Document:

Exhibit 10.2

 

SECURITY
AGREEMENT

 

This SECURITY
AGREEMENT (this “Agreement”)
is dated as of January 31, 2005 and entered into by and among QUIDEL CORPORATION, a Delaware corporation (“Borrower”), each of THE UNDERSIGNED DIRECT AND INDIRECT SUBSIDIARIES
of Borrower (each of such undersigned Subsidiaries being a “Subsidiary Grantor” and collectively “Subsidiary Grantors”) and each ADDITIONAL GRANTOR that may become a party hereto after the
date hereof in accordance with Section 21 hereof (each of Borrower, each
Subsidiary Grantor, and each Additional Grantor being a “Grantor” and collectively the “Grantors”) and BANK OF
AMERICA, N.A., as Agent for and representative of (in such capacity
herein called “Secured Party”) the
Beneficiaries (as hereinafter defined).

 

PRELIMINARY
STATEMENTS

 

A.            Pursuant
to the Credit Agreement dated as of January 31, 2005 (as amended, restated,
extended, supplemented or otherwise modified in writing from time to time, the “Credit Agreement;” the terms defined
therein and not otherwise defined in Section 31, the UCC or elsewhere herein
being used herein as therein defined), by and among Borrower, the financial
institutions listed therein as Lenders and Bank of America, N.A., as Agent (in
such capacity, “Agent”), Lenders have made certain commitments, subject to the
terms and conditions set forth in the Credit Agreement, to extend certain
credit facilities to Borrower.

 

B.            Borrower
may from time to time enter, or may from time to time have entered, into one or
more Lender Swap Contracts with one or more Swap Counterparties in accordance
with the terms of the Credit Agreement, and it is desired that the obligations
of Borrower under the Lender Swap Contracts, including, without limitation, the
obligation of Borrower to make payments thereunder in the event of early
termination thereof, together with all obligations of Borrower under the Credit
Agreement and the other Loan Documents, be secured hereunder.

 

C.            Subsidiary
Grantors have executed and delivered the Subsidiary Guaranty, in each case in
favor of Secured Party for the benefit of Lenders and any Swap Counterparties,
pursuant to which each Subsidiary Grantor has guarantied the prompt payment and
performance when due of all obligations of Borrower under the Credit Agreement
and all obligations of Borrower under the Lender Swap Contracts.

 

D.            It
is a condition precedent to the initial extensions of credit by Lenders under
the Credit Agreement that Grantors listed on the signature pages hereof shall
have granted the security interests and undertaken the obligations contemplated
by this Agreement.

 

NOW, THEREFORE, in
consideration of the agreements set forth herein and in the Credit Agreement
and in order to induce Lenders to make Loans and other extensions of credit
under the Credit Agreement and to induce Swap Counterparties to enter into the
Lender Swap Contracts, each Grantor hereby agrees with Secured Party as
follows:

 

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SECTION 1.         Grant
of Security.

 

Each Grantor hereby assigns to Secured Party, and
hereby grants to Secured Party a security interest in, all of such Grantor’s
right, title and interest in and to all of the personal property of such
Grantor, in each case whether now or hereafter existing, whether tangible or
intangible, whether now owned or hereafter acquired, wherever the same may be
located and whether or not subject to the Uniform Commercial Code as it exists
on the date of this Agreement, or as it may hereafter be amended in the State
of California (the “UCC”),
including the following (the “Collateral”):

 

(a)           all
Accounts;

 

(b)           all
Chattel Paper;

 

(c)           all
Money and all Deposit Accounts, together with all amounts on deposit from time
to time in such Deposit Accounts;

 

(d)           all
Documents;

 

(e)           all
General Intangibles, including all intellectual property, Payment Intangibles
and Software;

 

(f)            all
Goods, including Inventory, Equipment and Fixtures;

 

(g)           all
Instruments;

 

(h)           all
Investment Property;

 

(i)            all
Letter-of-Credit Rights and other Supporting Obligations;

 

(j)            all
Records;

 

(k)           all
Commercial Tort Claims, including those set forth on Schedule 1  annexed hereto; and

 

(l)            all
Proceeds and Accessions with respect to any of the foregoing Collateral.

 

Each category of Collateral set forth above shall have
the meaning set forth in the UCC (to the extent such term is defined in the
UCC), it being the intention of Grantors that the description of the Collateral
set forth above be construed to include the broadest possible range of assets.

 

Notwithstanding anything herein to the contrary, in no
event shall the Collateral include, and no Grantor shall be deemed to have
granted a security interest in, any of such Grantor’s rights or interests in or
under, any license, contract, permit, Instrument, Security or franchise to
which such Grantor is a party or any of its rights or interests thereunder to
the extent, but only to the extent, that such a grant would, under the terms of
such license, contract, permit, Instrument, Security or franchise, result in a
breach of the terms of, or constitute a default under, such license, contract,
permit, Instrument, Security or franchise (other than to the extent that any

 

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such term would be rendered ineffective pursuant to
the UCC or any other applicable law (including the Bankruptcy Code) or
principles of equity); provided, that immediately upon the
ineffectiveness, lapse or termination of any such provision the Collateral
shall include, and such Grantor shall be deemed to have granted a security
interest in, all such rights and interests as if such provision had never been
in effect.

 

Notwithstanding the foregoing, the Collateral shall
not include (a) any equity interests issued by a Person if such Person is a
controlled foreign corporation (used hereinafter as such term is defined in
Section 957(a) or any successor provision of the Internal Revenue Code), in
excess of the amount of such equity interests possessing up to but not
exceeding 65% of the voting power of all classes of such equity interests
entitled to vote of such Person, and (b) assets subject to any Lien permitted
under Section 7.1(j) of the Credit Agreement where the security agreement or
other instrument creating such purchase money Lien prohibits the granting of a
security interest in such assets to Secured Party or results in an event of
default under such security agreement or instrument (other than to the extent
that such term would be rendered ineffective pursuant to the UCC or any other
applicable law (including the Bankruptcy Code)); provided that the
security interest in any such assets shall automatically attach hereunder when
and after any such Liens are discharged or released or when the assets
encumbered by such Liens is no longer subject to such restrictions; provided
further, that in any event any Account or any money or other amounts due
or to become due under any such contract, agreement, instrument or indenture
shall not be excluded from the definition of Collateral to the extent that any
of the foregoing is (or if it contained a provision limiting the
transferability or pledge thereof would be) subject to Section 9406 of the UCC.

 

SECTION 2.         Security
for Obligations.

 

This Agreement secures, and the Collateral is
collateral security for, the prompt payment or performance in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise, of all Secured Obligations of each Grantor.  “Secured
Obligations” means:

 

(a)           with
respect to Borrower, all obligations and liabilities of every nature of
Borrower now or hereafter existing under or arising out of or in connection
with the Credit Agreement and the other Loan Documents and any Lender Swap
Contract (including all Obligations (as defined in the Credit Agreement)); and

 

(b)           with
respect to each Subsidiary Grantor and Additional Grantor, all obligations and
liabilities of every nature of such Subsidiary Grantor now or hereafter
existing under or arising out of or in connection with the Subsidiary Guaranty
(including all Guarantied Obligations (as defined in the Subsidiary Guaranty));

 

in each case
together with all extensions or renewals thereof, whether for principal,
interest, reimbursement of amounts drawn under Letters of Credit, payments for
early termination of Lender Swap Contracts, fees, expenses, indemnities or
otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with
others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such
obligations or liabilities that

 

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are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Lender or Swap Counterparty as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature of Grantors now or hereafter existing under this Agreement (including,
without limitation, interest and other amounts that, but for the filing of a
petition in bankruptcy with respect to Borrower or any other Grantor, would
accrue on such obligations, whether or not a claim is allowed against Borrower
or such Grantor for such amounts in the related bankruptcy proceeding).

 

SECTION 3.         Grantors
Remain Liable.

 

Anything contained herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under any contracts and
agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release any Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any
contracts, licenses, and agreements included in the Collateral by reason of
this Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of any Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.

 

SECTION 4.         Representations
and Warranties.

 

Each Grantor represents and warrants as follows:

 

(a)           Ownership of Collateral.  Except as expressly permitted by the Credit
Agreement, such Grantor owns its interests in the Collateral free and clear of
any Lien and no effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any filing or
recording office, including any IP Filing Office.

 

(b)           Perfection. 
The security interests in the Collateral granted to Secured Party for
the ratable benefit of Lenders and Swap Counterparties hereunder constitute
valid security interests in the Collateral, securing the payment of the Secured
Obligations.  Upon (i) the filing of
UCC financing statements naming each Grantor as “debtor”, naming Secured Party
as “secured party” and describing the Collateral in the filing offices with
respect to such Grantor set forth on Schedule 2 annexed hereto,
(ii) in the case of the Securities Collateral consisting of certificated
Securities or evidenced by Instruments, in addition to filing of such UCC
financing statements, delivery of the certificates representing such
certificated Securities and delivery of such Instruments to Secured Party, and
in the case of Securities Collateral issued by a foreign issuer, any actions
required under foreign law to perfect a security interest in such Securities
Collateral), in each case duly endorsed or accompanied by duly executed
instruments of assignment or transfer in blank, (iii) in the case of the
Intellectual Property Collateral described in clause (a) of the definition
thereof, in addition to the filing of such UCC financing statements, the
recordation of a Grant with the applicable IP Filing Office, (iv) in the
case of Equipment that is covered by a certificate of title, the filing with
the registrar of motor vehicles or other appropriate authority in the
applicable jurisdiction of an application requesting the notation of the
security interest created hereunder on such certificate of title, and (v), in
the case

 

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of any Deposit Account and any Investment Property
constituting a Security Entitlement, Securities Account, Commodity Contract or
Commodity Account, the execution and delivery to Secured Party of an agreement
providing for control by Secured Party thereof, the security interests in the
Collateral (except for security interests in Collateral that cannot be
perfected by the filing of financing statements and are not material to the
Company) granted to Secured Party for the ratable benefit of Lenders and Swap
Counterparties will constitute perfected security interests therein prior to
all other Liens (except for Liens permitted by clauses (b) through (i) of
subsection 7.1 of the Credit Agreement), and all filings and other actions
necessary or desirable to perfect and protect such security interests have been
duly made or taken.

 

(c)           Office Locations; Type and Jurisdiction of
Organization; Locations of Equipment and Inventory.  Such Grantor’s name as it appears in official
filings in the jurisdiction of its organization, type of organization (i.e.
corporation, limited partnership, etc.), jurisdiction of organization,
principal place of business, chief executive office, office where such Grantor
keeps its Records regarding the Accounts, Intellectual Property and originals
of Chattel Paper, and organization number provided by the applicable Government
Authority of the jurisdiction of organization are set forth on Schedule 3
annexed hereto.  All of the Equipment and
Inventory is located at the places set forth on Schedule 4 annexed
hereto, except for Inventory which, in the ordinary course of business, is in
transit either (i) from a supplier to a Grantor, (ii) between the
locations set forth on Schedule 4 annexed hereto, or (iii) to
customers of a Grantor.

 

(d)           Names. 
No Grantor (or predecessor by merger or otherwise of such Grantor) has,
within the five year period preceding the date hereof, or, in the case of an
Additional Grantor, the date of the applicable Counterpart, had a different
name from the name of such Grantor listed on the signature pages hereof, except
the names set forth on Schedule 5 annexed hereto.

 

(e)           Delivery of Certain Collateral.  All certificates or Instruments (excluding
checks) evidencing, comprising or representing the Collateral having a value or
face amount in excess of $25,000 have been delivered to Secured Party duly
endorsed or accompanied by duly executed instruments of transfer or assignment
in blank.

