Document:

ELOQUENT, INC.

                           1999 EQUITY INCENTIVE PLAN

                            Adopted October 21, 1999
                   Approved By Stockholders November 19, 1999
                       Termination Date: October 21, 2009
                 Amended by the Board of Directors March 2, 2001
                     Approved by Stockholders July 12, 2001

1. PURPOSES.

         (a) Eligible Stock Award  Recipients.  The persons  eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.

         (b)  Available  Stock  Awards.  The purpose of the Plan is to provide a
means by which  eligible  recipients of Stock Awards may be given an opportunity
to benefit from  increases in value of the Common Stock  through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options,  (iii) stock bonuses and (iv) rights to acquire  restricted  stock. The
Plan also provides for non-discretionary grants of Nonstatutory Stock Options to
Non-Employee Directors of the Company.

         (c) General Purpose. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the  services of new members of this group and to provide  incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.

2. DEFINITIONS.

         (a) "Affiliate" means any parent corporation or subsidiary  corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

         (b) "Board" means the Board of Directors of the Company.

         (c) "Code" means the Internal Revenue Code of 1986, as amended.

         (d)  "Committee"  means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).

         (e) "Common Stock" means the common stock of the Company.

         (f) "Company" means Eloquent, Inc., a Delaware corporation.

                                       1.
<PAGE>

         (g) "Consultant" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated  for such services or (ii) who is a member of the Board of Directors
of an  Affiliate.  However,  the term  "Consultant"  shall  not  include  either
Directors who are not compensated by the Company for their services as Directors
or  Directors  who are merely  paid a  director's  fee by the  Company for their
services as Directors.

         (h) "Continuous Service" means that the Participant's  service with the
Company or an Affiliate,  whether as an Employee, Director or Consultant, is not
interrupted or terminated.  The  Participant's  Continuous  Service shall not be
deemed to have  terminated  merely  because of a change in the capacity in which
the  Participant  renders service to the Company or an Affiliate as an Employee,
Consultant  or  Director  or a change in the  entity  for which the  Participant
renders such service,  provided that there is no  interruption or termination of
the Participant's  Continuous  Service.  For example, a change in status from an
Employee of the Company to a Consultant  of an Affiliate or a Director  will not
constitute  an  interruption  of  Continuous  Service.  The  Board or the  chief
executive officer of the Company, in that party's sole discretion, may determine
whether  Continuous  Service shall be considered  interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.

         (i) "Covered  Employee" means the chief executive  officer and the four
(4)  other  highest   compensated   officers  of  the  Company  for  whom  total
compensation is required to be reported to stockholders  under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

         (j) "Director" means a member of the Board of Directors of the Company.

         (k)  "Disability"  means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.

         (l)  "Employee"  means  any  person  employed  by  the  Company  or  an
Affiliate.  Mere  service as a Director  or payment of a  director's  fee by the
Company or an Affiliate  shall not be sufficient to constitute  "employment"  by
the Company or an Affiliate.

         (m)  "Exchange  Act"  means the  Securities  Exchange  Act of 1934,  as
amended.

         (n) "Fair Market Value" means,  as of any date, the value of the Common
Stock determined as follows:

                  (i) If the  Common  Stock is listed on any  established  stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap  Market,
the Fair Market  Value of a share of Common  Stock  shall be the  closing  sales
price for such stock (or the closing  bid, if no sales were  reported) as quoted
on such  exchange or market (or the exchange or market with the greatest  volume
of trading in the Common Stock) on the day of determination,  as reported in The
Wall Street Journal or such other source as the Board deems reliable.

                  (ii) In the absence of such markets for the Common Stock,  the
Fair Market Value shall be determined in good faith by the Board.

                                       2.
<PAGE>

         (o) "Incentive  Stock Option" means an Option intended to qualify as an
incentive  stock  option  within the  meaning of Section 422 of the Code and the
regulations promulgated thereunder.

         (p) "IPO Date" means the effective date of the initial public  offering
of the Company's Common Stock.

         (q)  "Non-Employee  Director"  means a Director who either (i) is not a
current  Employee or Officer of the Company or its parent or a subsidiary,  does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary  for services  rendered as a consultant or in any capacity other
than as a Director  (except  for an amount as to which  disclosure  would not be
required  under  Item  404(a) of  Regulation  S-K  promulgated  pursuant  to the
Securities Act  ("Regulation  S-K")),  does not possess an interest in any other
transaction  as to which  disclosure  would be  required  under  Item  404(a) of
Regulation  S-K  and is not  engaged  in a  business  relationship  as to  which
disclosure  would be required  under Item 404(b) of  Regulation  S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.

         (r) "Non-Employee  Director Option" means a Non-Statutory  Stock Option
granted pursuant to Section 7 hereof.

         (s) "Non-Employee  Director Option Agreement" means a written agreement
between  the  Company  and a  Non-Employee  Director  evidencing  the  terms and
conditions of a Non-Employee  Director Option grant. Each Non-Employee  Director
Option Agreement shall be subject to the terms and conditions of the Plan.

         (t) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.

         (u)  "Officer"  means a person who is an officer of the Company  within
the  meaning  of Section 16 of the  Exchange  Act and the rules and  regulations
promulgated thereunder.

         (v) "Option" means an Incentive  Stock Option or a  Nonstatutory  Stock
Option granted pursuant to the Plan.

         (w) "Option  Agreement" means a written  agreement  between the Company
and an Optionholder  evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

         (x) "Optionholder" means a person to whom an Option is granted pursuant
to the Plan or, if  applicable,  such  other  person  who  holds an  outstanding
Option.

         (y) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an  "affiliated  corporation"  (within the meaning of
Treasury  Regulations  promulgated  under Section 162(m) of the Code),  is not a
former  employee  of  the  Company  or  an  "affiliated  corporation"  receiving
compensation  for prior  services  (other than  benefits  under a tax  qualified
pension plan), was not an officer of the Company or an "affiliated  corporation"
at any time and is not currently receiving direct or indirect  remuneration from
the Company or an

                                       3.
<PAGE>

"affiliated  corporation"  for services in any capacity other than as a Director
or (ii) is otherwise  considered  an "outside  director" for purposes of Section
162(m) of the Code.

         (z)  "Participant"  means a person  to whom a Stock  Award  is  granted
pursuant  to the  Plan  or,  if  applicable,  such  other  person  who  holds an
outstanding Stock Award.

         (aa) "Plan" means this Eloquent, Inc. 1999 Equity Incentive Plan.

         (bb) "Rule 16b-3" means Rule 16b-3  promulgated  under the Exchange Act
or any successor to Rule 16b-3, as in effect from time to time.

         (cc) "Securities Act" means the Securities Act of 1933, as amended.

         (dd) "Stock Award" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.

         (ee) "Stock  Award  Agreement"  means a written  agreement  between the
Company and a holder of a Stock Award  evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

         (ff) "Ten Percent Stockholder" means a person who owns (or is deemed to
own  pursuant  to Section  424(d) of the Code)  stock  possessing  more than ten
percent (10%) of the total combined  voting power of all classes of stock of the
Company or of any of its Affiliates.

3. ADMINISTRATION.

         (a) Administration by Board. The Board shall administer the Plan unless
and until the Board  delegates  administration  to a  Committee,  as provided in
subsection 3(c). Any interpretation of the Plan by the Board and any decision by
the Board under the Plan shall be final and binding on all persons.

         (b) Powers of Board.  The Board  shall have the power,  subject to, and
within the limitations of, the express provisions of the Plan:

                  (i) To  determine  from  time to  time  which  of the  persons
eligible  under the Plan shall be granted Stock Awards;  when and how each Stock
Award shall be granted;  what type or  combination of types of Stock Award shall
be  granted;  the  provisions  of each Stock  Award  granted  (which need not be
identical),  including  the time or times when a person  shall be  permitted  to
receive  Common  Stock  pursuant to a Stock  Award;  and the number of shares of
Common  Stock with  respect to which a Stock Award shall be granted to each such
person.

                  (ii) To  construe  and  interpret  the Plan and  Stock  Awards
granted under it, and to establish,  amend and revoke rules and  regulations for
its  administration.  The Board, in the exercise of this power,  may correct any
defect,  omission or  inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem  necessary  or expedient to make the
Plan fully effective.

                  (iii)  To  amend  the Plan or a Stock  Award  as  provided  in
Section 13.

