exceed the Formula Amount by more than tenpercent (10%), Agent shall use its efforts to have Borrowers decrease suchexcess in as expeditious a manner as is practicable under the circumstances andnot inconsistent with the reason for such excess.  Revolving Advances made after Agent hasdetermined the existence of involuntary overadvances shall be deemed to beinvoluntary overadvances and shall be decreased in accordance with thepreceding sentence.

 

Inaddition to (and not in substitution of) the discretionary Revolving Advancespermitted above in this Section 16.2, Agent is hereby authorized by Borrowersand Lenders, from time to time in Agent’s sole discretion, (a) after theoccurrence and during the continuation of a Default or an Event of Default, or(b) at any time that any of the other applicable conditions precedent set forthin Section 8.2 hereof have not been satisfied, to make Revolving Advances toBorrowers on behalf of Lenders which Agent, in its reasonable businessjudgment, deems necessary or desirable (a) to preserve or protect theCollateral, or any portion thereof, (b) to enhance the likelihood of, ormaximize the amount of, repayment of the Advances and other Obligations, or(iii) to pay any other amount chargeable to Borrowers pursuant to the terms ofthis Agreement; provided, that at any time after giving effect toany such Revolving Advances the outstanding Revolving Advances do not exceedone hundred and ten percent (110%) of the Formula Amount.

 

16.3.                        Successors and Assigns; Participations; NewLenders.

 

(a)                                  This Agreement shall be binding upon andinure to the benefit of Borrowers, Agent, each Lender, all future holders ofthe Obligations and their respective successors and assigns, except that noBorrower may assign or transfer any of its rights or obligations under thisAgreement without the prior written consent of Agent and each Lender.

 

(b)                                 Each Borrower acknowledges that in the regularcourse of commercial banking business one or more Lenders may at any time andfrom time to time sell participating interests in the Advances to otherfinancial

 

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institutions(each such transferee or purchaser of a participating interest, a“Transferee”).  Each Transferee mayexercise all rights of payment (including without limitation rights of set-off)with respect to the portion of such Advances held by it or other Obligationspayable hereunder as fully as if such Transferee were the direct holder thereofprovided that Borrowers shall not be required to pay to any Transferee morethan the amount which it would have been required to pay to Lender whichgranted an interest in its Advances or other Obligations payable hereunder tosuch Transferee had such Lender retained such interest in the Advanceshereunder or other Obligations payable hereunder and in no event shallBorrowers be required to pay any such amount arising from the samecircumstances and with respect to the same Advances or other Obligationspayable hereunder to both such Lender and such Transferee.  Each Borrower hereby grants to any Transfereea continuing security interest in any deposits, moneys or other propertyactually or constructively held by such Transferee as security for theTransferee’s interest in the Advances.

 

(c)                                  Any Lender may with the consent of Agentwhich shall not be unreasonably withheld or delayed sell, assign or transferall or any part of its rights under this Agreement and the Other Documents toone or more additional banks or financial institutions and one or moreadditional banks or financial institutions may commit to make Advanceshereunder (each a “Purchasing Lender”), in minimum amounts of not less thanFive Million Dollars ($5,000,000.00), pursuant to a Commitment TransferSupplement, executed by a Purchasing Lender, the transferor Lender, and Agentand delivered to Agent for recording. Upon such execution, delivery, acceptance and recording, from and afterthe transfer effective date determined pursuant to such Commitment TransferSupplement, (i) Purchasing Lender thereunder shall be a party hereto and, tothe extent provided in such Commitment Transfer Supplement, have the rights andobligations of a Lender thereunder with a Commitment Percentage as set forththerein, and (ii) the transferor Lender thereunder shall, to the extentprovided in such Commitment Transfer Supplement, be released from itsobligations under this Agreement, the Commitment Transfer Supplement creating anovation for that purpose.  SuchCommitment Transfer Supplement shall be deemed to amend this Agreement to theextent, and only to the extent, necessary to reflect the addition of suchPurchasing Lender and the resulting adjustment of the Commitment Percentagesarising from the purchase by such Purchasing Lender of all or a portion of therights and obligations of such transferor Lender under this Agreement and theOther Documents.  Borrowers herebyconsent to the addition of such Purchasing Lender and the resulting adjustmentof the Commitment Percentages arising from the purchase by such PurchasingLender of all or a portion of the rights and obligations of such transferorLender under this Agreement and the Other Documents.  Borrowers shall execute and deliver suchfurther documents and do such further acts and things in order to effectuatethe foregoing.