 

(f)            Securities Collateral.  All of the Pledged Subsidiary Equity set
forth on Schedule 6 annexed hereto has been duly authorized and validly
issued and is fully paid and non-assessable; all of the Pledged Subsidiary Debt
set forth on Schedule 7 annexed hereto has been duly authorized and is
the legally valid and binding obligation of the issuers thereof and is not in
default; there are no outstanding warrants, options or other rights to
purchase, or other agreements outstanding with respect to, or property that is
now or hereafter convertible into, or that requires the issuance or sale of,
any Pledged Subsidiary Equity; Schedule 6 annexed hereto sets forth all
of the Equity Interests and the Pledged Equity owned by each Grantor, and the
percentage ownership in each issuer thereof; and Schedule 7 annexed
hereto sets forth all of the Pledged Debt owned by such Grantor.

 

(g)           Intellectual Property Collateral.  A true and complete list of all Trademark
Registrations and applications for any Trademark owned, held (whether pursuant
to a license or otherwise) or used by such Grantor, in whole or in part, is set
forth on Schedule 8 

 

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annexed hereto; a true and complete list of all
Patents owned, held (whether pursuant to a license or otherwise) or used by
such Grantor, in whole or in part, is set forth on Schedule 9 annexed
hereto; a true and complete list of all Copyright Registrations and
applications for Copyright Registrations held (whether pursuant to a license or
otherwise) by such Grantor, in whole or in part (other than non-exclusive
licenses obtained in the ordinary course of business), is set forth on Schedule
10 annexed hereto; and such Grantor is not aware of any pending or
threatened claim by any third party that any of the Intellectual Property
Collateral owned, held or used by such Grantor is invalid or unenforceable.

 

(h)           Deposit Accounts, Securities Accounts, Commodity
Accounts.  Schedule 11
annexed hereto lists all Deposit Accounts, Securities Accounts and Commodity
Accounts owned by each Grantor, and indicates the institution or intermediary
at which the account is held and the account number.

 

(i)            Chattel Paper.  Such Grantor has no interest in any Chattel
Paper, except as set forth in Schedule 12 annexed hereto.

 

(j)            Letter-of-Credit Rights.  Such Grantor has no interest in any
Letter-of-Credit Rights, except as set forth on Schedule 13 annexed
hereto.

 

(k)           Documents. 
No negotiable Documents are outstanding with respect to any of the
Inventory, except as set forth on Schedule 14 annexed hereto.

 

The representations and warranties as to the information set forth in
Schedules referred to herein are made as to each Grantor (other than Additional
Grantors) as of the date hereof and as to each Additional Grantor as of the
date of the applicable Counterpart, except that, in the case of a Pledge
Supplement, IP Supplement or notice delivered pursuant to Section 5(d) hereof,
such representations and warranties are made as of the date of such supplement
or notice.

 

SECTION 5.         Further
Assurances.

 

(a)           Generally. 
Each Grantor agrees that from time to time, at the expense of Grantors,
such Grantor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Secured Party may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.  Without
limiting the generality of the foregoing, each Grantor will:  (i) notify Secured Party in writing of
receipt by such Grantor of any interest in Chattel Paper having a value or face
amount in excess of $25,000 and at the request of Secured Party, mark
conspicuously each item of Chattel Paper and each of its records pertaining to
the Collateral, with a legend, in form and substance satisfactory to Secured
Party, indicating that such Collateral is subject to the security interest
granted hereby, (ii) deliver to Secured Party all promissory notes and
other Instruments having a value or face amount in excess of $25,000 and, at
the request of Secured Party, all original counterparts of Chattel Paper, duly
endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to Secured Party,
(iii) (A) execute (if necessary) and file such financing or
continuation statements, or amendments thereto, (B) execute and deliver,
and cause to be

 

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executed and delivered, agreements establishing that Secured
Party has control of Deposit Accounts and Investment Property of such Grantor,
(C) deliver such documents, instruments, notices, records and consents,
and take such other actions, necessary to establish that secured party has
control over electronic Chattel Paper and Letter-of-Credit Rights of such
Grantor and (D) deliver such other instruments or notices, in each case,
as may be necessary or desirable, or as Secured Party may request, in order to
perfect and preserve the security interests granted or purported to be granted
hereby, (iv) furnish to Secured Party from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may reasonably request,
all in reasonable detail, (v) at any reasonable time, upon request by
Secured Party, exhibit the Collateral to and allow inspection of the Collateral
by Secured Party, or persons designated by Secured Party, (vi) at Secured Party’s
request, appear in and defend any action or proceeding that may affect such
Grantor’s title to or Secured Party’s security interest in all or any part of
the Collateral, and (vii) use commercially reasonable efforts to obtain any
necessary consents of third parties to the creation and perfection of a
security interest in favor of Secured Party with respect to any
Collateral.  Each Grantor hereby
authorizes Secured Party to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the
Collateral (including any financing statement indicating that it covers “all
assets” or “all personal property” of such Grantor) without the signature of
any Grantor.

 

(b)           Securities Collateral.  Without limiting the generality of the
foregoing Section 5(a), each Grantor agrees that (i) all certificates or
Instruments representing or evidencing the Securities Collateral having a value
or face amount in excess of $25,000 shall be delivered to and held by or on
behalf of Secured Party pursuant hereto and shall be in suitable form for
transfer by delivery or, as applicable, shall be accompanied by such Grantor’s
endorsement, where necessary, or duly executed instruments of transfer or
assignments in blank, all in form and substance satisfactory to Secured Party
and (ii) it will, upon obtaining any additional Equity Interests or
Indebtedness having a value or face amount in excess of $25,000, promptly (and
in any event within five Business Days) deliver to Secured Party a Pledge
Supplement, duly executed by such Grantor, in respect of such additional
Pledged Equity or Pledged Debt; provided, that the failure of any
Grantor to execute a Pledge Supplement with respect to any additional Pledged
Equity or Pledged Debt shall not impair the security interest of Secured Party
therein or otherwise adversely affect the rights and remedies of Secured Party
hereunder with respect thereto.  Upon
each such acquisition, the representations and warranties contained in Section
4(f) hereof shall be deemed to have been made by such Grantor as to such
Pledged Equity or Pledged Debt, whether or not such Pledge Supplement is
delivered.

 

(c)           Intellectual Property Collateral.  At least quarterly, within 15 days after the
end of each calendar quarter, each Grantor shall notify Secured Party in
writing of any rights to registered Intellectual Property Collateral having a
value in excess of $25,000 acquired by such Grantor after the date hereof.  At least quarterly, within 15 days after the
end of each calendar quarter in which the Grantor has acquired any such
registered IP Collateral, each Grantor shall execute and deliver to Secured
Party an IP Supplement, and submit a Grant for recordation with respect thereto
in the applicable IP Filing Office; provided, the failure of any Grantor
to execute an IP Supplement or submit a Grant for recordation with respect to
any additional Intellectual Property Collateral shall not impair the security
interest of Secured Party therein or otherwise adversely affect the rights and
remedies of Secured Party hereunder with

 

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respect thereto. 
Upon delivery to Secured Party of an IP Supplement, Schedules 8, 9
and 10 annexed hereto and Schedule A to each Grant, as applicable,
shall be deemed modified to include a reference to any right, title or interest
in any existing Intellectual Property Collateral or any Intellectual Property
Collateral set forth on Schedule A to such IP Supplement.  Upon each such acquisition, the
representations and warranties contained in Section 4(g) hereof shall be deemed
to have been made by such Grantor as to such Intellectual Property Collateral,
whether or not such IP Supplement is delivered.

 

(d)           Commercial Tort Claims.  Grantors have no Commercial Tort Claims
asserted in any judicial action as of the date hereof, except as set forth on Schedule
1 annexed hereto.  In the event that
a Grantor shall at any time after the date hereof have any Commercial Tort
Claims asserted in any judicial action, such Grantor shall promptly notify Secured
Party thereof in writing, which notice shall (i) set forth in reasonable
detail the basis for and nature of such Commercial Tort Claim and
(ii) constitute an amendment to this Agreement by which such Commercial
Tort Claim shall constitute part of the Collateral.

 

SECTION 6.         Certain
Covenants of Grantors.

 

Each Grantor shall:

 

(a)           not
use or permit any Collateral to be used unlawfully or in violation of any
provision of this Agreement or any applicable statute, regulation or ordinance
or any policy of insurance covering the Collateral;

 

(b)           give
Secured Party at least 30 days’ prior written notice of (i) any change in
such Grantor’s name, identity or corporate structure and (ii) any
reincorporation, reorganization or other action that results in a change of the
jurisdiction of organization of such Grantor;

 

(c)           if
Secured Party gives value to enable such Grantor to acquire rights in or the
use of any Collateral, use such value for such purposes;

 

(d)           keep
correct and accurate Records of Collateral at the locations described in Schedule
3 annexed hereto; and

 

(e)           permit
representatives of Secured Party at any time during normal business hours to
inspect and make abstracts from such Records, and each Grantor agrees to render
to Secured Party, at such Grantor’s cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto.

 

SECTION 7.         Special
Covenants With Respect to Equipment and Inventory.

 

Each Grantor shall:

 

(a)           if
any Inventory is in possession or control of any of such Grantor’s agents or
processors, if the aggregate book value of all such Inventory exceeds $100,000,
and in any event upon the occurrence of an Event of Default, instruct such
agent or processor to hold all such Inventory for the account of Secured Party
and subject to the instructions of Secured Party;

 

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(b)           subject
to Section 6.16(c) of the Credit Agreement, if any Inventory is located on
premises leased by such Grantor, deliver to Secured Party a fully executed
Landlord Waiver; and

 

(c)           promptly
upon the issuance and delivery to such Grantor of any negotiable Document
having a value or face amount in excess of $25,000, deliver such Document to
Secured Party.

 

SECTION 8.         Special
Covenants with respect to Accounts.

 

(a)           Each
Grantor shall, for not less than three years from the date on which each
Account of such Grantor arose, maintain (i) complete Records of such
Account, including records of all payments received, credits granted and
merchandise returned, and (ii) all documentation relating thereto.

 

(b)           Except
as otherwise provided in this subsection (b), each Grantor shall continue to
collect, at its own expense, all amounts due or to become due to such Grantor
under the Accounts.  In connection with
such collections, each Grantor may take (and, upon the occurrence and during
the continuance of an Event of Default at Secured Party’s direction, shall
take) such action as such Grantor or Secured Party may deem necessary or
advisable to enforce collection of amounts due or to become due under the
Accounts; provided, however, that Secured Party shall have the right at
any time, upon the occurrence and during the continuation of an Event of
Default and upon written notice to such Grantor of its intention to do so, to
(i) notify the account debtors or obligors under any Accounts of the
assignment of such Accounts to Secured Party and to direct such account debtors
or obligors to make payment of all amounts due or to become due to such Grantor
thereunder directly to Secured Party, (ii) notify each Person maintaining
a lockbox or similar arrangement to which account debtors or obligors under any
Accounts have been directed to make payment to remit all amounts representing
collections on checks and other payment items from time to time sent to or
deposited in such lockbox or other arrangement directly to Secured Party,
(iii) enforce collection of any such Accounts at the expense of Grantors,
and (iv) adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as such Grantor might have done.  After receipt by such Grantor of the notice
from Secured Party referred to in the proviso to the preceding sentence, (A)
all amounts and proceeds (including checks and other Instruments) received by
such Grantor in respect of the Accounts shall be received in trust for the
benefit of Secured Party hereunder, shall be segregated from other funds of
such Grantor and shall be forthwith paid over or delivered to Secured Party in
the same form as so received (with any necessary endorsement) to be held as
cash Collateral and applied as provided by Section 17 hereof, and (B) such
Grantor shall not, without the written consent of Secured Party, adjust, settle
or compromise the amount or payment of any Account, or release wholly or partly
any account debtor or obligor thereof, or allow any credit or discount thereon.