                                       4.
<PAGE>

                  (iv)  Generally,  to exercise  such powers and to perform such
acts as the Board deems  necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.

         (c) Delegation to Committee.

                  (i) General. The Board may delegate administration of the Plan
to a Committee or  Committees  of one (1) or more members of the Board,  and the
term "Committee" shall apply to any person or persons to whom such authority has
been delegated.  If  administration  is delegated to a Committee,  the Committee
shall  have,  in  connection  with the  administration  of the Plan,  the powers
theretofore  possessed  by the  Board,  including  the  power to  delegate  to a
subcommittee  any of the  administrative  powers the  Committee is authorized to
exercise (and  references  in this Plan to the Board shall  thereafter be to the
Committee  or  subcommittee),   subject,  however,  to  such  resolutions,   not
inconsistent  with the  provisions  of the Plan,  as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan.

                  (ii)  Committee  Composition  when  Common  Stock is  Publicly
Traded.  At such time as the Common Stock is publicly traded,  in the discretion
of the Board, a Committee may consist  solely of two or more Outside  Directors,
in  accordance  with Section  162(m) of the Code,  and/or  solely of two or more
Non-Employee  Directors, in accordance with Rule 16b-3. Within the scope of such
authority,  the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors,  the authority to grant
Stock Awards to eligible  persons who are either (a) not then Covered  Employees
and are not  expected  to be Covered  Employees  at the time of  recognition  of
income  resulting  from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or (2) delegate
to a  committee  of one or more  members  of the Board who are not  Non-Employee
Directors  the  authority to grant Stock Awards to eligible  persons who are not
then subject to Section 16 of the Exchange Act.

4. SHARES SUBJECT TO THE PLAN.

         (a) Share Reserve.  Subject to the provisions of Section 12 relating to
adjustments  upon changes in Common  Stock,  the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate  the initial  reserve
amount set forth below (the "Initial Reserve  Amount"),  plus an annual increase
to be added each  January 1,  beginning  January 1, 2001,  equal to four percent
(4.0%) of the total number of shares of Common Stock outstanding on such January
1.  Notwithstanding  the foregoing,  the Board may designate a smaller number of
shares  of  Common  Stock to be added to the share  reserve  as of a  particular
January 1. The Initial Reserve Amount shall be equal to that number of shares of
Common Stock that,  as of the IPO Date,  is reserved  under the  Company's  1995
Equity  Incentive Plan and 1997 Equity  Incentive Plan and has not been reserved
for  outstanding  stock awards under such plans or issued under such plans.  For
purposes of  complying  with the  requirements  of Section 422 of the Code,  the
maximum  aggregate  number of shares of Common Stock that may be issued pursuant
to Incentive  Stock Options under this Plan shall be two hundred fifty  thousand
(250,000) shares  multiplied by the number of years of the term of this Plan, or
an  aggregate  of  two  million  five

                                       5.
<PAGE>

hundred thousand (2,500,000) shares.  Notwithstanding the foregoing, the Company
shall have no obligation to grant any Incentive Stock Options under the Plan.

         (b) Reversion of Shares to the Share Reserve.  If any Stock Award shall
for any  reason  expire or  otherwise  terminate,  in whole or in part,  without
having been  exercised in full,  the shares of Common  Stock not acquired  under
such Stock Award shall revert to and again become  available for issuance  under
the Plan. In addition, if any stock award issued under the Company's 1995 Equity
Incentive  Plan and 1997 Equity  Incentive  Plan shall for any reason  expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the shares of Common Stock not  acquired  under such stock award shall revert to
and again become available for issuance under this Plan.

         (c) Source of Shares.  The shares of Common  Stock  subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.

5. ELIGIBILITY.

         (a) Eligibility for Specific Stock Awards.  Incentive Stock Options may
be granted only to Employees.  Stock Awards other than  Incentive  Stock Options
may be granted to Employees, Directors and Consultants.

         (b) Ten Percent  Stockholders.  A Ten Percent  Stockholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is at
least one  hundred ten  percent  (110%) of the Fair  Market  Value of the Common
Stock  at the  date of  grant  and  the  Option  is not  exercisable  after  the
expiration of five (5) years from the date of grant.

         (c) Section 162(m) Limitation.  Subject to the provisions of Section 12
relating to adjustments  upon changes in the shares of Common Stock, no Employee
shall be  eligible to be granted  Options  covering  more than two million  five
hundred  thousand  (2,500,000)  shares of the Common  Stock  during any calendar
year.

         (d) Consultants.  A Consultant shall not be eligible for the grant of a
Stock Award if, at the time of grant, a Form S-8  Registration  Statement  under
the Securities Act ("Form S-8") is not available to register either the offer or
the sale of the Company's securities to such Consultant because of the nature of
the services  that the  Consultant  is providing to the Company,  or because the
Consultant  is not a  natural  person,  or as  otherwise  provided  by the rules
governing the use of Form S-8, unless the Company  determines both (i) that such
grant (A) shall be registered in another  manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration under
the  Securities Act in order to comply with the  requirements  of the Securities
Act, if applicable,  and (ii) that such grant complies with the securities  laws
of all other relevant jurisdictions.

6. OPTION PROVISIONS.

         Each  Option  shall be in such form and shall  contain  such  terms and
conditions as the Board shall deem appropriate.  All Options shall be separately
designated  Incentive Stock Options or Nonstatutory Stock Options at the time of
grant,  and, if certificates are issued, a separate  certificate or certificates
will be issued for shares of Common Stock  purchased on

                                       6.
<PAGE>

exercise of each type of Option.  The provisions of separate Options need not be
identical,  but each Option shall include  (through  incorporation of provisions
hereof by reference  in the Option or  otherwise)  the  substance of each of the
following provisions:

         (a) Term.  Subject to the  provisions of subsection  5(b) regarding Ten
Percent  Stockholders,  no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.

         (b)  Exercise  Price  of an  Incentive  Stock  Option.  Subject  to the
provisions of subsection 5(b) regarding Ten Percent  Stockholders,  the exercise
price of each Incentive  Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted.  Notwithstanding  the foregoing,  an Incentive Stock
Option may be granted  with an  exercise  price lower than that set forth in the
preceding  sentence  if such  Option is granted  pursuant  to an  assumption  or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.

         (c) Exercise Price of a Nonstatutory  Stock Option.  The exercise price
of each  Nonstatutory  Stock Option shall be not less than  eighty-five  percent
(85%) of the Fair Market Value of the Common Stock  subject to the Option on the
date the Option is granted.  Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted  with an  exercise  price lower than that set forth in the
preceding  sentence  if such  Option is granted  pursuant  to an  assumption  or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.

         (d) Consideration. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent  permitted by applicable  statutes and
regulations,  either (i) in cash at the time the Option is  exercised or (ii) at
the  discretion  of the  Board  at the  time  of the  grant  of the  Option  (or
subsequently in the case of a Nonstatutory  Stock Option) (1) by delivery to the
Company of other Common  Stock,  (2)  according  to a deferred  payment or other
similar  arrangement  with the  Optionholder  or (3) in any other  form of legal
consideration that may be acceptable to the Board;  provided,  however,  that at
any time that the Company is  incorporated  in  Delaware,  payment of the Common
Stock's "par value," as defined in the Delaware  General  Corporation Law, shall
not be made by deferred payment.

         In the case of any  deferred  payment  arrangement,  interest  shall be
compounded  at least  annually  and  shall be  charged  at the  minimum  rate of
interest  necessary to avoid the  treatment as  interest,  under any  applicable
provisions of the Code, of any amounts other than amounts  stated to be interest
under the deferred payment arrangement.

         (e)  Transferability  of an Incentive Stock Option.  An Incentive Stock
Option  shall not be  transferable  except by will or by the laws of descent and
distribution  and shall be exercisable  during the lifetime of the  Optionholder
only by the Optionholder.  Notwithstanding the foregoing,  the Optionholder may,
by  delivering  written  notice to the Company,  in a form  satisfactory  to the
Company,  designate  a  third  party  who,  in the  event  of the  death  of the
Optionholder, shall thereafter be entitled to exercise the Option.