 

(d)                                 Agent shall maintain at its address a copy ofeach Commitment Transfer Supplement delivered to it and a register (the“Register”) for the recordation of the names and addresses of the Advancesowing to each Lender from time to time. The entries in the Register shall be conclusive, in the absence ofmanifest error, and Borrowers, Agent and Lenders may treat each Person whosename is recorded in the Register as the owner of the Advance recorded thereinfor the purposes of this Agreement.  TheRegister shall be available for inspection by Borrowers or any Lender at anyreasonable time and from time to time upon reasonable prior notice.  Agent shall receive a fee in the amount of$3,500 payable by the applicable Purchasing Lender upon the effective date ofeach transfer or assignment to such Purchasing Lender.  Agent shall provide Borrower notice of anysuch transfer or assignment, identify the Purchasing Lender and the amount andpercentage of the Commitment transferred or assigned not later than ten (10)days after the effective date of the applicable Commitment Transfer Supplement.

 

(e)                                  Each Borrower authorizes each Lender todisclose to any Transferee or Purchasing Lender and any prospective Transfereeor Purchasing Lender any and all financial information in such Lender’spossession concerning such Borrower which has been delivered to such Lender byor on behalf of such Borrower pursuant to this Agreement or in connection withsuch Lender’s credit evaluation of such Borrower.

 

16.4.                        Application of Payments. Agent shall have the continuing and exclusive right to apply or reverseand re-apply any payment and any and all proceeds of Collateral to any portionof the Obligations.  To the extent thatany Borrower makes a payment or Agent or any Lender receives any payment orproceeds of the Collateral for any Borrower’s benefit, which are subsequently invalidated,declared to be fraudulent or preferential, set aside or required to be repaidto a trustee, debtor in possession, receiver, custodian or any other partyunder any bankruptcy law, common law or equitable cause, then, to such extent,the Obligations or part thereof intended to be satisfied shall be revived andcontinue as if such payment or proceeds had not been received by Agent or suchLender.

 

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16.5.                        Indemnity.  Each Borrower shall indemnifyAgent, each Lender and each of their respective officers, directors,Affiliates, employees and agents from and against any and all liabilities,obligations, losses, damages, penalties, actions, judgments, suits, costs,expenses and disbursements of any kind or nature whatsoever (including, withoutlimitation, fees and disbursements of counsel) which may be imposed on,incurred by, or asserted against Agent or any Lender in any litigation,proceeding or investigation instituted or conducted by any governmental agencyor instrumentality or any other Person with respect to any aspect of, or anytransaction contemplated by, or referred to in, or any matter related to, thisAgreement or the Other Documents, whether or not Agent or any Lender is a partythereto, except to the extent that any of the foregoing arises out of thewillful misconduct or gross negligence of the party being indemnified.

 

16.6.                        Notice.  Any notice or requesthereunder may be given to Borrowing Agent or any Borrower or to Agent or anyLender at their respective addresses set forth below or at such other addressas may hereafter be specified in a notice designated as a notice of change ofaddress under this Section.  Any notice,request, demand, direction or other communication (for purposes of this Section16.6 only, a “Notice”) to be given to or made upon any party hereto under anyprovision of this Loan Agreement shall be given or made by telephone or inwriting (which includes by means of electronic transmission (i.e., “e-mail”) orfacsimile transmission or by setting forth such Notice on a site on the WorldWide Web (a “Website Posting”) if Notice of such Website Posting (including theinformation necessary to access such site) has previously been delivered to theapplicable parties hereto by another means set forth in this Section 16.6) inaccordance with this Section 16.6.  Anysuch Notice must be delivered to the applicable parties hereto at the addressesand numbers set forth under their respective names on Section 16.6 hereof or inaccordance with any subsequent unrevoked Notice from any such party that isgiven in accordance with this Section 16.6. Any Notice shall be effective:

 

(a)                                  In the case of hand-delivery, when delivered;

 

(b)                                 If given by mail, five (5) days after suchNotice is deposited with the United States Postal Service, with first-classpostage prepaid, return receipt requested;

 