 

SECTION 9.         Special
Covenants With Respect to the Securities Collateral.

 

(a)           Form of Securities Collateral.  Secured Party shall have the right at any
time to exchange certificates or instruments representing or evidencing
Securities Collateral for certificates or instruments of smaller or larger
denominations.  If any Securities
Collateral is not

 

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a security pursuant to Section 8-103 of the UCC, no
Grantor shall take any action that, under such Section, converts such
Securities Collateral into a security without causing the issuer thereof to
issue to it certificates or instruments evidencing such Securities Collateral,
which it shall promptly deliver to Secured Party as provided in this Section
9(a).

 

(b)           Covenants. 
Each Grantor shall (i) not, except as expressly permitted by the
Credit Agreement, permit any issuer of Pledged Subsidiary Equity to merge or
consolidate unless all the outstanding Equity Interests of the surviving or
resulting Person are, upon such merger or consolidation, pledged and become
Collateral hereunder and no cash, securities or other property is distributed in
respect of the outstanding Equity Interests of any other constituent
corporation; (ii) cause each issuer of Pledged Subsidiary Equity not to
issue Equity Interests in addition to or in substitution for the Pledged
Subsidiary Equity issued by such issuer, except to such Grantor;
(iii) immediately upon its acquisition (directly or indirectly) of any
Equity Interests, including additional Equity Interests in each issuer of
Pledged Equity, comply with Section 5(b); (iv) immediately upon issuance
of any and all Instruments or other evidences of additional Indebtedness from
time to time owed to such Grantor by any obligor on the Pledged Debt, comply
with Section 5; (v) promptly deliver to Secured Party all written notices
received by it with respect to the Securities Collateral; (vi) at its
expense (A) perform and comply in all material respects with all terms and
provisions of any agreement related to the Securities Collateral required to be
performed or complied with by it, (B) maintain all such agreements in full
force and effect and (C) enforce all such agreements in accordance with their
terms; and (vii), at the request of Secured Party, promptly execute and deliver
to Secured Party an agreement providing for control by Secured Party of all
Securities Entitlements, Securities Accounts, Commodity Contracts and Commodity
Accounts of such Grantor.

 

(c)           Voting and Distributions.  So long as no Event of Default shall have
occurred and be continuing, (i) each Grantor shall be entitled to exercise
any and all voting and other consensual rights pertaining to the Securities
Collateral or any part thereof for any purpose not prohibited by the terms of
this Agreement or the Credit Agreement; provided, no Grantor shall
exercise or refrain from exercising any such right if Secured Party shall have
notified such Grantor that, in Secured Party’s judgment, such action would have
a material adverse effect on the value of the Securities Collateral or any part
thereof; and (ii) each Grantor shall be entitled to receive and retain any
and all dividends, other distributions, principal and interest paid in respect
of the Securities Collateral.

 

Upon the occurrence and during the continuation of an
Event of Default, (x) upon written notice from Secured Party to any Grantor,
all rights of such Grantor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant hereto shall cease,
and all such rights shall thereupon become vested in Secured Party who shall
thereupon have the sole right to exercise such voting and other consensual
rights; (y) except as otherwise specified in the Credit Agreement, upon written
notice from Secured Party to any Grantor of any exercise of remedies under
Section 8.2 of the Credit Agreement, all rights of such Grantor to receive the
dividends, other distributions, principal and interest payments which it would
otherwise be authorized to receive and retain pursuant hereto shall cease, and
all such rights shall thereupon become vested in Secured Party who shall thereupon
have the sole right to receive and hold as Collateral such dividends, other
distributions, principal and interest payments; and (z) all dividends,
principal, interest payments and other distributions which are

 

10

 

received by such Grantor contrary to the provisions of
clause (y) above shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of such Grantor and shall forthwith be
paid over to Secured Party as Collateral in the same form as so received (with
any necessary endorsements).

 

In order to permit Secured Party to exercise the
voting and other consensual rights which it may be entitled to exercise
pursuant hereto and to receive all dividends and other distributions which it
may be entitled to receive hereunder, (I) each Grantor shall promptly execute
and deliver (or cause to be executed and delivered) to Secured Party all such
proxies, dividend payment orders and other instruments as Secured Party may
from time to time reasonably request, and (II) without limiting the effect of
clause (I) above, each Grantor hereby grants to Secured Party an irrevocable
proxy to vote the Pledged Equity and to exercise all other rights, powers,
privileges and remedies to which a holder of the Pledged Equity would be
entitled (including giving or withholding written consents of holders of Equity
Interests, calling special meetings of holders of Equity Interests and voting
at such meetings), which proxy shall be effective, automatically and without
the necessity of any action (including any transfer of any Pledged Equity on
the record books of the issuer thereof) by any other Person (including the
issuer of the Pledged Equity or any officer or agent thereof), upon the
occurrence of an Event of Default and which proxy shall only terminate upon the
payment in full of the Secured Obligations, the cure of such Event of Default
or waiver thereof as evidenced by a writing executed by Secured Party.

 

SECTION 10.                                             Special Covenants With Respect to the
Intellectual Property Collateral.

 

(a)           Each
Grantor shall:

 

(i)            use reasonable efforts so as not to
permit the inclusion in any contract to which it hereafter becomes a party of
any provision that could or might in any way impair or prevent the creation of
a security interest in, or the assignment of, such Grantor’s rights and
interests in any property included within the definitions of any Intellectual
Property Collateral acquired under such contracts;

 

(ii)           take any and all reasonable steps to
protect the secrecy of all trade secrets relating to the products and services
sold or delivered under or in connection with the Intellectual Property
Collateral, including, without limitation, where appropriate entering into
confidentiality agreements with employees and labeling and restricting access
to secret information and documents;

 

(iii)          use proper statutory notice in
connection with its use of any of the Intellectual Property Collateral and
products and services covered by the registered Intellectual Property
Collateral; and

 

(iv)          use a commercially appropriate
standard of quality (which may be consistent with such Grantor’s past
practices) in the manufacture, sale and delivery of products and services sold
or delivered under or in connection with the Trademarks.

 

11

 

(b)           Except
as otherwise provided in this Section 10, each Grantor shall continue to
collect, at its own expense, all amounts due or to become due to such Grantor
in respect of the Intellectual Property Collateral or any portion thereof.  In connection with such collections, each
Grantor may take (and, after the occurrence and during the continuance of any
Event of Default at Secured Party’s reasonable direction, shall take) such
action as such Grantor or Secured Party may deem reasonably necessary or
advisable to enforce collection of such amounts; provided, Secured Party
shall have the right at any time, upon the occurrence and during the
continuation of an Event of Default and upon written notice to such Grantor of
its intention to do so, to notify the obligors with respect to any such amounts
of the existence of the security interest created hereby and to direct such
obligors to make payment of all such amounts directly to Secured Party, and,
upon such notification and at the expense of such Grantor, to enforce
collection of any such amounts and to adjust, settle or compromise the amount
or payment thereof, in the same manner and to the same extent as such Grantor
might have done.  After receipt by any
Grantor of the notice from Secured Party referred to in the proviso to the
preceding sentence and upon the occurrence and during the continuance of any
Event of Default, (i) all amounts and proceeds (including checks and
Instruments) received by each Grantor in respect of amounts due to such Grantor
in respect of the Intellectual Property Collateral or any portion thereof shall
be received in trust for the benefit of Secured Party hereunder, shall be
segregated from other funds of such Grantor and shall be forthwith paid over or
delivered to Secured Party in the same form as so received (with any necessary
endorsement) to be held as cash Collateral and applied as provided by Section
17 hereof, and (ii) such Grantor shall not adjust, settle or compromise
the amount or payment of any such amount or release wholly or partly any
obligor with respect thereto or allow any credit or discount thereon.

 

(c)           Each
Grantor shall have the duty diligently, through counsel reasonably acceptable
to Secured Party, to prosecute, file and/or make, unless and until such
Grantor, in its commercially reasonable judgment, decides otherwise,
(i) any application for registration relating to any of the Intellectual
Property Collateral owned, held or used by such Grantor and set forth on Schedules
8, 9 or 10 annexed hereto, as applicable, that is pending as
of the date of this Agreement, (ii) any Copyright Registration on any
existing or future unregistered but copyrightable works (except for works of
nominal commercial value or with respect to which such Grantor has determined
in the exercise of its commercially reasonable judgment that it shall not seek
registration), (iii) any application on any future patentable but
unpatented innovation or invention comprising Intellectual Property Collateral,
and (iv) any Trademark opposition and cancellation proceedings, renew
Trademark Registrations and Copyright Registrations and do any and all acts
which are necessary or desirable to preserve and maintain all rights in all
Intellectual Property Collateral.  Any
expenses incurred in connection therewith shall be borne solely by
Grantors.  Subject to the foregoing, each
Grantor shall give Secured Party prior written notice of any abandonment of any
material Intellectual Property Collateral.

 

(d)           Except
as provided herein, each Grantor shall have the right to commence and prosecute
in its own name, as real party in interest, for its own benefit and at its own
expense, such suits, proceedings or other actions for infringement, unfair
competition, dilution, misappropriation or other damage, or reexamination or
reissue proceedings as are necessary to protect the Intellectual Property
Collateral.  Each Grantor shall promptly,
following its becoming aware thereof, notify Secured Party of the institution
of, or of any adverse determination in, any proceeding (whether in an IP Filing
Office or any federal, state, local or foreign court) or

 

12

 

regarding such Grantor’s ownership, right to use, or
interest in any material Intellectual Property Collateral.  Each Grantor shall provide to Secured Party
any information with respect thereto requested by Secured Party.

 

(e)           In
addition to, and not by way of limitation of, the granting of a security
interest in the Collateral pursuant hereto, each Grantor, effective upon the
occurrence and during the continuance of an Event of Default, hereby assigns,
transfers and conveys to Secured Party the nonexclusive right and license to
use all Trademarks, tradenames, Copyrights, Patents or technical processes
(including, without limitation, the Intellectual Property Collateral) owned or
used by such Grantor that relate to the Collateral, together with any goodwill
associated therewith, all to the extent necessary to enable Secured Party to
realize on the Collateral in accordance with this Agreement and to enable any
transferee or assignee of the Collateral to enjoy the benefits of the
Collateral.  This right shall inure to
the benefit of all successors, assigns and transferees of Secured Party and its
successors, assigns and transferees, whether by voluntary conveyance, operation
of law, assignment, transfer, foreclosure, deed in lieu of foreclosure or
otherwise.  Such right and license shall
be granted free of charge, without requirement that any monetary payment
whatsoever be made to such Grantor.

 

SECTION 11.       Collateral
Account.