                                       7.
<PAGE>

         (f)  Transferability  of a  Nonstatutory  Stock Option.  A Nonstatutory
Stock  Option  shall  be  transferable  to the  extent  provided  in the  Option
Agreement.   If  the   Nonstatutory   Stock   Option   does  not   provide   for
transferability,  then the  Nonstatutory  Stock Option shall not be transferable
except  by  will  or by the  laws of  descent  and  distribution  and  shall  be
exercisable  during the lifetime of the Optionholder  only by the  Optionholder.
Notwithstanding  the  foregoing,  the  Optionholder  may, by delivering  written
notice to the Company, in a form satisfactory to the Company,  designate a third
party who, in the event of the death of the  Optionholder,  shall  thereafter be
entitled to exercise the Option.

         (g)  Vesting  Generally.  The total  number  of shares of Common  Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic  installments  that may,  but need not,  be equal.  The  Option  may be
subject to such other terms and  conditions  on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem  appropriate.  The vesting  provisions of individual  Options may vary. The
provisions  of  this  subsection  6(g)  are  subject  to any  Option  provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.

         (h) Termination of Continuous  Service.  In the event an Optionholder's
Continuous  Service  terminates  (other  than upon the  Optionholder's  death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the  Optionholder  was  entitled  to  exercise  such  Option  as of the  date of
termination)  but only  within  such period of time ending on the earlier of (i)
the date  three (3)  months  following  the  termination  of the  Optionholder's
Continuous  Service (or such longer or shorter  period  specified  in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination,  the Optionholder does not exercise his
or her Option  within the time  specified  in the Option  Agreement,  the Option
shall terminate.

         (i) Extension of Termination Date. An  Optionholder's  Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's  Continuous Service (other than upon the Optionholder's death
or  Disability)  would be prohibited at any time solely  because the issuance of
shares of Common Stock would  violate the  registration  requirements  under the
Securities  Act,  then the  Option  shall  terminate  on the  earlier of (i) the
expiration  of the term of the Option set forth in  subsection  6(a) or (ii) the
expiration  of a  period  of three  (3)  months  after  the  termination  of the
Optionholder's  Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.

         (j)  Disability of  Optionholder.  In the event that an  Optionholder's
Continuous Service terminates as a result of the Optionholder's  Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise  such Option as of the date of  termination),  but only
within  such  period of time  ending on the  earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option  Agreement)  or (ii) the  expiration of the term of the Option as set
forth in the Option Agreement. If, after termination,  the Optionholder does not
exercise his or her Option within the time  specified  herein,  the Option shall
terminate.

                                       8.
<PAGE>

         (k)  Death  of  Optionholder.   In  the  event  (i)  an  Optionholder's
Continuous Service  terminates as a result of the  Optionholder's  death or (ii)
the  Optionholder  dies  within  the  period  (if any)  specified  in the Option
Agreement after the termination of the  Optionholder's  Continuous Service for a
reason  other than death,  then the Option may be  exercised  (to the extent the
Optionholder  was  entitled to exercise  such Option as of the date of death) by
the  Optionholder's  estate,  by a person who acquired the right to exercise the
Option by bequest or  inheritance  or by a person  designated  to  exercise  the
option upon the  Optionholder's  death pursuant to subsection  6(e) or 6(f), but
only  within the period  ending on the  earlier  of (1) the date  eighteen  (18)
months  following the date of death (or such longer or shorter period  specified
in the Option Agreement) or (2) the expiration of the term of such Option as set
forth in the Option  Agreement.  If,  after death,  the Option is not  exercised
within the time specified herein, the Option shall terminate.

         (l) Early Exercise.  The Option may, but need not,  include a provision
whereby  the  Optionholder  may  elect at any  time  before  the  Optionholder's
Continuous  Service  terminates  to exercise the Option as to any part or all of
the shares of Common  Stock  subject to the Option  prior to the full vesting of
the Option. Any unvested shares of Common Stock so purchased may be subject to a
repurchase  option in favor of the Company or to any other restriction the Board
determines to be appropriate.

         (m) Re-Load  Options.  Without in any way limiting the authority of the
Board to make or not to make grants of Options  hereunder,  the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision  entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the  Optionholder  exercises  the  Option  evidenced  by the Option
Agreement,  in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option  Agreement.
Any such Re-Load Option shall (i) provide for a number of shares of Common Stock
equal to the number of shares of Common Stock  surrendered as part or all of the
exercise price of such Option; (ii) have an expiration date which is the same as
the  expiration  date of the  Option  the  exercise  of which  gave rise to such
Re-Load  Option;  and (iii) have an exercise price which is equal to one hundred
percent  (100%) of the Fair  Market  Value of the  Common  Stock  subject to the
Re-Load Option on the date of exercise of the original  Option.  Notwithstanding
the foregoing,  a Re-Load Option shall be subject to the same exercise price and
term provisions heretofore described for Options under the Plan.

         Any  such  Re-Load  Option  may  be  an  Incentive  Stock  Option  or a
Nonstatutory  Stock Option,  as the Board may designate at the time of the grant
of the original Option;  provided,  however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar  ($100,000)  annual  limitation on the  exercisability of Incentive Stock
Options  described in subsection  11(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load  Option.  Any such Re-Load Option shall
be  subject to the  availability  of  sufficient  shares of Common  Stock  under
subsection  4(a) and the "Section  162(m)  Limitation"  on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent  with the express  provisions
of the Plan regarding the terms of Options.

                                       9.
<PAGE>

7. NON-EMPLOYEE DIRECTOR STOCK OPTIONS.

         Without any further  action of the Board,  each  Non-Employee  Director
shall be granted Nonstatutory Stock Options as described in subsections 7(a) and
7(b) (collectively, "Non-Employee Director Options"). Each Non-Employee Director
Option shall  include the substance of the terms set forth in  subsections  7(c)
through 7(k).

         (a) Initial  Grants.  After the IPO Date, each person who is elected or
appointed for the first time to be a Non-Employee Director  automatically shall,
upon the date of his or her initial election or appointment to be a Non-Employee
Director  by the Board or  stockholders  of the  Company,  be granted an Initial
Grant to purchase  fifty thousand  (50,000)  shares of Common Stock on the terms
and conditions set forth herein. For purposes of the foregoing sentence,  on the
IPO Date,  each person then serving as a  Non-Employee  Director and who has not
previously  been granted options to acquire Common Stock shall be deemed to have
been initially elected as a Non-Employee Director on such date.

         (b)  Annual  Grants.   After  the  IPO  Date,  each  person  who  is  a
Non-Employee  Director  on the Board on the day after the  annual  stockholders'
meeting,  shall,  on that date, be granted an Annual Grant to purchase up to ten
thousand  (10,000)  shares of Common Stock on the terms and conditions set forth
herein, provided, that for the year 2001 only, the Annual Grant shall be a stock
option to purchase up to fifty thousand  (50,000)  shares of Common Stock on the
terms and conditions set forth herein. Notwithstanding the foregoing, the number
of shares of Common Stock subject to an Annual Grant to a Non-Employee  Director
that has not served in that  capacity for the entire  period since the preceding
annual  stockholders'  meeting shall be reduced, pro rata, for each full quarter
the person did not serve during such period.

         (c) Term.  Each  Non-Employee  Director Option shall have a term of ten
(10) years from the date it is granted.

         (d) Exercise Price.  The exercise price of each  Non-Employee  Director
Option shall be one hundred percent (100%) of the Fair Market Value of the stock
subject   to  the   Non-Employee   Director   Option   on  the  date  of  grant.
Notwithstanding  the foregoing,  a Non-Employee  Director  Option may be granted
with an exercise  price lower than that set forth in the  preceding  sentence if
such  Non-Employee  Director  Option is granted  pursuant  to an  assumption  or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.

         (e) Vesting.  Each Initial  Grant shall vest  one-third  (1/3) per year
from the date on which it is granted. Each Annual Grant shall vest one year from
the date on which it is granted.

         (f)  Consideration.  The purchase price of stock acquired pursuant to a
Non-Employee  Director Option may be paid, to the extent permitted by applicable
statutes and regulations, in any combination of (i) cash or check, (ii) delivery
to the Company of other Common Stock,  (ii)  deferred  payment or (iv) any other
form of legal  consideration that may be acceptable to the Board and provided in
the Non-Employee Director Option Agreement;  provided, however, that at any time
that the Company is incorporated in Delaware, payment of the Common Stock's "par
value," as defined in the Delaware General Corporation Law, shall not

                                      10.
<PAGE>

be made by deferred  payment.  In the case of any deferred payment  arrangement,
interest  shall be  compounded  at least  annually  and shall be  charged at the
minimum rate of interest necessary to avoid the treatment as interest, under any
applicable  provisions of the Code, of any amounts other than amounts  stated to
be interest under the deferred payment arrangement.