(c)                                  In the case of a telephonic Notice, when aparty is contacted by telephone, if delivery of such telephonic Notice isconfirmed no later than the next Business Day by hand delivery, a facsimile orelectronic transmission, a Website Posting or an overnight courier delivery ofa confirmatory Notice (received at or before noon on such next Business Day);

 

(d)                                 In the case of a facsimile transmission, whensent to the applicable party’s facsimile machine’s telephone number, if theparty sending such Notice receives confirmation of the delivery thereof fromits own facsimile machine;

 

(e)                                  In the case of electronic transmission, whenactually received;

 

(f)                                    In the case of a Website Posting, upondelivery of a Notice of such posting (including the information necessary toaccess such site) by another means set forth in this Section 16.6; and

 

(g)                                 If given by any other means (including byovernight courier), when actually received.

 

AnyLender giving a Notice to Borrowing Agent or any Borrower shall concurrentlysend a copy thereof to Agent, and Agent shall promptly notify the other Lendersof its receipt of such Notice.

 
| (A)    | If  to Agent or PNC at: | PNC  Bank, National Association  |
|--------|-------------------------|----------------------------------|
|   |                    | PNC  Business Credit, Inc.       |
|   |                    | 70  East 55th street, 14th Floor |
|   |                    | New  York, New York 10022        |
|   |                    | Attention:                       | Michelle  Stanley-Nurse, V.P. |
|   |                    | Telephone:                       | (646)  497-0145 |
|   |                    | Telecopier:                      | (646)  497-0324 |

 

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|   | and  a copy to:                                                               | Pitney,  Hardin, Kipp & Szuch LLP |
|--------|-------------------------------------------------------------------------------|---------------------------------------|
|   |                                                                          | *Postal Service Address:*             |
|   |                                                                          | P.O.  Box 1945                        |
|   |                                                                          | Morristown,  New Jersey 07962-1945    |
|   |                                                                          | *Courier Address:*                    |
|   |                                                                          | 200  Campus Drive                     |
|   |                                                                          | Florham  Park New Jersey 07932        |
|   |                                                                          | Attention:                            | Linda  K. Smith, Esq. |
|   |                                                                          | Telephone:                            | (973)  966-8420 |
|   |                                                                          | Telecopier:                           | (973)  966-1550 |
|   |                                                                          |                                  |
|   | and,  from and after any  syndication, with a copy to:                        | PNC  Bank, National Association       |
|   |                                                                          | PNC  Agency Services                  |
|   |                                                                          | One  PNC Plaza                        |
|   |                                                                          | 249  Fifth Avenue                     |
|   |                                                                          | Pittsburgh,  Pennsylvania 15222       |
|   |                                                                          | Telephone:                            | (412)  762-3627 |
|   |                                                                          | Telecopier:                           | (412)  762-8672 |
|   |                                                                          |                                  |
| (B)    | If  to a Lender other than Agent, as specified on the signature pages hereof. |
|   |                                                                          |
| (C)    | If  to Borrowing Agent  or any Borrower, at:                                  | Bio-Reference  Laboratories, Inc.     |
|   |                                                                          | 481  Edward H. Ross Drive             |
|   |                                                                          | Elmwood  Park, New Jersey 07407       |
|   |                                                                          | Attention:                            | Sam  Singer, Chief Financial Officer |
|   |                                                                          | Telephone:                            | (201)  791-2600 |
|   |                                                                          | Telecopier:                           | (201)  475-8730 |
|   |                                                                          |                                  |
|   | with  a copy to:                                                              | Tolins  & Lowenfels               |
|   |                                                                          | 747  Third Avenue, 19th Floor         |
|   |                                                                          | New  York, New York 10017             |
|   |                                                                          | Attention:                            | Roger  Tolins, Esq. |
|   |                                                                          | Telephone:                            | (212)  421-1965 |
|   |                                                                          | Telecopier:                           | (212)  888-7706 |
|        |                                                                               |                                       |  |  |

 

16.7.                        Survival.  The obligations of Borrowersunder Sections 2.2(f), 3.7, 3.8, 3.9, 4.19(h), 14.7 and 16.5 shall survivetermination of this Agreement and the Other Documents and payment in full ofthe Obligations.