 

(a)           Secured
Party is hereby authorized to establish and maintain as a blocked account under
the sole dominion and control of Secured Party, a restricted Deposit Account
designated as “Quidel Corporation Collateral Account”.  All amounts at any time held in the
Collateral Account shall be beneficially owned by Grantors but shall be held in
the name of Secured Party hereunder, for the benefit of Beneficiaries, as
collateral security for the Secured Obligations upon the terms and conditions
set forth herein.  Grantors shall have no
right to withdraw, transfer or, except as expressly set forth herein or in the
Credit Agreement, otherwise receive any funds deposited into the Collateral
Account.  Anything contained herein to
the contrary notwithstanding, the Collateral Account shall be subject to such
applicable laws, and such applicable regulations of the Board of Governors of
the Federal Reserve System and of any other appropriate banking or Government
Authority, as may now or hereafter be in effect.  All deposits of funds in the Collateral
Account shall be made by wire transfer (or, if applicable, by intra-bank transfer
from another account of a Grantor) of immediately available funds, in each case
addressed in accordance with instructions of Secured Party.  Each Grantor shall, promptly after initiating
a transfer of funds to the Collateral Account, give notice to Secured Party by
telefacsimile or E-mail (if and when confirmed by telephone) of the date,
amount and method of delivery of such deposit. 
Cash held by Secured Party in the Collateral Account shall not be
invested by Secured Party but instead shall be maintained as a cash deposit in
the Collateral Account pending application thereof as elsewhere provided in
this Agreement or in the Credit Agreement. 
To the extent permitted under Regulation Q of the Board of Governors of
the Federal Reserve System, any cash held in the Collateral Account shall bear
interest at the standard rate paid by Secured Party to its customers for
deposits of like amounts and terms. 
Subject to Secured Party’s rights hereunder, any interest earned on
deposits of cash in the Collateral Account shall be deposited directly in, and
held in, the Collateral Account.

 

(b)           In
the event that Borrower is required to cash collateralize any Letter of Credit
or Letters of Credit pursuant to the Credit Agreement, other than pursuant to
Section 8 of the Credit

 

13

 

Agreement, in which case the provisions of
Section 15(c) of this Agreement shall apply, subject to the provisions of the
Credit Agreement, such cash collateral shall be retained by Secured Party until
such time as such Letter of Credit or Letters of Credit shall have expired or
been surrendered and any drawings under such Letter of Credit or Letters of
Credit paid in full, whether by reason of application of funds in the
Collateral Account or otherwise.  Secured
Party is authorized to apply any amount in the Collateral Account to pay any
drawing on a Letter of Credit.  Subject
to the provisions of Section 15(c) of this Agreement and the Credit Agreement,
if any such cash collateral is no longer required to be retained in the
Collateral Account, it shall be paid by Secured Party to Borrower or at
Borrower’s direction.

 

SECTION 12.       Secured
Party Appointed Attorney-in-Fact.

 

Each Grantor hereby irrevocably appoints Secured Party
as such Grantor’s attorney-in-fact, with full authority in the place and stead
of such Grantor and in the name of such Grantor, Secured Party or otherwise,
from time to time in Secured Party’s discretion to take any action and to
execute any instrument that Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:

 

(a)           upon
the occurrence and during the continuance of an Event of Default, to obtain and
adjust insurance required to be maintained by such Grantor or paid to Secured
Party pursuant to the Credit Agreement;

 

(b)           upon
the occurrence and during the continuance of an Event of Default, to ask for,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Collateral;

 

(c)           upon
the occurrence and during the continuance of an Event of Default, to receive,
endorse and collect any drafts or other Instruments, Documents, Chattel Paper
and other documents in connection with clauses (a) and (b) above;

 

(d)           upon
the occurrence and during the continuance of an Event of Default, to file any
claims or take any action or institute any proceedings that Secured Party may
deem necessary or desirable for the collection of any of the Collateral or
otherwise to enforce or protect the rights of Secured Party with respect to any
of the Collateral;

 

(e)           to
pay or discharge taxes or Liens (other than taxes not required to be discharged
pursuant to the Credit Agreement and Liens permitted under this Agreement or
the Credit Agreement) levied or placed upon or threatened against the
Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by Secured Party in its sole discretion,
any such payments made by Secured Party to become obligations of such Grantor
to Secured Party, due and payable immediately without demand;

 

(f)            upon
the occurrence and during the continuance of an Event of Default, to sign and
endorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications and
notices in connection with Accounts and other documents relating to the
Collateral; and

 

14

 

(g)           upon
the occurrence and during the continuance of an Event of Default, generally to
sell, transfer, pledge, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though Secured Party were
the absolute owner thereof for all purposes, and to do, at Secured Party’s
option and Grantors’ expense, at any time or from time to time, all acts and
things that Secured Party deems necessary to protect, preserve or realize upon
the Collateral and Secured Party’s security interest therein in order to effect
the intent of this Agreement, all as fully and effectively as such Grantor
might do.

 

SECTION 13.       Termination
Statements.

 

Each Grantor hereby authorizes Secured Party to file a termination
statement with respect to all UCC financing statements (including financing
statement number 0229560538) filed by Comerica Bank against such Grantor.

 

SECTION 14.       Secured
Party May Perform.

 

If any Grantor fails to perform any agreement
contained herein, Secured Party may itself perform, or cause performance of,
such agreement, and the expenses of Secured Party incurred in connection
therewith shall be payable by Grantors under Section 18(b) hereof.

 

SECTION 15.       Standard
of Care.

 

The powers conferred on Secured Party hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. 
Except for the exercise of reasonable care in the custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, Secured Party shall have no duty as to any Collateral or as to
the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral. 
Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of Collateral in its possession if such Collateral is
accorded treatment substantially equal to that which Secured Party accords its
own property.

 

SECTION 16.       Remedies.

 

(a)           Generally. 
If any Event of Default shall have occurred and be continuing, Secured
Party may, subject to Section 20 hereof, 
exercise in respect of the Collateral, in addition to all other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party on default under the UCC (whether or not the
UCC applies to the affected Collateral), and also may (i) require each
Grantor to, and each Grantor hereby agrees that it will at its expense and upon
request of Secured Party forthwith, assemble all or part of the Collateral as
directed by Secured Party and make it available to Secured Party at a place to
be designated by Secured Party that is reasonably convenient to both parties,
(ii) enter onto the property where any Collateral is located and take
possession thereof with or without judicial process, (iii) prior to the
disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Secured Party deems appropriate, (iv) take possession of any
Grantor’s premises or place custodians in exclusive control thereof, remain on
such premises and use the same and any of such Grantor’s equipment for the
purpose of completing any work in process, taking any actions described in the

 

15

 

preceding clause (iii) and collecting any Secured
Obligation, (v) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private
sale, at any of Secured Party’s offices or elsewhere, for cash, on credit or
for future delivery, at such time or times and at such price or prices and upon
such other terms as Secured Party may deem commercially reasonable,
(vi) exercise dominion and control over and refuse to permit further
withdrawals from any Deposit Account maintained with Secured Party or any
Lender and provide instructions directing the disposition of funds in Deposit
Accounts not maintained with Secured Party or any Lender and (vii) provide
entitlement orders with respect to Security Entitlements and other Investment
Property constituting a part of the Collateral and, without notice to any
Grantor, transfer to or register in the name of Secured Party or any of its
nominees any or all of the Securities Collateral.  Secured Party or any Lender or Swap
Counterparty may be the purchaser of any or all of the Collateral at any such
sale and Secured Party, as agent for and representative of Lenders and Swap
Counterparties (but not any Lender or Swap Counterparty in its individual
capacity unless Requisite Obligees shall otherwise agree in writing), shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such public
sale, to use and apply any of the Secured Obligations as a credit on account of
the purchase price for any Collateral payable by Secured Party at such
sale.  Each purchaser at any such sale
shall hold the property sold absolutely free from any claim or right on the
part of any Grantor, and each Grantor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted.  Each
Grantor agrees that, to the extent notice of sale shall be required by law, at
least ten days’ notice to such Grantor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute reasonable
notification.  Secured Party shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given.  Secured Party may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. 
Each Grantor hereby waives any claims against Secured Party arising by
reason of the fact that the price at which any Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale, even if Secured Party accepts the first offer received and does
not offer such Collateral to more than one offeree.  If the proceeds of any sale or other disposition
of the Collateral are insufficient to pay all the Secured Obligations, Grantors
shall be jointly and severally liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.  Each Grantor further agrees that a breach of
any of the covenants contained in this Section 15 will cause irreparable injury
to Secured Party, that Secured Party has no adequate remedy at law in respect
of such breach and, as a consequence, that each and every covenant contained in
this Section shall be specifically enforceable against such Grantor, and each
Grantor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no default
has occurred giving rise to the Secured Obligations becoming due and payable
prior to their stated maturities.

 

(b)           Securities Collateral.  Each Grantor recognizes that, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws, Secured Party may be compelled, with respect to any sale of
all or any part of the Securities Collateral conducted without prior
registration or qualification of such Securities Collateral under the
Securities Act and/or such state securities laws, to limit purchasers to those
who will agree,

 

16

 

among other things, to acquire the Securities
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof.  Each
Grantor acknowledges that any such private placement may be at prices and on
terms less favorable than those obtainable through a sale without such
restrictions (including an offering made pursuant to a registration statement
under the Securities Act) and, notwithstanding such circumstances, each Grantor
agrees that any such private placement shall not be deemed, in and of itself,
to be commercially unreasonable and that Secured Party shall have no obligation
to delay the sale of any Securities Collateral for the period of time necessary
to permit the issuer thereof to register it for a form of sale requiring
registration under the Securities Act or under applicable state securities
laws, even if such issuer would, or should, agree to so register it.  If Secured Party determines to exercise its
right to sell any or all of the Securities Collateral, upon written request,
each Grantor shall and shall cause each issuer of any Securities Collateral to
be sold hereunder from time to time to furnish to Secured Party all such
information as Secured Party may request in order to determine the amount of
Securities Collateral which may be sold by Secured Party in exempt transactions
under the Securities Act and the rules and regulations of the Securities and
Exchange Commission thereunder, as the same are from time to time in effect.

 

(c)           Collateral Account.  If an Event of Default has occurred and is
continuing, any amounts on deposit in the Collateral Account, except for funds
deposited in the Collateral Account as described in the next sentence, shall be
held by Agent and applied as Obligations become due.  If, in accordance with Section 8 of the
Credit Agreement, Borrower is required to pay to Secured Party an amount (the “Aggregate Available Amount”) equal to the
maximum amount that may at any time be drawn under all Letters of Credit then
outstanding under the Credit Agreement, Borrower shall deliver funds in such an
amount for deposit in the Collateral Account. 
Following such deposit in the Collateral Account, (i) upon any
drawing under any outstanding Letter of Credit, Secured Party shall apply any
amount in the Collateral Account to reimburse the Issuing Lender for the amount
of such drawing and (ii) in the event of cancellation or expiration of any
Letter of Credit, or in the event of any reduction in the maximum available
amount under any Letter of Credit, Secured Party shall apply the amount then on
deposit in the Collateral Account in excess of the Aggregate Available Amount
(calculated giving effect to such cancellation, expiration or reduction) as
provided in Section 17.

 

SECTION 17.       Additional
Remedies for Intellectual Property Collateral.