         (g)  Transferability.  A  Non-Employee  Director  Option  shall  not be
transferable except by will or by the laws of descent and distribution and shall
be  exercisable  during the lifetime of the  Non-Employee  Director  only by the
Non-Employee Director.  Notwithstanding the foregoing, the Non-Employee Director
may, by delivering written notice to the Company,  in a form satisfactory to the
Company,  designate  a  third  party  who,  in the  event  of the  death  of the
Non-Employee Director, shall thereafter be entitled to exercise the Non-Employee
Director Option.

         (h)  Termination  of Continuous  Service.  In the event a  Non-Employee
Director's  Continuous  Service  terminates  (other  than upon the  Non-Employee
Director's death or Disability),  the Non-Employee  Director may exercise his or
her Non-Employee  Director Option (to the extent that the Non-Employee  Director
was entitled to exercise it as of the date of termination)  but only within such
period of time ending on the earlier of (i) the date three (3) months  following
the termination of the Non-Employee  Director's  Continuous Service, or (ii) the
expiration of the term of the  Non-Employee  Director Option as set forth in the
Non-Employee Director Option Agreement. If, after termination,  the Non-Employee
Director does not exercise his or her  Non-Employee  Director  Option within the
time specified in the Non-Employee  Director Option Agreement,  the Non-Employee
Director Option shall terminate.

         (i) Extension of Termination  Date. If the exercise of the Non-Employee
Director  Option  following  the  termination  of  the  Non-Employee  Director's
Continuous  Service  (other  than  upon  the  Non-Employee  Director's  death or
Disability)  would be  prohibited  at any time solely  because  the  issuance of
shares would violate the  registration  requirements  under the Securities  Act,
then the Non-Employee  Director Option shall terminate on the earlier of (i) the
expiration  of the  term  of the  Non-Employee  Director  Option  set  forth  in
subsection 7(c) or (ii) the expiration of a period of three (3) months after the
termination of the Non-Employee  Director's  Continuous Service during which the
exercise of the Non-Employee Director Option would not violate such registration
requirements.

         (j) Disability of  Non-Employee  Director.  In the event a Non-Employee
Director's  Continuous  Service  terminates  as a  result  of  the  Non-Employee
Director's  Disability,  the  Non-Employee  Director  may  exercise  his  or her
Non-Employee  Director Option (to the extent that the Non-Employee  Director was
entitled  to exercise  it as of the date of  termination),  but only within such
period  of time  ending  on the  earlier  of (i) the  date  twelve  (12)  months
following  such   termination  or  (ii)  the  expiration  of  the  term  of  the
Non-Employee  Director Option as set forth in the  Non-Employee  Director Option
Agreement.  If, after termination,  the Non-Employee  Director does not exercise
his or her Non-Employee  Director Option within the time specified  herein,  the
Non-Employee Director Option shall terminate.

         (k) Death of  Non-Employee  Director.  In the event (i) a  Non-Employee
Director's  Continuous  Service  terminates  as a  result  of  the  Non-Employee
Director's death or (ii) the  Non-Employee  Director dies within the three-month
period after the termination of the Non-

                                      11.
<PAGE>

Employee  Director's  Continuous Service for a reason other than death, then the
Non-Employee  Director  Option may be exercised (to the extent the  Non-Employee
Director  was entitled to exercise the  Non-Employee  Director  Option as of the
date of death) by the Non-Employee  Director's  estate, by a person who acquired
the right to exercise the Non-Employee Director Option by bequest or inheritance
or by a person designated to exercise the Non-Employee  Director Option upon the
Non-Employee  Director's death, but only within the period ending on the earlier
of (1) the date  eighteen  (18)  months  following  the date of death or (2) the
expiration of the term of such Non-Employee  Director Option as set forth in the
Non-Employee  Director  Option  Agreement.  If,  after death,  the  Non-Employee
Director  Option  is  not  exercised  within  the  time  specified  herein,  the
Non-Employee Director Option shall terminate.

8. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

         (a) Stock Bonus  Awards.  Each stock bonus  agreement  shall be in such
form and shall  contain  such  terms and  conditions  as the  Board  shall  deem
appropriate.  The terms and conditions of stock bonus agreements may change from
time to time, and the terms and  conditions of separate  stock bonus  agreements
need not be identical,  but each stock bonus  agreement  shall include  (through
incorporation  of provisions  hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

                  (i)   Consideration.   A  stock   bonus  may  be   awarded  in
consideration for past services actually rendered to the Company or an Affiliate
for its benefit.

                  (ii)  Vesting.  Shares of Common Stock awarded under the stock
bonus  agreement may, but need not, be subject to a share  repurchase  option in
favor of the Company in accordance  with a vesting  schedule to be determined by
the Board.

                  (iii) Termination of Participant's  Continuous Service. In the
event a Participant's  Continuous Service terminates,  the Company may reacquire
any or all of the shares of Common Stock held by the Participant  which have not
vested  as of the  date of  termination  under  the  terms  of the  stock  bonus
agreement.

                  (iv) Transferability. Rights to acquire shares under the stock
bonus agreement  shall be  transferable by the Participant  only upon such terms
and conditions as are set forth in the stock bonus agreement, as the Board shall
determine in its  discretion,  so long as Common Stock  awarded  under the stock
bonus agreement remains subject to the terms of the stock bonus agreement.

         (b) Restricted Stock Awards.  Each restricted stock purchase  agreement
shall be in such form and shall  contain such terms and  conditions as the Board
shall  deem  appropriate.  The  terms and  conditions  of the  restricted  stock
purchase  agreements  may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted  stock purchase  agreement shall include  (through  incorporation  of
provisions  hereof by reference in the agreement or otherwise)  the substance of
each of the following provisions:

                  (i) Purchase  Price.  The purchase price under each restricted
stock purchase  agreement  shall be such amount as the Board shall determine and
designate in such restricted

                                      12.
<PAGE>

stock purchase agreement.  The purchase price shall not be less than eighty-five
percent (85%) of the Common  Stock's Fair Market Value on the date such award is
made or at the time the purchase is consummated.

                  (ii)  Consideration.   The  purchase  price  of  Common  Stock
acquired  pursuant to the  restricted  stock  purchase  agreement  shall be paid
either:  (i) in cash at the  time of  purchase;  (ii) at the  discretion  of the
Board,  according to a deferred  payment or other similar  arrangement  with the
Participant;  or (iii) in any  other  form of  legal  consideration  that may be
acceptable to the Board in its discretion;  provided,  however, that at any time
that the Company is incorporated in Delaware, then payment of the Common Stock's
"par value," as defined in the Delaware  General  Corporation  Law, shall not be
made by deferred payment.

                  (iii)  Vesting.  Shares of  Common  Stock  acquired  under the
restricted  stock  purchase  agreement  may, but need not, be subject to a share
repurchase  option in favor of the Company in accordance with a vesting schedule
to be determined by the Board.

                  (iv) Termination of Participant's  Continuous  Service. In the
event a Participant's Continuous Service terminates,  the Company may repurchase
or  otherwise  reacquire  any or all of the  shares of Common  Stock held by the
Participant  which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.

                  (v)  Transferability.  Rights  to  acquire  shares  under  the
restricted  stock purchase  agreement  shall be  transferable by the Participant
only upon such terms and  conditions  as are set forth in the  restricted  stock
purchase agreement,  as the Board shall determine in its discretion,  so long as
Common Stock awarded  under the  restricted  stock  purchase  agreement  remains
subject to the terms of the restricted stock purchase agreement.

9. COVENANTS OF THE COMPANY.

         (a) Availability of Shares.  During the terms of the Stock Awards,  the
Company  shall keep  available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

         (b)  Securities Law  Compliance.  The Company shall seek to obtain from
each  regulatory  commission  or agency having  jurisdiction  over the Plan such
authority  as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided,  however, that this
undertaking  shall not require the Company to register  under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts,  the Company is unable to obtain
from any such  regulatory  commission or agency the authority  which counsel for
the Company  deems  necessary  for the lawful  issuance and sale of Common Stock
under the Plan,  the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon  exercise of such Stock Awards unless and until
such authority is obtained.

10. USE OF PROCEEDS FROM STOCK.

         Proceeds  from the sale of Common Stock  pursuant to Stock Awards shall
constitute general funds of the Company.