 

16.8.                        Severability.  Ifany part of this Agreement is contrary to, prohibited by, or deemed invalidunder applicable laws or regulations, such provision shall be inapplicable anddeemed omitted to the extent so contrary, prohibited or invalid, but theremainder hereof shall not be invalidated thereby and shall be given effect sofar as possible.

 

16.9.                        Expenses.  All costs and expensesincluding, without limitation, reasonable attorneys’ fees (including theallocated costs of in house counsel) and disbursements incurred by Agent on itsbehalf or on behalf of Lenders (a) in all efforts made to enforce payment ofany Obligation or effect collection of any Collateral, or (b) in connectionwith the entering into, modification, amendment, administration and enforcementof this Agreement or any consents or waivers hereunder and all relatedagreements, documents and instruments, or (c) in instituting, maintaining,preserving, enforcing and foreclosing on Agent’s security interest in or Lienon any of the Collateral, whether through judicial proceedings or otherwise, or(d) in defending or prosecuting any actions or proceedings arising out of orrelating to Agent’s or any Lender’s transactions with any Borrower, or (e) inconnection with any advice given to Agent or any Lender with respect

 

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toits rights and obligations under this Agreement and all related agreements, maybe charged to Borrowers’ Account and shall be part of the Obligations.

 

16.10.                  Injunctive Relief.  EachBorrower recognizes that, in the event any Borrower fails to perform, observeor discharge any of its obligations or liabilities under this Agreement, anyremedy at law may prove to be inadequate relief to Lenders; therefore, Agent,if Agent so requests, shall be entitled to temporary and permanent injunctiverelief in any such case without the necessity of proving that actual damagesare not an adequate remedy.

 

16.11.                  Consequential Damages. Neither Agent nor any Lender, nor any agent or attorney for any of them,shall be liable to any Borrower for consequential damages arising from anybreach of contract, tort or other wrong relating to the establishment,administration or collection of the Obligations.

 

16.12.                  Captions.  The captions at various placesin this Agreement are intended for convenience only and do not constitute andshall not be interpreted as part of this Agreement.

 

16.13.                  Counterparts; Telecopied Signatures.  ThisAgreement may be executed in any number of and by different parties hereto onseparate counterparts, all of which, when so executed, shall be deemed anoriginal, but all such counterparts shall constitute one and the sameagreement.  Any signature delivered by aparty by facsimile transmission shall be deemed to be an original signature hereto.

 

16.14.                  Construction.  Theparties acknowledge that each party and its counsel have reviewed thisAgreement and that the normal rule of construction to the effect that anyambiguities are to be resolved against the drafting party shall not be employedin the interpretation of this Agreement or any amendments, schedules orexhibits thereto.

 

16.15.                  Confidentiality; Sharing Information.  (a)                         Agent, each Lender and each Transferee shallhold all non-public information obtained by Agent, such Lender or suchTransferee pursuant to the requirements of this Agreement in accordance withAgent’s, such Lender’s and such Transferee’s customary procedures for handlingconfidential information of this nature; provided, however,Agent, each Lender and each Transferee may disclose such confidentialinformation (i) to its examiners, affiliates, outside auditors, counsel andother professional advisors, (ii) to Agent, any Lender or to any prospectiveTransferees and Purchasing Lenders, and (iii) as required or requested by anyGovernmental Body or representative thereof or pursuant to legal process; provided,further that (A) unless specifically prohibited by applicable law orcourt order, Agent, each Lender and each Transferee shall use its best effortsprior to disclosure thereof, to notify the applicable Borrower of theapplicable request for disclosure of such non-public information (1) by aGovernmental Body or representative thereof (other than any such request inconnection with an examination of the financial condition of a Lender or aTransferee by such Governmental Body) or (2) pursuant to legal process and (B)in no event shall Agent, any Lender or any Transferee be obligated to returnany materials furnished by any Borrower other than those documents and instrumentsin possession of Agent or any Lender in order to perfect its Lien on theCollateral once the Obligations have been paid in full and this Agreement hasbeen terminated.