 

(a)           Anything
contained herein to the contrary notwithstanding, upon the occurrence and
during the continuation of an Event of Default, (i) Secured Party shall
have the right (but not the obligation) to bring suit, in the name of any
Grantor, Secured Party or otherwise, to enforce any Intellectual Property
Collateral, in which event each Grantor shall, at the request of Secured Party,
do any and all lawful acts and execute any and all documents required by
Secured Party in aid of such enforcement and each Grantor shall promptly, upon
demand, reimburse and indemnify Secured Party as provided in subsections 10.4
and 10.5 of the Credit Agreement and Section 18 hereof, as applicable, in
connection with the exercise of its rights under this Section 16, and, to the
extent that Secured Party shall elect not to bring suit to enforce any
Intellectual Property Collateral as provided in this Section, each Grantor
agrees to use all reasonable measures, whether by action, suit, proceeding or
otherwise, to prevent the infringement of any of the material Intellectual
Property Collateral by others and for that purpose agrees to use its commercially
reasonable judgment in maintaining any action, suit or proceeding

 

17

 

against any Person so infringing reasonably necessary
to prevent such infringement; (ii) upon written demand from Secured Party,
each Grantor shall execute and deliver to Secured Party an assignment or
assignments of the Intellectual Property Collateral and such other documents as
are necessary or appropriate to carry out the intent and purposes of this
Agreement; (iii) each Grantor agrees that such an assignment and/or
recording shall be applied to reduce the Secured Obligations outstanding only
to the extent that Secured Party (or any Lender) receives cash proceeds in
respect of the sale of, or other realization upon, the Intellectual Property
Collateral; and (iv) within five Business Days after written notice from
Secured Party, each Grantor shall make available to Secured Party, to the
extent within such Grantor’s power and authority, such personnel in such
Grantor’s employ as Secured Party may reasonably designate, by name, title or
job responsibility, to permit such Grantor to continue, directly or indirectly,
to produce, advertise and sell the products and services sold or delivered by
such Grantor under or in connection with the Trademarks, Trademark
Registrations and Trademark Rights, such persons to be available to perform
their prior functions on Secured Party’s behalf and to be compensated by
Secured Party at such Grantor’s expense on a per diem, pro-rata basis
consistent with the salary and benefit structure applicable to each as of the
date of such Event of Default.

 

(b)           If
(i) an Event of Default shall have occurred and, by reason of cure,
waiver, modification, amendment or otherwise, no longer be continuing,
(ii) no other Event of Default shall have occurred and be continuing,
(iii) an assignment to Secured Party of any rights, title and interests in
and to the Intellectual Property Collateral shall have been previously made,
and (iv) the Secured Obligations shall not have become immediately due and
payable, upon the written request of any Grantor, Secured Party shall promptly
execute and deliver to such Grantor such assignments as may be necessary to
reassign to such Grantor any such rights, title and interests as may have been assigned
to Secured Party as aforesaid, subject to any disposition thereof that may have
been made by Secured Party; provided, after giving effect to such reassignment,
Secured Party’s security interest granted pursuant hereto, as well as all other
rights and remedies of Secured Party granted hereunder, shall continue to be in
full force and effect; and provided further, the rights, title and interests so
reassigned shall be free and clear of all Liens other than Liens (if any)
encumbering such rights, title and interest at the time of their assignment to
Secured Party and Liens permitted under Section 7.1 of the Credit Agreement.

 

SECTION 18.       Application
of Proceeds.

 

Except as expressly provided elsewhere in this
Agreement, all proceeds received by Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
shall be applied as provided in Section 8.3 of the Credit Agreement.

 

SECTION 19.       Indemnity
and Expenses.

 

(a)           Grantors
jointly and severally agree to indemnify Secured Party, each Lender and each
Swap Counterparty from and against any and all claims, losses and liabilities
in any way relating to, growing out of or resulting from this Agreement and the
transactions contemplated hereby (including, without limitation, enforcement of
this Agreement), except to the extent such claims, losses or liabilities result
from Secured Party’s or such Lender’s or Swap Counterparty’s gross negligence
or willful misconduct as finally determined by a court of competent
jurisdiction.

 

18

 

(b)           Grantors
jointly and severally agree to pay to Secured Party upon demand the amount of
any and all costs and expenses in accordance with subsection 10.4 of the Credit
Agreement.

 

(c)           The
obligations of Grantors in this Section 18 shall (i) survive the termination of
this Agreement and the discharge of Grantors’ other obligations under this
Agreement, the Lender Swap Contracts, the Credit Agreement and the other Loan
Documents and (ii), as to any Grantor that is a party to a Subsidiary Guaranty,
be subject to the provisions of Section 1(b) thereof.

 

SECTION 20.                                                                           Continuing Security Interest; Transfer of
Loans; Termination and Release.

 

(a)           This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the payment in full of the
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit (or the
securing of reimbursement Obligations in respect thereof with cash collateral
or letters of credit in a manner satisfactory to Secured Party), (ii) be
binding upon Grantors and their respective successors and assigns, and
(iii) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns.  Without limiting the generality
of the foregoing clause (iii), (A) but subject to the provisions of subsection
10.7 of the Credit Agreement, any Lender may assign or otherwise transfer any
Loans held by it to any other Person, and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to Lenders
herein or otherwise and (B) any Swap Counterparty may assign or otherwise
transfer any Lender Swap Contract to which it is a party to any other Person in
accordance with the terms of such Lender Swap Contract, and such other Person
shall thereupon become vested with all the benefits in respect thereof granted
to Swap Counterparties herein or otherwise.

 

(b)           Upon
the payment in full of all Secured Obligations, the cancellation or termination
of the Commitments and the cancellation or expiration of all outstanding
Letters of Credit (or the securing of reimbursement Obligations in respect
thereof with cash collateral or letters of credit in a manner satisfactory to
Secured Party), the security interest granted hereby (other than with respect
to any cash collateral in respect of Letters of Credit) shall terminate and all
rights to the Collateral shall revert to the applicable Grantors.  Upon any such termination Secured Party will,
at Grantors’ expense, execute and deliver to Grantors such documents as
Grantors shall reasonably request to evidence such termination.  In addition, upon the proposed sale or other
disposition of any Collateral by a Grantor in accordance with the Credit
Agreement for which such Grantor desires a security interest release from
Secured Party, such a release may be obtained pursuant to the provisions of
subsection 9.12 of the Credit Agreement.

 

SECTION 21.       Secured
Party as Agent.

 

(a)           Secured
Party has been appointed to act as Secured Party hereunder by Lenders and, by
their acceptance of the benefits hereof, Swap Counterparties.  Secured Party shall be obligated, and shall
have the right hereunder, to make demands, to give notices, to exercise or
refrain from exercising any rights, and to take or refrain from taking any
action

 

19

 

(including, without limitation, the release or
substitution of Collateral), solely in accordance with this Agreement and the
Credit Agreement; provided that Secured Party shall exercise, or refrain from
exercising, any remedies provided for in Section 15 hereof in accordance with
the instructions of Requisite Obligees. 
In furtherance of the foregoing provisions of this Section 20(a), each
Swap Counterparty, by its acceptance of the benefits hereof, agrees that it
shall have no right individually to realize upon any of the Collateral
hereunder, it being understood and agreed by such Swap Counterparty that all
rights and remedies hereunder may be exercised solely by Secured Party for the
benefit of Lenders and Swap Counterparties in accordance with the terms of this
Section 20(a).

 

(b)           Secured
Party shall at all times be the same Person that is Agent under the Credit
Agreement.  Written notice of resignation
by Agent pursuant to subsection 9.9 of the Credit Agreement shall also
constitute notice of resignation as Secured Party under this Agreement; and
appointment of a successor Agent pursuant to subsection 9.9 of the Credit
Agreement shall also constitute appointment of a successor Secured Party under
this Agreement.  Upon the acceptance of
any appointment as Agent under subsection 9.9 of the Credit Agreement by a
successor Agent, that successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Secured Party under this Agreement, and the retiring Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all
sums, securities and other items of Collateral held hereunder, together with
all records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute (if necessary) and deliver to such successor Secured
Party such amendments to financing statements, and take such other actions, as
may be necessary or appropriate in connection with the assignment to such
successor Secured Party of the security interests created hereunder, whereupon
such retiring Secured Party shall be discharged from its duties and obligations
under this Agreement.  After any retiring
Agent’s resignation hereunder as Secured Party, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Secured Party hereunder.

 

(c)           Secured
Party shall not be deemed to have any duty whatsoever with respect to any Swap
Counterparty until it shall have received written notice in form and substance
satisfactory to Secured Party from a Grantor or the Swap Counterparty as to the
existence and terms of the applicable Lender Swap Contract.

 

SECTION 22.       Additional
Grantors.

 

The initial Grantors hereunder shall be Borrower and
such of the Subsidiaries of Borrower as are signatories hereto on the date
hereof.  From time to time subsequent to
the date hereof, additional Subsidiaries of Borrower may become Additional
Grantors, by executing a Counterpart. 
Upon delivery of any such Counterpart to Secured Party, notice of which
is hereby waived by Grantors, each such Additional Grantor shall be a Grantor
and shall be as fully a party hereto as if such Additional Grantor were an
original signatory hereto.  Each Grantor
expressly agrees that its obligations arising hereunder shall not be affected
or diminished by the addition or release of any other Grantor hereunder, nor by
any election of Secured Party not to cause any Subsidiary of Borrower to become
an Additional Grantor hereunder.  This
Agreement shall be

 

20

 

fully effective as to any Grantor that is or becomes a
party hereto regardless of whether any other Person becomes or fails to become
or ceases to be a Grantor hereunder.

 

SECTION 23.       Amendments;
Etc.

 

No amendment, modification, termination or waiver of
any provision of this Agreement, and no consent to any departure by any Grantor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Secured Party and, in the case of any such amendment or
modification, by Grantors; provided this Agreement may be modified by
the execution of a Counterpart by an Additional Grantor in accordance with
Section 21 hereof and Grantors hereby waive any requirement of notice of or
consent to any such amendment.  Any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given.

 

SECTION 24.       Notices.

 

Any notice or other communication herein required or
permitted to be given shall be in writing and may be personally served or sent
by telefacsimile or United States mail or courier service and shall be deemed
to have been given when delivered in person or by courier service, upon receipt
of telefacsimile, or three Business Days after depositing it in the United
States mail, certified or registered, with postage prepaid and properly
addressed; provided that notices to Secured Party shall not be effective
until received.  For the purposes hereof,
the address of each party hereto shall be as provided in subsection 10.2 of the
Credit Agreement or as set forth under such party’s name on the signature pages
hereof or such other address as shall be designated by such party in a written
notice delivered to the other parties hereto.

 

SECTION 25.       Failure
or Indulgence Not Waiver; Remedies Cumulative.

 

No failure or delay on the part of Secured Party in
the exercise of any power, right or privilege hereunder shall impair such
power, right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude any other or further exercise thereof or of
any other power, right or privilege.  All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.

 

SECTION 26.       Severability.

 

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

 

SECTION 27.       Headings.

 

Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive
effect.

 

21

 

SECTION 28.       Governing
Law; Rules of Construction.

 

THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA (INCLUDING,
WITHOUT LIMITATION, SECTION 1646.5 OF THE CIVIL CODE OF THE STATE OF
CALIFORNIA), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE
EXTENT THAT THE UCC PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF CALIFORNIA, IN
WHICH CASE THE LAWS OF SUCH JURISDICTION SHALL GOVERN WITH RESPECT TO THE
PERFECTION OF THE SECURITY INTEREST IN, OR THE REMEDIES WITH RESPECT TO, SUCH
PARTICULAR COLLATERAL.  The rules of
construction set forth in subsection 1.2 of the Credit Agreement shall be
applicable to this Agreement mutatis
mutandis.

 

SECTION 29.       Consent
to Jurisdiction and Service of Process.

 

ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR
ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE
OF CALIFORNIA.  BY EXECUTING AND
DELIVERING THIS AGREEMENT, EACH GRANTOR, FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY
DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY
SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, TO SUCH GRANTOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 23
HEREOF; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH GRANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT; (V) AGREES THAT SECURED PARTY RETAINS THE RIGHT
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST SUCH GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SECTION 28 RELATING TO JURISDICTION
AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE
UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 410.40 OR OTHERWISE.

 

SECTION 30.       Waiver
of Jury Trial.