                                      13.
<PAGE>

11. MISCELLANEOUS.

         (a) Acceleration of  Exercisability  and Vesting.  The Board shall have
the power to  accelerate  the time at which a Stock Award may first be exercised
or the  time  during  which a Stock  Award  or any  part  thereof  will  vest in
accordance  with the Plan,  notwithstanding  the  provisions  in the Stock Award
stating the time at which it may first be  exercised or the time during which it
will vest.

         (b) Stockholder Rights. No Participant shall be deemed to be the holder
of, or to have any of the  rights of a holder  with  respect  to,  any shares of
Common Stock subject to such Stock Award unless and until such  Participant  has
satisfied  all  requirements  for  exercise of the Stock  Award  pursuant to its
terms.

         (c) No Employment or other Service  Rights.  Nothing in the Plan or any
instrument  executed or Stock Award granted  pursuant  thereto shall confer upon
any  Participant  any right to continue to serve the Company or an  Affiliate in
the  capacity in effect at the time the Stock Award was granted or shall  affect
the right of the Company or an Affiliate to terminate  (i) the  employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate,  and any applicable  provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.

         (d) Incentive Stock Option $100,000 Limitation.  To the extent that the
aggregate  Fair Market Value  (determined  at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by Participant  during any calendar year (under all plans of the Company and its
Affiliates)  exceeds one hundred  thousand  dollars  ($100,000),  the Options or
portions  thereof which exceed such limit  (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.

         (e) Investment Assurances. The Company may require a Participant,  as a
condition of exercising or acquiring  Common Stock under any Stock Award, (i) to
give  written  assurances  satisfactory  to the Company as to the  Participant's
knowledge and  experience in financial and business  matters  and/or to employ a
purchaser   representative   reasonably  satisfactory  to  the  Company  who  is
knowledgeable  and experienced in financial and business  matters and that he or
she  is  capable  of   evaluating,   alone  or  together   with  the   purchaser
representative,  the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the  Participant's  own
account and not with any present intention of selling or otherwise  distributing
the Common Stock. The foregoing requirements,  and any assurances given pursuant
to such  requirements,  shall be inoperative if (iii) the issuance of the shares
of Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award  has  been  registered  under  a  then  currently  effective  registration
statement under the Securities Act or (iv) as to any particular  requirement,  a
determination  is made by counsel for the Company that such requirement need not
be met in the  circumstances  under the then  applicable  securities  laws.  The
Company  may,  upon  advice of counsel to the  Company,  place  legends on stock
certificates   issued  under  the  Plan  as  such  counsel  deems  necessary  or
appropriate in order to comply with

                                      14.
<PAGE>

applicable securities laws,  including,  but not limited to, legends restricting
the transfer of the Common Stock.

         (f) Withholding  Obligations.  To the extent provided by the terms of a
Stock Award Agreement,  the Participant may satisfy any federal,  state or local
tax  withholding  obligation  relating to the exercise or  acquisition of Common
Stock  under a Stock  Award by any of the  following  means (in  addition to the
Company's right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means:  (i) tendering a cash payment;  (ii)
authorizing  the Company to withhold  shares of Common  Stock from the shares of
Common Stock  otherwise  issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award; or (iii) delivering to the
Company owned and unencumbered  shares of the Common Stock.  Notwithstanding the
foregoing,  the Company  shall not be  authorized  to withhold  shares of Common
Stock at rates in excess of the minimum statutory  withholding rates for federal
and state tax purposes, including payroll taxes.

12. ADJUSTMENTS UPON CHANGES IN STOCK.

         (a)  Capitalization  Adjustments.  If any  change is made in the Common
Stock subject to the Plan, or subject to any Stock Award, without the receipt of
consideration  by the Company (through  merger,  consolidation,  reorganization,
recapitalization,  reincorporation,  stock dividend,  dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares,  change in corporate  structure or other  transaction  not involving the
receipt  of  consideration  by the  Company),  the  Plan  will be  appropriately
adjusted in the class(es) and maximum  number of securities  subject to the Plan
pursuant to subsection  4(a), the maximum number of securities  subject to award
to any person  pursuant to  subsection  5(c),  the  prescribed  number of shares
subject to award to any person pursuant to Section 7, and the outstanding  Stock
Awards will be appropriately  adjusted in the class(es) and number of securities
and price per share of Common Stock  subject to such  outstanding  Stock Awards.
The Board shall make such  adjustments,  and its  determination  shall be final,
binding and conclusive.  (The  conversion of any  convertible  securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)

         (b) Change in Control.  In the event of (i) a dissolution,  liquidation
or sale of  substantially  all of the  assets of the  Company,  (ii) a merger or
consolidation  in which the Company is not the surviving  corporation or (iii) a
reverse merger in which the Company is the surviving  corporation but the shares
of Common Stock  outstanding  immediately  preceding the merger are converted by
virtue of the merger  into other  property,  whether in the form of  securities,
cash or  otherwise,  then, to the extent  permitted by  applicable  law: (i) any
surviving  corporation shall assume any Stock Awards  outstanding under the Plan
or shall substitute similar stock awards (including an award to acquire the same
consideration  paid to the  stockholders  in the  transaction  described in this
subsection  12(b))  for those  outstanding  under the Plan,  or (ii) such  Stock
Awards  shall  continue  in full force and  effect.  In the event any  surviving
corporation  refuses to assume or continue such Stock  Awards,  or to substitute
similar stock awards for those  outstanding under the Plan, then with respect to
Stock Awards held by Participants  whose Continuous  Service has not terminated,
the time during which such Stock Awards may be exercised  shall be  accelerated,
and the Stock Awards terminated if not exercised prior to such event.

                                      15.
<PAGE>

13. AMENDMENT OF THE PLAN AND STOCK AWARDS.

         (a)  Amendment of Plan.  The Board at any time,  and from time to time,
may amend the Plan.  However,  except as  provided  in  Section 12  relating  to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent  stockholder  approval
is necessary to satisfy the  requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.

         (b) Stockholder Approval. The Board may, in its sole discretion, submit
any other amendment to the Plan for  stockholder  approval,  including,  but not
limited to,  amendments  to the Plan  intended to satisfy  the  requirements  of
Section  162(m)  of the  Code  and  the  regulations  thereunder  regarding  the
exclusion  of  performance-based   compensation  from  the  limit  on  corporate
deductibility of compensation paid to certain executive officers.

         (c)  Contemplated  Amendments.  It is expressly  contemplated  that the
Board may amend the Plan in any respect the Board deems  necessary  or advisable
to provide  eligible  Employees  with the  maximum  benefits  provided  or to be
provided  under  the  provisions  of the  Code and the  regulations  promulgated
thereunder  relating to Incentive  Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.

         (d) No  Impairment  of Rights.  Rights  under any Stock  Award  granted
before  amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the  Company  requests  the consent of the  Participant  and (ii) the
Participant consents in writing.

         (e) Amendment of Stock Awards.  The Board at any time, and from time to
time,  may amend the terms of any one or more Stock Awards;  provided,  however,
that the  rights  under  any  Stock  Award  shall  not be  impaired  by any such
amendment  unless (i) the Company  requests the consent of the  Participant  and
(ii) the Participant consents in writing.

14. TERMINATION OR SUSPENSION OF THE PLAN.

         (a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner  terminated,  the Plan shall terminate on the day before the tenth
(10th)  anniversary  of the date the Plan is adopted by the Board or approved by
the  stockholders of the Company,  whichever is earlier.  No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

         (b) No Impairment  of Rights.  Suspension  or  termination  of the Plan
shall not impair rights and obligations  under any Stock Award granted while the
Plan is in effect, except with the written consent of the Participant.

15. EFFECTIVE DATE OF PLAN.

         The Plan shall  become  effective on the date on which it is adopted by
the Board,  but no Stock  Award shall be  exercised  (or, in the case of a stock
bonus,  shall be  granted)  unless and until the Plan has been  approved  by the
stockholders  of the Company,  which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the Board.

                                      16.
<PAGE>

16. CHOICE OF LAW.

         The law of the State of Delaware shall govern all questions  concerning
the construction,  validity and  interpretation of this Plan,  without regard to
such state's conflict of laws rules.

                                      17.<PAGE>

                                                                   Exhibit 10.22

                          LOAN AND SECURITY AGREEMENT

                                     among

                           MERIDIAN BIOSCIENCE, INC.