 

(b)                                 Each Borrower acknowledges that from time totime financial advisory, investment banking and other services may be offeredor provided to such Borrower or one or more of its Affiliates (in connectionwith this Agreement or otherwise) by any Lender or by one or more Subsidiariesor Affiliates of such Lender and each Borrower hereby authorizes each Lender toshare any information delivered to such Lender by such Borrower and itsSubsidiaries pursuant to this Agreement, or in connection with the decision ofsuch Lender to enter into this Agreement, to any such Subsidiary or Affiliate ofsuch Lender, it being understood that any such Subsidiary or Affiliate of anyLender receiving such information shall be bound by the provision of Section16.15 as if it were a Lender hereunder. Such authorization shall survive the repayment of the other Obligationsand the termination of the Loan Agreement.

 

(c)                                  Notwithstanding anything herein to thecontrary, the information subject to this Section 16.15 shall not include, andAgent and each Lender and Transferee may disclose without limitation of anykind, any information with respect to the “tax treatment” and “tax structure”(in each case, within the meaning of Treasury Regulation Section 1.6011-4) ofthe transactions contemplated hereby and all materials of any kind (includingopinions or other tax analyses) that are provided to Agent or such Lenderrelating to such tax treatment and tax structure; provided that withrespect to any document or similar item that in either case containsinformation concerning the tax treatment or tax structure of the

 

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transactionas well as other information, this sentence shall only apply to such portionsof the document or similar item that relate to the tax treatment or taxstructure of the Revolving Loans and other accommodations contemplated hereby.

 

(d)                                 Notwithstanding anything herein to thecontrary, Borrowers are authorized to publicly disclose such informationconcerning this Agreement and the transactions contemplated hereby as theyreasonably believe is required pursuant to the federal securities laws and anyother applicable laws and the regulations promulgated thereunder.

 

16.16.                  Publicity.  Each Borrower and each Lenderhereby authorizes Agent to make appropriate announcements of the financialarrangement entered into among Borrowers, Agent and Lenders, including, withoutlimitation, announcements which are commonly known as tombstones, in suchpublications and to such selected parties as Agent shall in its sole andabsolute discretion deem appropriate.

 

XVII.                    CONTINUING NATURE OF OBLIGATIONS AND SECURITYINTEREST

 

17.1.                        Amendment and Restatement.  ThisAgreement is an amendment and restatement of the Existing Loan Agreement in itsentirety.

 

17.2.                        Continuing Obligations.

 

(a)                                  This Agreement is not intended and shall notbe deemed to constitute a novation of indebtedness.

 

(b)                                 All of the Obligations are continuing innature and, as of the Closing Date, are due in accordance with the terms ofthis Agreement without any defense, offset, counterclaim or recoupment.

 

(c)                                  As of the close of business on October 4,2004, the aggregate outstanding principal balance of the Revolving Advancesequals Ten Million Three Hundred Thirty Nine Thousand One and 90/100 Dollars($10,339,001.90).

 

17.3.                        Continuing Security Interests.  Theliens and security interests in and to the Collateral in favor of PNC whichwere created under the Existing Loan Agreement, and which are reaffirmedhereunder, are continuing and uninterrupted liens and security interests.

 

**Signature page follows.**

 

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Eachof the parties has signed this Amended and Restated Loan and Security Agreementas of the day and year first above written.

 

 
| ATTEST: |                             | BIO-REFERENCE  LABORATORIES, INC. |
|---------|----------------------------------|-----------------------------------|
|    |                             |                              |
|    |                             |
| By:     |   /S/ SAM  SINGER |                              | By: | /S/ MARC D. GRODMAN |   |
|    | SAM SINGER, Secretary            |                              | MARC D. GRODMAN, President |
|    |                             |                              |
|    |                             |                              |
| ATTEST: |                             | MEDILABS, INC.,                   |
|    |                             | a Subsidiary Party                |
|    |                             |                              |
|    |                             |                              |
| By      |   /S/ SAM  SINGER |                              | By: : | /S/ MARC D. GRODMAN |
|    | SAM SINGER, Secretary            |                              | MARC D. GRODMAN, President |
|    |                             |                              |
|    |                             |                              |
|    |                             | PNC BANK, NATIONAL  ASSOCIATION   |
|    |                             |                              |
|    |                             |                              |
|    |                             | By:                               | /S/ MICHELLE  STANLEY-NURSE |
|    |                             |                              | MICHELLE STANLEY-NURSE |
|    |                             |                              | Vice President |
|    |                             |                              |
|    |                             | Commitment percentage:  100%      |
|         |                                  |                                   |  |  |  |  |  |  |  |  |  |  |

 

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