 

GRANTORS AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT.  THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES

 

22

 

THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS.  EACH GRANTOR AND
SECURED PARTY ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR
GRANTORS AND SECURED PARTY TO ENTER INTO A BUSINESS RELATIONSHIP, THAT GRANTORS
AND SECURED PARTY HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED
FUTURE DEALINGS.  EACH GRANTOR AND
SECURED PARTY FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 29 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.  In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.

 

SECTION 31.       Counterparts.

 

This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are physically
attached to the same document.

 

SECTION 32.       Definitions.

 

(a)           Each
capitalized term utilized in this Agreement that is not defined in the Credit
Agreement or in this Agreement, but that is defined in the UCC, including the
categories of Collateral listed in Section 1 hereof, shall have the meaning set
forth in Articles 1, 8 or 9 of the UCC.

 

(b)           In
addition, the following terms used in this Agreement shall have the following
meanings:

 

“Additional Grantor”
means a Subsidiary of Borrower that becomes a party hereto after the date
hereof as an additional Grantor by executing a Counterpart.

 

“Beneficiary” means
Agent, each Lender and each Swap Counterparty.

 

“Collateral” has
the meaning set forth in Section 1 hereof.

 

“Collateral Account” means the “Quidel
Corporation Collateral Account” established pursuant to Section 11.

 

23

 

“Copyright Registrations”
means all copyright registrations issued to any Grantor and applications for
copyright registration that have been or may hereafter be issued to, or applied
for thereon by, any Grantor in the United States and any state thereof and in
foreign countries (including, without limitation, the registrations set forth
on Schedule 10 annexed hereto, as the same may be amended pursuant
hereto from time to time).

 

“Copyright Rights”
means all common law and other rights in and to the Copyrights in the United
States and any state thereof and in foreign countries including all copyright
licenses (but with respect to such copyright licenses, only to the extent
permitted by such licensing arrangements), the right (but not the obligation)
to renew and extend Copyright Registrations and any such rights and to register
works protectable by copyright and the right (but not the obligation) to sue in
the name of any Grantor or in the name of Secured Party or Lenders for past,
present and future infringements of the Copyrights and any such rights.

 

“Copyrights” means
all items under copyright in various published and unpublished works of
authorship including, without limitation, computer programs, computer data
bases, other computer software layouts, trade dress, drawings, designs,
writings, and formulas (including, without limitation, the works set forth on Schedule
10 annexed hereto, as the same may be amended pursuant hereto from time to
time).

 

“Counterpart” means
a counterpart to this Agreement entered into by a Subsidiary of Borrower
pursuant to Section 21 hereof.

 

“Credit Agreement”
has the meaning set forth in the Preliminary Statements of this Agreement.

 

“Equity Interests”
means all shares of stock, partnership interests, interests in Joint Ventures,
limited liability company interests and all other equity interests in a Person,
whether such stock or interests are classified as Investment Property or
General Intangibles under the UCC.

 

“Event of Default”
means any Event of Default as defined in the Credit Agreement or, after payment
in full of all Obligations under the Credit Agreement and the other Loan
Documents, the cancellation or expiration of all Letters of Credit and the
termination of the Commitments, the occurrence of an Early Termination Date (as
defined in a Master Agreement in the form prepared by the International Swap
and Derivatives Association, Inc. or a similar event under any similar swap
agreement) under any Lender Swap Contract.

 

“Grant” means a
Grant of Trademark Security Interest, substantially in the form of Exhibit I
annexed hereto, and a Grant of Patent Security Interest, substantially in the
form of Exhibit II annexed hereto, and a Grant of Copyright Security
Interest, substantially in the form of Exhibit III annexed hereto.

 

“Intellectual Property Collateral”
means, with respect to any Grantor all right, title and interest (including
rights acquired pursuant to a license or otherwise but only to the extent
permitted by agreements governing such license or other use) in and to all

 

24

 

(a)           Copyrights,
Copyright Registrations and Copyright Rights, including, without limitation,
each of the Copyrights, rights, titles and interests in and to the Copyrights,
all derivative works and other works protectable by copyright, which are
presently, or in the future may be, owned, created (as a work for hire for the
benefit of such Grantor), authored (as a work for hire for the benefit of such
Grantor), or acquired by such Grantor, in whole or in part, and all Copyright
Rights with respect thereto and all Copyright Registrations therefor,
heretofore or hereafter granted or applied for, and all renewals and extensions
thereof, throughout the world;

 

(b)           Patents;

 

(c)           Trademarks,
Trademark Registrations, the Trademark Rights and goodwill of such Grantor’s
business symbolized by the Trademarks and associated therewith;

 

(d)           all
trade secrets, trade secret rights, know-how, customer lists, processes of
production, ideas, confidential business information, techniques, processes,
formulas, and all other proprietary information; and

 

(e)           all
proceeds thereof (such as, by way of example and not by limitation, license
royalties and proceeds of infringement suits).

 

“IP Supplement”
means an IP Supplement, substantially in the form of Exhibit V annexed
hereto.

 

“Lender Swap Contract”
means a Swap Contract or other swap agreement between Borrower or a Subsidiary
of Borrower and a Swap Counterparty.

 

“Patents” means all
patents and patent applications and rights and interests in patents and patent
applications under any domestic or foreign law that are presently, or in the
future may be, owned or held by a Grantor and all patents and patent
applications and rights, title and interests in patents and patent applications
under any domestic or foreign law that are presently, or in the future may be,
owned by such Grantor in whole or in part (including, without limitation, the
patents and patent applications set forth on Schedule 9 annexed hereto),
all rights (but not obligations) corresponding thereto to sue for past, present
and future infringements and all re-issues, divisions, continuations, renewals,
extensions and continuations-in-part thereof.

 

“Pledged Debt”
means the Indebtedness from time to time owed to a Grantor, including the
Indebtedness set forth on Schedule 7 annexed hereto and issued by the
obligors named therein, the Instruments and certificates evidencing such
Indebtedness and all interest, cash or other property received, receivable or
otherwise distributed in respect of or exchanged therefor.

 

“Pledged Equity”
means all Equity Interests now or hereafter owned by a Grantor, including all
securities convertible into, and rights, warrants, options and other rights to
purchase or otherwise acquire, any of the foregoing, including those owned on
the date hereof and set forth on Schedule 6 annexed hereto, the
certificates or other instruments representing any of the foregoing and any
interest of such Grantor in the entries on the books of any securities
intermediary pertaining thereto and all distributions, dividends and other
property received, receivable or otherwise distributed in respect of or
exchanged therefor.

 

25

 

“Pledged Subsidiary Debt”
means Pledged Debt owed to a Grantor by any obligor that is, or becomes, a
direct or indirect Subsidiary of such Grantor, of which such Grantor is a
direct or indirect Subsidiary or that controls, is controlled by or under
common control with such Grantor.

 

“Pledged Subsidiary Equity”
means Pledged Equity in a Person that is, or becomes a direct Subsidiary of a
Grantor.

 

“Pledge Supplement”
means a Pledge Supplement, in substantially the form of Exhibit IV
annexed hereto, in respect of the additional Pledged Equity or Pledged Debt
pledged pursuant to this Agreement.

 

“Requisite Obligees”
means either (i) Required Lenders or (ii), after payment in full of all
Obligations under the Credit Agreement and the other Loan Documents, the
cancellation or expiration of all Letters of Credit and the termination of the
Commitments, the holders of a majority of (A) the aggregate notional amount
under all Lender Swap Contracts (including Lender Swap Contracts that have been
terminated) or (B), if all Lender Swap Contracts have been terminated in
accordance with their terms, the aggregate amount then due and payable
(exclusive of expenses and similar payments but including any early termination
payments then due) under such Lender Swap Contracts.

 

“Secured Obligations”
has the meaning set forth in Section 2 hereof.

 

“Securities
Collateral” means, with respect to any Grantor, the Pledged Equity,
the Pledged Debt and any other Investment Property in which such Grantor has an
interest.

 

“Swap Counterparty”
means a Person that enters into a swap agreement with Borrower or a Subsidiary
and is a Lender or an Affiliate of a Lender at the time such agreement is
entered into.

 

“Trademark Registrations”
means all registrations that have been or may hereafter be issued or applied
for thereon in the United States and any state thereof and in foreign countries
(including, without limitation, the registrations and applications set forth on
Schedule 10 annexed hereto).

 

“Trademark Rights”
means all common law and other rights (but in no event any of the obligations)
in and to the Trademarks in the United States and any state thereof and in
foreign countries.

 

“Trademarks” means
all trademarks, service marks, designs, logos, indicia, tradenames, trade
dress, corporate names, company names, business names, fictitious business
names, trade styles and/or other source and/or business identifiers and
applications pertaining thereto, owned by a Grantor, or hereafter adopted and
used, in its business (including, without limitation, the trademarks
specifically set forth on Schedule 10 annexed hereto).

 

“UCC” means the
Uniform Commercial Code, as it exists on the date of this Agreement or as it
may hereafter be amended, in the State of California.

 

26

 

IN
WITNESS WHEREOF, Grantors and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.

 

 

	
   

  	
  QUIDEL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul E. Landers

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Paul E. Landers

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Chief Financial Officer

  	
   

  
	
   

  
	
   

  
	
   

  	
   

  	
  Notice Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PACIFIC BIOTECH, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul E. Landers

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Paul E. Landers

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  
	
   

  
	
   

  	
   

  	
  Notice Address:

  	
   

  

 

S - 1

 

	
   

  	
  METRA BIOSYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul E. Landers

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Paul E. Landers

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  
	
   

  
	
   

  	
   

  	
  Notice Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OSTEO SCIENCES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul E. Landers

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Paul E. Landers

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  
	
   

  
	
   

  	
   

  	
  Notice Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  LITMUS CONCEPTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul E. Landers

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Paul E. Landers

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  
	
   

  
	
   

  	
   

  	
  Notice Address:

  	
   

  

 

S - 2

 

	
   

  	
  BANK OF AMERICA, N.A.
as Agent and
  Secured Party

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert W. Troutman

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Robert W. Troutman

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
	
   

  
	
   

  
	
   

  	
   

  	
  Notice Address:

  	
   

  

 

S - 3Exhibit
10.18

 

THIRD AMENDMENT TO LEASE

 

1.             PARTIES

 

1.1           THIS AGREEMENT
made the 30th day of December, 2004 is between SYLVAN/ CAMPUS REALTY L.L.C. (“Lessor”)
whose address is c/o Mack-Cali Realty Corporation, 11 Commerce Drive, Cranford,
New Jersey 07016 and THE MEDICINES COMPANY (“Lessee”), whose address is 8
Campus Drive, Parsippany, New Jersey.

 

2.             STATEMENT OF FACTS

 

2.1           Lessor and
Lessee entered into a Lease dated September 30, 2002, as amended by First
Amendment to Lease dated June 30, 2003 and a Second Amendment to Lease
dated December 31, 2003 (together, the “Lease”) covering approximately
32,666 gross rentable square feet, consisting of 20,229 gross rentable square
feet on the second (2nd) floor and 12,437 gross rentable square feet
on the first (1st) floor (collectively, the “Existing Premises”), in
the building located at 8 Campus Drive, Parsippany, New Jersey (“Building”);
and

 

2.2           Lessee
desires to expand the office space subject to the Lease by leasing
approximately 19,462 gross rentable square feet on the first (1st)
floor of the Building (“Expansion Premises”), as shown on Exhibit A attached
hereto and made a part hereof; and

 

2.3           The
parties desire to amend certain terms of the Lease as set forth below.

 

3.             AGREEMENT

 

NOW, THEREFORE, in
consideration of the terms, covenants and conditions hereinafter set forth,
Lessor and Lessee agree as follows:

 

3.1           The above
recitals are incorporated herein by reference.

 

3.2           All capitalized
and non-capitalized terms used in this Agreement which are not separately
defined herein but are defined in the Lease shall have the meaning given to any
such term in the Lease.