                        MERIDIAN BIOSCIENCE CORPORATION

                           OMEGA TECHNOLOGIES, INC.

                        GULL LABORATORIES INCORPORATED

                            BIODESIGN INCORPORATED

                                      and

                               FIFTH THIRD BANK

                        Dated as of September 20, 2001
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>

Section 1.    Definitions....................................................................................     1

       1.1.   Specific Definitions...........................................................................     1

       1.2.   GAAP and Uniform Commercial Code...............................................................     8

Section 2.    Loan and Term .................................................................................     9

       2.1.   Revolving Credit Loans.........................................................................     9

       2.2    Interest.......................................................................................     9

       2.3    Applicable LIBOR Margins.......................................................................    12

       2.4.   Accounting.....................................................................................    13

       2.5.   Costs..........................................................................................    13

       2.6.   Banking Services...............................................................................    13

       2.7.   Use of Proceeds................................................................................    14

       2.8.   Maximum Interest Rate..........................................................................    14

Section 3.    Representations and Warranties.................................................................    17

       3.1.   Organization and Qualification.................................................................    17

       3.2.   Due Authorization..............................................................................    17

       3.3.   Litigation.....................................................................................    18

       3.4.   Margin Stock...................................................................................    18

       3.5.   Business.......................................................................................    18

       3.6.   Laws and Taxes.................................................................................    18
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                                                <C>
        3.7.   Environmental Laws..............................................................................     19

        3.8.   Financial Condition.............................................................................     19

        3.9.   Solvency........................................................................................     19

Section 4.     Financial Statements and Information............................................................     19

        4.1.   Financial Statements............................................................................     19

Section 5.     Covenants.......................................................................................     21

        5.1.   Existence; Merger; Disposition of Assets........................................................     21

        5.2.   Pledge or Encumbrance of Assets.................................................................     21

        5.3.   Guarantees and Loans............................................................................     21

        5.4.   Business........................................................................................     21

        5.5.   Condition and Repair............................................................................     22

        5.6.   Insurance.......................................................................................     22

        5.7.   Taxes...........................................................................................     22

        5.8.   Compliance with Law.............................................................................     22

        5.9.   Transactions with Affiliates....................................................................     22

        5.10   Indebtedness....................................................................................     22

        5.11   Leases..........................................................................................     23

        5.12   Management......................................................................................     23

        5.13   Depository......................................................................................     23

        5.17   ................................................................................................     23

        5.18   Representations.................................................................................     23

Section 6.     Security........................................................................................     24
</TABLE>

                                   ii
<PAGE>

<TABLE>
<S>                                                                                                                   <C>
        6.1.     Security Interest of Bank.............................................................................24

        6.2.     Representations in Exhibit 6.2.....................................................................   25

        6.3.     Provisions Concerning Accounts.....................................................................   25

        6.4.     Liens..............................................................................................   26

        6.5.     Further Assurances.................................................................................   26

        6.6.     Reinstatement of Lien..............................................................................   27

        6.7.     Other Amounts Deemed Loans.........................................................................   27

        6.8.     Borrower Remains Liable............................................................................   27

        6.9.     Financing Statements...............................................................................   27

Section 7.      Conditions Precedent................................................................................   28

        7.1.    Conditions to Loans.................................................................................   28

        7.2.    Conditions to each Loan.............................................................................   28

Section 8.      Events of Default and Remedies......................................................................   28

        8.1.    Events of Default...................................................................................   28

        8.2.    Remedies............................................................................................   30

        8.3.    Cumulative Remedies.................................................................................   31

        8.4.    Fees and Expenses...................................................................................   31

Section 9.      Miscellaneous Provisions............................................................................   31

        9.1.    Delays and Waiver...................................................................................   31

        9.2.    Waiver by Borrower..................................................................................   31

        9.3.    Complete Agreement..................................................................................   31

        9.4.    Severability........................................................................................   31
</TABLE>

                                      iii
<PAGE>

<TABLE>
<S>                                                                                                                   <C>
       9.5.     Binding Effect......................................................................................   32

       9.6.     Subsidiaries........................................................................................   32

       9.7.     Notices.............................................................................................   32

       9.8.     Governing Law; Jurisdiction.........................................................................   33

       9.9      Confession of Judgment..............................................................................   33
</TABLE>

                                      iv
<PAGE>

     This Loan and Security Agreement (the "Agreement") is entered into as of
the 20/th/ day of September, 2001, by and among Meridian Bioscience, Inc., an
Ohio corporation ("Parent" or "Agent"), Meridian Bioscience Corporation, an Ohio
corporation ("Corp."), Omega Technologies, Inc., an Ohio corporation ("Omega"),
Gull Laboratories, Inc. a Utah corporation ("Gull") and BIODESIGN Incorporated,
a Maine corporation (collectively, the "Borrowers" and individually a
"Borrower") and Fifth Third Bank, an Ohio banking corporation (the "Bank"). Bank
and Borrowers hereby agree as follows:

Section 1.     Definitions.
               ------------

     1.1.      Specific Definitions.  The following definitions shall apply:
               ---------------------

               "Account Debtors" means a Borrower's customers and all other
persons who are obligated or indebted to a Borrower in any manner, whether
directly or indirectly, primarily or secondarily, contingently or otherwise,
with respect to Accounts or General Intangibles.

               "Accounts" means all accounts, accounts receivable, health-care
insurance receivables, credit card receivables, contract rights, instruments,
documents, chattel paper, tax refunds from federal, state or local governments
and all obligations in any form including without limitation those arising out
of the sale or lease of goods or the rendition of services by a Borrower; all
guaranties, letters of credit and other security and support obligations for any
of the above; all merchandise returned to or reclaimed by any Borrower; and all
books and records (including computer programs, tapes and data processing
software) evidencing an interest in or relating to the above; all winnings in a
lottery or other game of chance operated by a governmental unit or person
licensed to operate such game by a governmental unit and all rights to payment
therefrom; and all "Accounts" as same is now or hereinafter defined in the
Uniform Commercial Code.

               "Affiliate" means, as to a Borrower, (a) any person which,
directly or indirectly, is in control of, is controlled by or is under common
control with, such Borrower, or (b) any person who is a director, officer or
employee (i) of a Borrower or (ii) of any person described in the preceding
clause (a). For purposes of this definition, control of a person shall mean (a)
the power, direct or indirect, (i) to vote 15% or more of the securities having
ordinary voting power for the election of directors of such person or (ii) to
direct or cause the direction of the management and policies of such person
whether by contract or otherwise, or (b) the ownership, direct or indirect, of
15% or more of any class of equity securities of such person.

               "Applicable LIBOR Margin" on any date means the percentage
identified as such in Section 2.3 hereof.

               "Applicable Prime Margin" on any date means -1.0% (minus one
percent) per annum.

                                       1
<PAGE>

               "Bank Affiliate" means the Bank, Fifth Third Leasing Company,
Fifth Third, Northern Kentucky, Inc., Fifth Third, Kentucky, Inc. and any other
entity the majority of the ownership of which is held directly or indirectly by
Fifth Third Bancorp.

               "Borrower Default Rate" means 6% in excess of the otherwise
applicable interest rate.

               "Cash Equivalents" means (i) marketable direct obligations issued
or unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within three (3) months from the date of acquisition thereof;
(ii) investments in certificates of deposit or bankers' acceptance maturing
within three (3) months from the date of acquisition issued by the Lender or any
commercial bank organized under the laws of the United States or any state
thereof having capital surplus and undivided profits aggregating at least Two
Hundred Fifty Million Dollars ($250,000,000); (iii) investments in commercial
paper of the Lender or of any other Person which, at the time of issuance, have
a rating of at least A-1 from Standard & Poor's Corporation or at least P-1 from
Moody's Investors Service, Inc. and maturing not more than six (6) months from
the date of acquisition thereof; (iv) obligations of the type described in (i),
(ii) or (iii) above purchased pursuant to a repurchase agreement obligating the
counter party to repurchase such obligations not later than thirty (30) days
after the purchase thereof, secured by a fully perfected security interest in
any such obligation, and having a market value at the time such repurchase
agreement is entered into of not less than 100% of the repurchase obligation of
the issuing bank; and (v) time deposits or Eurodollar time deposits maturing no
more than thirty (30) days from the date of creation with commercial banks
having membership in the Federal Deposit Insurance Corporation in amounts not
exceeding the lesser of One Hundred Thousand Dollars ($100,000) or the maximum
insurance applicable to the aggregate amount of such Person's deposits in such
institution.