 

3.3           The
Term applicable to the Expansion Premises shall commence on the Effective Date
(as defined below) and shall terminate at 11:59 p.m. on January 31, 2013.

 

3.4           The
effective date applicable to the Expansion Premises shall be the earlier of (i)
the day Lessor substantially completes the improvements to be made to the
Expansion Premises in accordance with Exhibit B attached hereto and made part
hereof and obtains a (temporary or final) certificate of occupancy for the
Expansion Premises (if required by local law) or (ii) the date Lessee or anyone
claiming under or through Lessee shall occupy the Expansion Premises (the “Effective
Date”).

 

3.5           Lessor
shall perform the improvement work to the Expansion Premises in accordance with
Exhibit B attached hereto and made part hereof.

 

3.6           From
and after the Effective Date, the following shall be effective:

 

a.             Lessor shall
lease to Lessee and Lessee shall hire from Lessor the Expansion Premises as
shown on Exhibit A attached hereto and made part hereof.

 

b.                                      The
Premises shall be defined as approximately 52,128 gross rentable square feet
consisting of 31,899 gross rentable square feet on the first (1st) floor
and 20,229 gross rentable square feet on the second (2nd) floor of
the Building and Paragraph 7 of the Preamble to the Lease shall be deemed
amended accordingly. Lessee, at its sole cost and expense, shall be responsible
for cleaning and maintaining the existing bathrooms within the Expansion
Premises.

 

1

 

c.                                       In
addition to the Fixed Basic Rent payable applicable to the Existing Premises,
Lessee shall pay Lessor Fixed Basic Rent applicable to the Expansion Premises
which shall accrue as follows and Paragraph 10 of the Preamble to the Lease
shall be deemed supplemented accordingly:

 

(i)            commencing on
the Effective Date,  Lessee shall pay
Lessor Fixed Basic Rent applicable to the Expansion Premises for such number of
months equal to .0833 multiplied by the number of months of the Term applicable
to the Expansion Premises in an amount equal to TWENTY-ONE THOUSAND EIGHT
HUNDRED NINETY-FOUR AND 75/100 DOLLARS ($21,894.75)  per month; and

 

(ii)           commencing on
the expiration of the period set forth in subparagraph (i) above through and
including January 31, 2006, Lessee shall pay Lessor Fixed Basic Rent
applicable to the Expansion Premises in the amount of FIVE HUNDRED THIRTY-FIVE
THOUSAND TWO HUNDRED FIVE AND 00/100 DOLLARS ($535,205.00) per annum, payable
in advance on the first day of each and every calendar month in equal monthly
installments of FORTY-FOUR THOUSAND SIX HUNDRED AND 42/100 DOLLARS
($44,600.42); and

 

(iii)          commencing on February 1,
2006 through and including January 31, 2007, Lessee shall pay Lessor Fixed
Basic Rent applicable to the Expansion Premises in the amount of FIVE HUNDRED
FORTY-FOUR THOUSAND NINE HUNDRED THIRTY-SIX AND 00/100 DOLLARS ($544,936.00)
per annum, payable in advance on the first day of each and every calendar month
in equal monthly installments of FORTY-FIVE THOUSAND FOUR HUNDRED ELEVEN AND
33/100 DOLLARS ($45,411.33); and

 

(iv)          commencing on February 1,
2007 through and including January 31, 2008, Lessee shall pay Lessor Fixed
Basic Rent applicable to the Expansion Premises in the amount of FIVE HUNDRED
FIFTY-FOUR THOUSAND SIX HUNDRED SIXTY-SEVEN AND 00/100 DOLLARS ($554,667.00)
per annum, payable in advance on the first day of each and every calendar month
in equal monthly installments of FORTY-SIX THOUSAND TWO HUNDRED TWENTY-TWO AND
25/100 DOLLARS ($46,222.25); and

 

(v)           commencing on February 1,
2008 through and including January 31, 2009, Lessee shall pay Lessor Fixed
Basic Rent applicable to the Expansion Premises in the amount of FIVE HUNDRED
SIXTY-FOUR THOUSAND THREE HUNDRED NINETY-EIGHT AND 00/100 DOLLARS ($564,398.00)
per annum, payable in advance on the first day of each and every calendar month
in equal monthly installments of FORTY-SEVEN THOUSAND THIRTY-THREE AND 17/100 DOLLARS
($47,033.17); and

 

(vi)          commencing on February 1,
2009 through and including January 31, 2010, Lessee shall pay Lessor Fixed
Basic Rent applicable to the Expansion Premises in the amount of FIVE HUNDRED
SEVENTY-FOUR THOUSAND ONE HUNDRED TWENTY-NINE AND 00/100 DOLLARS ($574,129.00)
per annum, payable in advance on the first day of each and every calendar month
in equal monthly installments of FORTY-SEVEN THOUSAND EIGHT HUNDRED FORTY-FOUR
AND 08/100 DOLLARS ($47,844.08); and

 

(vii)         commencing on February 1,
2010 through and including January 31, 2011, Lessee shall pay Lessor Fixed
Basic Rent applicable to the Expansion Premises in the amount of FIVE HUNDRED
EIGHTY-THREE THOUSAND EIGHT HUNDRED SIXTY AND 00/100 DOLLARS ($583,860.00) per
annum, payable in advance on the first day of each and every calendar month in
equal monthly installments of FORTY-EIGHT THOUSAND SIX HUNDRED FIFTY-FIVE AND
00/100 DOLLARS ($48,655.00); and

 

2

 

(viii)        commencing on February 1,
2011 through and including January 31, 2012, Lessee shall pay Lessor Fixed
Basic Rent applicable to the Expansion Premises in the amount of FIVE HUNDRED
NINETY-THREE THOUSAND FIVE HUNDRED NINETY-ONE AND 00/100 DOLLARS ($593,591.00)
per annum, payable in advance on the first day of each and every calendar month
in equal monthly installments of FORTY-NINE THOUSAND FOUR HUNDRED SIXTY-FIVE
AND 92/100 DOLLARS ($49,465.92); and

 

(ix)           commencing on February 1,
2012 through and including January 31, 2013, Lessee shall pay Lessor Fixed
Basic Rent applicable to the Expansion Premises in the amount of SIX HUNDRED
THREE THOUSAND THREE HUNDRED TWENTY-TWO AND 00/100 DOLLARS ($603,322.00) per
annum, payable in advance on the first day of each and every calendar month in
equal monthly installments of FIFTY THOUSAND TWO HUNDRED SEVENTY-SIX AND 83/100
DOLLARS ($50,276.83).

 

d.             Parking Spaces
shall be increased by seventy-two (72) unassigned spaces and Paragraph 14 of
the Preamble to the Lease shall be deemed amended accordingly.

 

e.             Lessee shall
pay Lessor the cost of electricity consumed within the Expansion Premises in
accordance with Article 22 Building Standard Office Electrical Service
of the Lease.

 

f.              Lessee shall
pay Lessor, as Additional Rent, Lessee’s Percentage applicable to the Expansion
Premises of the increased cost to Lessor for each of the categories set forth
in Article 23 Additional Rent.

 

g.             Lessee’s
Percentage applicable to the Expansion Premises shall be 9.04%.

 

h.             Base Period
Costs with respect to the Expansion Premises shall be as follows and Paragraph
2 of the Preamble to the Lease shall be deemed supplemented accordingly:

 

(A)          Base Operating
Costs: Those costs incurred for the Building and Office Building Area during
the Calendar Year 2005.

 

(B)           Base Real Estate
Taxes: Those Real Estate Taxes incurred for the Building and Office Building
Area during Calendar Year 2005.

 

(C)           Base Utility and
Energy Costs: Those costs incurred for the Building and Office Building Area
during Calendar Year 2005.

 

3.7                                 Article 54
of the Lease shall be applicable to the Expansion Premises.

 

3.8           This
Agreement shall not extend or otherwise amend the Term or Fixed Basic Rent
applicable to the Existing Premises as defined herein.

 

3.9           No
later than thirty (30) days after the determination of the Effective Date, the
parties shall agree to memorialize the Effective Date in writing.

 

3.10         This Agreement is
contingent upon satisfaction of the following condition: the current tenant
leasing the Expansion Premises shall have surrendered and vacated the Expansion
Premises on or before February 15, 2005. If such condition is not
satisfied, then this Agreement shall, automatically and without further notice
or action by either of the parties, be null and void and of no force and effect
and the Lease shall otherwise continue in full force and effect.

 

3.11         Lessee represents
and warrants to Lessor that no broker brought about this transaction, except
The Trammel Crow Company, and Lessee agrees to indemnify and hold Lessor
harmless from any and all claims of any broker arising out of or in connection
with negotiations of, or entering into of, this Agreement.

 

3

 

3.12         Lessee
hereby represents to Lessor that (i) there exists no default under the Lease
either by Lessor or Lessee; (ii) Lessee is entitled to no credit, free rent or
other offset or abatement of the rents due under the Lease; and (iii) there
exists no offset, defense or counterclaim to Lessee’s obligation under the
Lease.

 

3.13         Except
as expressly amended herein, the Lease, as amended, shall remain in full force
and effect as if the same had been set forth in full herein, and Lessor and
Lessee hereby ratify and confirm all of the terms and conditions thereof.

 

3.14         This
agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective legal representatives, successors and permitted assigns.

 

3.15         Each
party agrees that it will not raise or assert as a defense to any obligation
under the Lease or this Agreement or make any claim that the Lease or this
Agreement is invalid or unenforceable due to any failure of this document to
comply with ministerial requirements including, but not limited to,
requirements for corporate seals, attestations, witnesses, notarizations, or
other similar requirements, and each party hereby waives the right to assert
any such defense or make any claim of invalidity or unenforceability due to any
of the foregoing.

 

IN WITNESS WHEREOF,
Lessor and Lessee have hereunto set their hands and seals the date and year
first above written, and acknowledge one to the other that they possess the
requisite authority to enter into this transaction and to sign this Agreement.

 

	
  LESSOR:

  	
   

  	
  LESSEE:

  
	
   

  	
   

  	
   

  
	
  SYLVAN/ CAMPUS REALTY
  L.L.C.

  	
   

  	
  THE MEDICINES COMPANY

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Mack-Cali Realty L.P.,
  member

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Mack-Cali Realty
  Corporation, its general

  	
   

  	
   

  
	
   

  	
  partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Michael K. Nevins

  	
   

  	
   

  	
  By:

  	
  /s/ Steven H. Koehler

  	
   

  
	
   

  	
  Michael K. Nevins

  	
   

  	
   

  	
  Steven H. Koehler

  
	
   

  	
  Vice President -
  Leasing

  	
   

  	
   

  	
  Chief Financial Officer

  
							

 

4

 

EXHIBIT A

 

[Schematic diagram
of original premises and expansion premises]

 

 

EXHIBIT B

 

NOTES

 

RE:          Workletter
Agreement for 19,462 gross rentable square feet of office space on the first (1st)
floor at 8 Campus Drive, Parsippany, New Jersey.

 

	
   

  	
   

  	
  December, 2004

  

 

LESSEE:

 

THE MEDICINES COMPANY

 

You (“Lessee”) and we (“Lessor”)
are executing simultaneously with this Workletter Agreement a written lease
amendment (“Amendment”), covering the space referred to above, as more
particularly described in the Third Amendment to Lease (“Expansion Premises”).