               "Collateral" has the meaning set forth in Section 6.1.

               "Current Assets" means all assets which may properly be
classified as current assets in accordance with generally accepted accounting
principles, provided that for the purpose of determining the Current Assets of
Borrowers (i) notes and accounts receivable shall be included only if good and
collectible and payable on demand or within twelve (12) months from the date as
of which Current Assets are to be determined (and if not directly or indirectly
renewable or extendible, at the option of the debtors, by their terms or by the
terms of any instrument or agreement relating thereto, beyond such twelve (12)
months) and shall be taken at their face value less reserves determined to be
sufficient in accordance with generally accepted accounting principles, and (ii)
the cash surrender value of life insurance policies shall be excluded.

               "Current Liabilities" mean all Indebtedness maturing on demand or
within twelve (12) months from the date as of which Current Liabilities are to
be determined (including,

                                       2
<PAGE>

without limitation, liabilities, including taxes accrued as estimated, as may
properly be classified as current liabilities in accordance with generally
accepted accounting principles).

               "Default" means any event that, with the giving of notice or the
passage of time, or both, would be an Event of Default.

               "EBITDA" means income of Borrowers before taxes plus interest
expenses, depreciation expense and amortization expense for the four quarters
ending with such fiscal quarters on a consolidated basis (on a rolling four
quarters basis); provided, however, that the one-time impairment charge for FDA
matters in the amount of $13,271,000 taken in the first quarter of Borrowers'
2001 fiscal year shall be excluded from the calculation of EBITDA.  Charges, if
any, in future periods for acquired in-process research and development shall
also be excluded form the calculation of EBITDA, provided such acquisitions are
permitted under this Agreement.

               "Environmental Laws" means all applicable federal, state, local
and foreign laws relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes into the environment (including without
limitation ambient air, surface water, ground water, or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes, and any and all
regulations, codes, plans, orders, decrees, judgments, injunctions, notices or
demand letters issued, entered, promulgated or approved thereunder.

               "Equipment" means all goods (excluding inventory, farm products
or consumer goods), all machinery, machine tools, equipment, fixtures, office
equipment, furniture, furnishings, motors, motor vehicles, tools, dies, parts,
jigs, goods (including, without limitation, each of the items of equipment set
forth on any schedule which is either now or in the future attached to Bank's
copy of this Agreement), and all attachments, accessories, accessions,
replacements, substitutions, additions and improvements thereto, all supplies
used or useful in connection therewith, and all "Equipment" as same is now or
hereinafter defined in the Uniform Commercial Code.

               "Funded Debt" means all Indebtedness (i) in respect of money
borrowed(senior and subordinated) or (ii) evidenced by a note, debenture (senior
or subordinated) or other like written obligation to pay money, or (iii) in
respect of rent or hire of property under leases or lease arrangements which
under  Generally Accepted Accounting Principles are required to be capitalized,
or (iv) in respect of obligations under conditional sales or other title
retention agreements; and shall also include all guaranties of any of the
foregoing.  In no event shall any of mandatory repayments be counted twice in
calculating Funded Indebtedness.

               "GAAP" or "Generally Accepted Accounting Principles" means
generally accepted accounting principles of the United Stated in effect on the
date of this Agreement,

                                       3
<PAGE>

which shall include the official interpretations thereof by the Financial
Accounting Standards Board, consistently applied or, in the case of compliance
with Section 5.15 through 5.17, consistent with those utilized in preparing the
audited financial statements referred to in Section 3.8.

               "General Intangibles" means all general intangibles, chooses in
action, causes of action, obligations or indebtedness owed to a Borrower from
any source whatsoever, payment intangibles, software and all other intangible
personal property of every kind and nature (other than Accounts) including
without limitation patents, trademarks, trade names, service marks, copyrights
and applications for any of the above, and goodwill, trade secrets, licenses,
franchises, rights under agreements, tax refund claims, and all books and
records including all computer programs, disks, tapes, printouts, customer
lists, credit files and other business and financial records, the equipment
containing any such information, and all "General Intangibles" as same is now or
hereinafter defined in the Uniform Commercial Code.

               "Indebtedness" means (i) all items (except items of capital
stock, of capital surplus, of general contingency reserves or of retained
earnings, deferred income taxes, and amount attributable to minority interest if
any) which in accordance with generally accepted accounting principles would be
included in determining total liabilities on a consolidated basis shown on the
liability side of a balance sheet as at the date as of which Indebtedness is to
be determined, (ii) all indebtedness secured by any mortgage, pledge, lien or
conditional sale or other title retention agreement to which any property or
asset owned or held is subject, whether or not the indebtedness secured thereby
shall have been assumed (excluding non-capitalized leases which may amount to
title retention agreements but including capitalized leases), and (iii) all
indebtedness of others which any Borrower or any Subsidiary has directly or
indirectly guaranteed, endorsed (otherwise than for collection or deposit in the
ordinary course of business), discounted or sold with recourse or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
in respect of which any Borrower or any Subsidiary has agreed to apply or
advance funds (whether by way of loan, stock purchase, capital contribution or
otherwise) or otherwise to become directly or indirectly liable.

               "Insolvency Event" means, with respect to a person, any of the
following:  a court enters a decree or order for relief in respect to such
person in an involuntary case under any applicable bankruptcy, insolvency or
other similar law then in effect, or appoints a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of such person or
for any substantial part of its property, or orders the wind-up or liquidation
of its affairs; or a petition initiating an involuntary case under any such
bankruptcy, insolvency or similar law is filed against such person; or such
person commences a voluntary case under any applicable bankruptcy, insolvency or
other similar law in effect, or makes any general assignment for the benefit of
creditors, or fails generally to pay its debts as such debts become due, or
takes corporate action in furtherance of any of the foregoing.

               "Inventory" means goods, supplies, wares, merchandises and other
tangible personal property, including raw materials, work in process, supplies
and components, and

                                       4
<PAGE>

finished goods, whether held for sale or lease, or furnished or to be furnished
under any contract for service, or used or consumed in business, and also
including products of and accessions to inventory, packing and shipping
materials, all documents of title, whether negotiable or non-negotiable,
representing any of the foregoing, and all "Inventory" as same is now or
hereinafter defined in the Uniform Commercial Code.

               "Investment Property" means a security, whether certificated or
uncertificated, security entitlement, securities account, commodity contract or
commodity account and all "Investment Property" as same is now or hereafter
defined in the Uniform Commercial Code.

               "LIBOR Interest Period" means any period of time up to and
including a 90 day period selected by Agent, commencing on any Business Day. If
a LIBOR Interest Period so selected would otherwise end on a date which is not a
Business Day, such LIBOR Interest Period shall instead end on the next Business
Day, provided, however, that if such next Business Day shall fall in a
succeeding month, such LIBOR Interest Period shall instead end on the preceding
Business Day.

               "LIBOR Pricing Option" means the option granted pursuant to
Section 2.3 hereof to have all or a portion of the interest on the principal
amount of the Note computed with reference to a LIBOR Rate.

               "LIBOR Rate" means, as applied to any LIBOR Interest Period, the
rate (adjusted for LIBOR Reserves if Bank is required to maintain LIBOR Reserves
with respect to the relevant loan) being asked on an amount of Eurodollar
deposits equal to the principal amount of the Note which is to be subject to a
LIBOR Pricing Option, and which has a maturity corresponding to the LIBOR
Interest Period in question, as reported by the TELERATE rate reporting system
(or any successor), as determined by Bank by noon of the date upon which a LIBOR
Interest Period is to commence. Each determination by Bank of the LIBOR Rate
shall be conclusive in the absence of manifest error.

               "LIBOR Reserves" means, for any principal amount which is subject
to a LIBOR Pricing Option for any LIBOR Interest Period therefor, the daily
average maximum rate (expressed as a decimal) at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under Regulation D established by the Board of
Governors of the Federal Reserve System (or any successor rule or regulation) by
Bank against "Eurocurrency Liabilities" (as such term is used in Regulation D)
but without benefit of credit or proration, exemptions or offsets that might
otherwise be available to Bank from time to time under Regulation D. Without
limiting the effect of the foregoing, LIBOR Reserves shall reflect any other
reserves required to be maintained by Bank against (1) any category of
liabilities that includes deposits by reference to which the LIBOR Interest Rate
for loans is to be determined; or (2) any category of extension of credit or
other assets that are subject to an interest rate based on the LIBOR Rate.