 

To induce Lessee to enter
into the Lease (which is hereby incorporated by reference) and in consideration
of the covenants hereinafter contained, Lessor and Lessee mutually agree as
follows:

 

1.             Lessor
shall have its architect prepare the following architectural and mechanical
drawings and specifications based upon the sketch layout supplied to Lessor by
Lessee, attached hereto and made a part hereof, upon full execution of this
Lease.

 

a.             Architectural
drawings and specifications for Lessee’s partition layout, reflected ceiling,
placement of electrical outlets and other installations for the work to be done
by Lessor.

 

b.             Mechanical
plans and specifications where necessary for installation of air conditioning
systems, ductwork and heating.

 

All such plans and
specifications are expressly subject to Lessor’s written approval, which Lessor
covenants it will not unreasonably withhold.

 

2.             Lessor
agrees to cause the partition plan, electrical plan and the reflected ceiling
plan to be delivered to Lessee on or before the fifteenth (15th) day after
Lessee’s approved sketch layout, which shall be received by Landlord within
fifteen (15) days after Lessee signs this Lease Amendment.  Lessee agrees to approve said plans by
initialing and returning same to Lessor within five (5) days of receipt of each
plan.  Upon approval of the plans
initialed by Lessee, Lessor shall file said plans with the appropriate
governmental agencies.

 

3.             Lessor
agrees to do the work in the Expansion Premises as shown on the plans
referenced above which shall hereinafter be referred to as “The Work”.  The Work shall include Lessor’s general
conditions and overhead amounts. “Building Standard” shall mean the type and
grade of material, equipment and/or device designated by Lessor as standard for
the Building.  All items are Building
Standard unless otherwise noted.  The provisions
of Article 6 of the Lease shall apply to any alterations made to the
Expansion Premises after the initial work to be performed herein.

 

4.             Lessor
will estimate the cost of The Work based upon the plans and specifications
submitted to Lessor by Lessee.  Against
such estimated cost, Lessor shall credit an allowance of $486,550.00 and the
remaining balance, if any, shall be deemed Additional Rent and paid by Lessee
as follows: (i) fifty percent (50%) upon Lessee’s execution and delivery of
this Amendment and (ii) fifty percent (50%) upon Lessor’s substantial
completion of The Work and prior to Lessee’s occupancy of the Expansion
Premises. If the cost of The Work is less than $486,550.00, the amount by which
the cost of The Work is less than $486,550.00 shall be credited in payment of
the Fixed Basic Rent applicable to the Expansion Premises in the order in which
such Fixed Basic Rent shall become due. 
All subcontracts which exceed $10,000.00 in cost will be competitively
bid by at least three (3) subcontractors. Lessee’s construction representative
identified in Paragraph 19 of this Exhibit B shall be given notice of and the
opportunity to participate in progress meetings with respect to The Work.

 

5.             All
low partitioning, workstation modules, bank screen partitions and prefabricated
partition systems shall be furnished and installed by Lessee.

 

B-1

 

6.             The
installation or wiring of telephone and computer (data) outlets is not part of
The Work. Lessee shall bear the responsibility to provide its own telephone and
data systems at Lessee’s sole cost and expense. 
Upon expiration or sooner termination of the Lease, Lessee shall remove
all telephone and data equipment and wiring from the Expansion Premises and the
Building risers upon vacation of same.

 

7.             Changes
in The Work, if necessary or requested by the Lessee, shall be accomplished
after submission of Lessee’s final approved sketch layout, and without
invalidating any part of the Lease or Workletter Agreement, by written
agreement between Lessor and Lessee hereinafter referred to as a Change Order.
Each Change Order shall be prepared by Lessor and signed by both Lessee and
Lessor stating their agreement upon all of the following:

 

a.             The
scope of the change in The Work; and

 

b.             The
cost of the change; and

 

c.             Manner
in which the cost will be paid or credited; and

 

d.             The
estimated extent of any adjustment to the Effective Date (if any) as a result
of the change in The Work.

 

Each and every
Change Order shall be signed by Lessor’s and Lessee’s respective construction
representatives.  In no event shall any
Change Order(s) be permitted without such authorizations.  A 10% supervision plus 10% overhead charge
will be added to the cost of any Change Order and to the cost of any other work
to be performed by Lessor in the Expansion Premises after Lessor’s completion
of The Work. If Lessee shall fail to approve any such Change Order within one
(1) week, the same shall be deemed disapproved in all respects by Lessee and
Lessor shall not be authorized to proceed thereon.  Any increase in the cost of The Work or the
change in The Work stated in a Change Order which results from Lessee’s failure
to timely approve and return said Change Order shall be paid by the
Lessee.  Lessee agrees to pay to Lessor
the cost of any Change Order promptly upon receipt of an invoice for same.  Similarly, any cost savings resulting from
such Change Order(s) shall be credited to the Lessee.

 

8.             If
Lessee elects to use the architect suggested by Lessor, this architect becomes
the Lessee’s agent solely with respect to the plans, specifications and The
Work.  If any change is made after
completion of schematic drawings and prior to completion of final construction
documents which result in a Change Order and additional costs, such costs shall
be the responsibility of the Lessee.

 

9.             Prior
to Lessee’s occupancy of the Expansion Premises, Lessee shall identify and list
any portion of The Work which does not conform to this Workletter Agreement (“Closing
Punch List”).  In addition, thirty (30)
days after Lessee’s first taking possession of the Expansion Premise, Lessee
shall identify and list any portion of The Work which does not conform to this
Workletter Agreement that could not reasonably be determined prior to Lessee’s
occupancy of the Expansion Premises (“30 Day Punch List”). The Lessor shall
review with the Lessee all of the items so listed on the Closing Punch List
and/or the 30 Day Punch List and correct or complete any portion of The Work
which fails to conform to the requirements of this Workletter Agreement.

 

10.           The
terms contained in the Amendment (which include all exhibits attached thereto)
constitute Lessor’s agreement with Lessee with respect to the work to be
performed by Lessor on Lessee’s behalf. 
If the architectural drawings are in conflict with the terms of the
Amendment, then the Lease shall be deemed the controlling document.

 

11.           All
materials and installations constructed for the Lessee within the Expansion
Premises shall become the property of the Lessor upon installation.  No refund, credit or removal of said items is
to be permitted at the termination of the Lease.  Items installed that are not integrated in
any such way with other common building materials do not fall under this
provision (e.g. shelving, furniture, etc.).

 

B-2

 

12.           It
is agreed that notwithstanding the date provided in the Lease for the Effective
Date, the term applicable to the Expansion Premises shall not commence until
Lessor has “substantially completed” all work to be performed by Lessor as
hereinbefore set forth in Paragraph 3 above and as set forth in the Amendment;
provided, however, that if Lessor shall be delayed in substantially completing
said work as a result of:

 

a.             Lessee’s
failure to approve the plans and specifications in accordance with Paragraph 2
hereof; or

 

b.             Lessee’s
failure to furnish interior finish specifications, i.e., paint colors, carpet
selection, etc., to Lessor by the fifth (5th) working day after Lessor has
approved the plans and specifications submitted by Lessee referred to in
Paragraph 2 hereof; or

 

c.             Lessee’s
request for materials, finishes or installations other than Lessor’s Building
Standard; or

 

d.             Lessee’s
changes in The Work; or

 

e.             The
performance of a person, firm, partnership or corporation employed by Lessee
and the completion of the said work by said person, firm, partnership or
corporation;

 

then the Effective Date
of the term of said Lease shall be accelerated by the number of days of such
delay and Lessee’s obligation to pay Fixed Basic Rent and Additional Rent shall
commence as of such earlier date. As to matters described in clauses (a) – (e)
above, Lessor shall advise Lessee of any delay that Lessor knows is reasonably
likely to occur as a result of the matter described, within a reasonable time
after Lessor becomes aware of such likelihood. If Lessee causes any delay in
the Effective Date by reason of any act and/or omission of Lessor or its
agents, then such delay by Lessee shall not result in an acceleration of the
Effective Date as set forth above.

 

13.           Lessor
shall permit Lessee and its agents to enter the Expansion Premises prior to the
Commencement Date in order that Lessee may perform through its own non-union
contractors (or union contractor if required by Lessor) such other work and
decorations as Lessee may desire at the same time Lessor’s contractors are
working in the Expansion Premises.  The
foregoing license to enter prior to the Commencement Date, however, is
conditioned upon:

 

a.             Lessee’s
workmen and mechanics working in harmony and not interfering with the labor
employed by Lessor, Lessor’s mechanics or contractors or by any other Lessee or
its mechanics or contractors; and

 

b.             Lessee
providing Lessor with evidence of Lessee’s contractors and subcontractors
carrying such worker’s compensation, general liability, personal and property
insurance as required by law and in amounts no less than the amounts set forth
in Article 30 of the Lease.  If at
any time such entry shall cause disharmony or interference therewith, this license
may be withdrawn by Lessor upon forty-eight (48) hours written notice to
Lessee.  Such entry shall be deemed
controlled by all of the terms, covenants, provisions and conditions of said
Lease, except as to the covenant to pay Fixed Basic Rent and Additional
Rent.  Lessor shall not be liable in any
way for any injury, loss or damage which may occur to any of Lessee’s
decorations or installations so made prior to the Effective Date, the same
being solely at Lessee’s risk.

 

14.           No
part of the Expansion Premises shall be deemed unavailable for occupancy by the
Lessee, or shall any work which the Lessor is obligated to perform in such part
of the Expansion Premises be deemed incomplete for the purpose of any
adjustment of Fixed Basic Rent payable hereunder, solely due to the
non-completion of details of construction, decoration or mechanical adjustments
which are minor in character and the non-completion of which does not
materially interfere with the Lessee’s use of such part of the Expansion
Premises.

 

15.           Lessee
is responsible for all costs related to the repairs and maintenance of any
additional or supplemental HVAC systems, appliances and equipment installed to
meet Lessee’s specific 

 

B-3

 

requirements.  Lessee shall purchase a service contract for
this equipment so that the equipment is covered by such service contract each
year of the term of the Lease and shall forward a copy of such contract to
Lessor.

 

16.           If
construction is to occur in a space occupied by Lessee’s employees, Lessee
shall be liable for all costs associated with a delay if Lessee shall fail to
comply with a submitted construction schedule to relocate personnel,
furniture, or equipment.  These costs
shall include, but not be limited to the following:

 

a.             cost
of construction workers time wasted; and

 

b.             cost
of any overtime work necessary to meet schedule deadlines; and

 

c.             any
other costs associated with delays in final completion.

 

17.           This
workletter is based on the quantities and specifications listed herein.  Any change to these specifications shall
require the recalculation of the construction costs.  Such recalculation shall not negate any other
section of this Lease.

 

18.           All sums payable
by Lessee to Lessor in connection with this Exhibit B and any other work to be
performed by Lessor within the Expansion Premises and billable to Lessee shall
be deemed Additional Rent.

 

19.           With respect to
the construction work being conducted in or about the Expansion Premises, each
party agrees to be bound by the approval and actions of their respective
construction representatives.  Unless
changed by written notification, the parties hereby designate the following
individuals as their respective construction representatives:

 

	
  FOR
  LESSOR:

  	
  FOR LESSEE:

  
	
   

  	
   

  
	
   

  	
   

  	
  David Mitchell

  
	
  c/o Mack-Cali Realty
  Corporation

  	
  8 Campus Drive

  
	
   

  	
   

  	
  Parsippany, NJ 07054

  
	
   

  	
  973 647 6069

  

 

B-4

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