                                       5
<PAGE>

               "Lien" means any security interest, mortgage, pledge, assignment,
or voluntary or involuntary lien, charge or other encumbrance of any kind,
including interests of vendors or lessors under conditional sale contracts or
capital leases.

               "Loan Documents" means this Agreement, the Note, and all
mortgages, instruments and documents securing Obligations, all guaranties of
Obligations, and all other documents delivered or required, as a condition to
the making of any Loan or otherwise, in connection with this Agreement.

               "Loans" means the Revolving Loans.

               "Note" means the Revolving Note.

               "Obligation(s)" means all loans, advances, indebtedness and other
obligations of any Borrower owed to Bank or any Bank Affiliate of every
description whether now existing or hereafter arising (including those owed by
any Borrower to others and acquired by Bank or any Bank Affiliate by purchase,
assignment or otherwise) and whether direct or indirect, primary or as guarantor
(including guaranties of obligations owed by any Affiliate to Bank or any Bank
Affiliate) or surety, absolute or contingent, liquidated or unliquidated,
matured or unmatured, whether or not secured by additional collateral, and
including without limitation obligations to perform or forbear from performing
acts, all amounts represented by letters of credit now or hereafter issued by
Bank or any Bank Affiliate for the benefit of or at the request of any Borrower,
and all expenses and attorney's fees incurred by Bank or any Bank Affiliate
under this Agreement or any other document or instrument related thereto.

               "Permitted Guaranties" means the following debt of Affiliates of
Agent which have been guaranteed by Agent: (1) VAI Mortgage in the principal
amount of $1,128,842 from AmSouth Bank due January, 2002; (2) VAI Term Loan in
the principal amount of $147,402 from AmSouth Bank; (3) VAI Line of Credit in
the principal amount of $1,000,000 with AmSouth Bank; and (4) a 6,000,000 BEF
Line of Credit of the Agent's Belgian Subsidiary.

               "Permitted Investments" means

                    (A)  investment in cash and Cash Equivalents;

                    (B)  intercompany loans to, between or among Borrowers:

                    (C)  loans and advances to employees for moving,
entertainment, travel and other similar expenses in the ordinary course of
business;

                    (D)  capital contributions by a Borrower to its
Subsidiaries;

                    (E)  investment in customers or account debtors of a
Borrower or a Subsidiary of Borrower received in connection with the bankruptcy
or reorganization, or in

                                       6
<PAGE>

settlement of delinquent obligations, of such entity, in the ordinary course of
business and in accordance with such entity's usual and customary collection and
credit policies;

                    (F)  investments in connection with accounts receivable in
the ordinary course of business;

                    (G)  investments received as the non-cash portion of
consideration received in connection with asset dispositions permitted
hereunder; and

                    (H)  investments existing as of the date hereof.

               "Permitted Liens" means the following liens, security interests
and other encumbrances:

               (a)  Existing liens and security interests;

               (b)  Purchase money security interests (which term shall include
mortgages, conditional sale contracts, capitalized leases and all other title
retention or deferred purchase devices) to secure the purchase price of property
acquired hereafter by any Borrower, or to secure Indebtedness incurred solely
for the purpose of financing such acquisitions;

               (c)  Deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age pensions or
other social security; liens in respect of judgements or awards; and liens for
taxes, assessments or governmental charges or levies and liens to secure claims
for labor, material or supplies to the extent that payment thereof shall not at
the time be required to be made in accordance with Section 5.7;

               (d)  Encumbrances in the nature of zoning restrictions,
easements, and rights or restrictions of record on the use of real property
which do not materially detract from the value of such property or impair its
use in the business of the owner or lessee;

               (e)  Liens (other than judgements and awards) created by or
resulting from any litigation or legal proceeding, provided the execution or
other enforcement thereof is effectively stayed and the claims secured thereby
are being actively contested in good faith by appropriate proceedings;

               (f)  Liens arising by operation of law to secure landlords,
lessors or renters under leases or rental agreements made in the ordinary course
of business and confined to the premises or property rented; and

               (g)  Liens in favor of the Bank securing the Obligations.

               "Pricing Option" means the LIBOR Pricing Option.

                                       7
<PAGE>

               "Prime Rate" means the rate of interest per annum announced to be
its prime rate from time to time by Bank at its principal office in Cincinnati,
Ohio, whether or not Bank shall at times lend to borrowers at lower rates of
interest or, if there is no such prime rate, then its base rate or such other
rate as may be substituted by Bank for the prime rate.

               "Quick Assets" means Current Assets minus Inventory.

               "Responsible Officer" means the chief operating officer or the
president of a Borrower or, with respect to financial matters, the chief
financial officer.

               "Subsidiary" means any corporation of which a Borrower directly
or indirectly owns or controls outstanding stock having under ordinary
circumstances (not depending on the happening of a contingency) voting power to
elect a majority of the board of directors of said corporation.

               "Tangible Net Worth" shall mean the outstanding principal amount
of the Subordinated Indebtedness plus the total of the capital stock (less
treasury stock), paid-in surplus, general contingency reserves and retained
earnings (deficit) of Borrowers and any Subsidiary as determined on consolidated
basis in accordance with generally accepted accounting principles, after
eliminating all inter-company items and all amounts properly attributable to
minority interests, if any, in the stock and surplus of any Subsidiary, minus
                                                                        -----
the following items (without duplication of deductions) if any, appearing on the
consolidated balance sheet of Borrowers:

        (i)    all deferred charges (less amortization, unamortized debt
discount and expense and corporate organization expenses);

        (ii)   the book amount of all assets which would be treated as
intangibles under generally accepted accounting principles, including, without
limitation, such items as goodwill, trademark applications, trade names, service
marks, brand names, copyrights, patents, patent applications and licenses, and
rights with respect to the foregoing;

        (iii)  the amount by which aggregate inventories or aggregate securities
appearing on the asset side of such consolidated balance sheet exceed the lower
of cost or market value (at the date of such balance sheet) thereof; and

        (iv)   any subsequent write-up in the book amount of any intangible
asset resulting from a revaluation thereof from the book amount entered upon
acquisition of such asset.

        1.2.   GAAP and Uniform Commercial Code.  All financial terms used in
               ---------------------------------
this Agreement, other than those defined in this Section 1, shall have the
meanings given to them by generally accepted accounting principles. All other
undefined terms shall have the meanings given to them in the Uniform Commercial
Code.

                                       8
<PAGE>

Section 2.     Loan and Term.
               --------------

     2.1.      Revolving Credit Loans.
               -----------------------

               (a)  Subject to the terms and conditions hereof, Bank hereby
extends to Borrowers a line of credit facility (the "Facility") under which Bank
shall make loans (the "Loans" or "Revolving Loans") to Borrowers at Agent's
request from time to time during the term of the Facility, in an amount up to
Twenty Million Dollars ($20,000,000). Borrowers may borrow, prepay, and reborrow
hereunder, provided that the principal amount of all Revolving Loans outstanding
at any one time shall not exceed $20,000,000. If the amount of Revolving Loans
outstanding at any time exceeds that amount, Borrowers shall immediately pay the
amount of such excess to Bank in cash. The principal balance of the Revolving
Note outstanding from time to time shall bear interest in accordance with
Section 2.2 of this Agreement.

               (b)  Bank will apply funds in Agent's principal depository
account at Bank (the "Corporate Bank Account") on a daily basis to the payment
of Revolving Loans automatically and without notice, request or demand by Agent
or any Borrower, in accordance with Bank's automatic sweep program. Pursuant to
that program, Bank will either make Revolving Loans or apply toward the payment
of interest and principal of Revolving Loans or apply toward the payment of
interest and principal of Revolving Loans an amount necessary to maintain a
minimum balance in the Corporate Bank Account of $600,000. However, in no event
will the principal amount of the Revolving Loans exceed the amount provided for
in clause (a) of this Section. Bank reserves the right to change the provisions
and mechanics of its automatic sweep program in a separate writing to Agent on
behalf of the Borrowers and such change need not be reflected by an amendment to
this Agreement in order to be effective.

               (c)  On the execution date of this Agreement, Borrowers shall
execute and deliver to Bank the Revolving Note in the principal amount of
$20,000,000, in the form attached as Exhibit 2.1(c) (the "Note").

               (d)  The Facility shall expire on September 15, 2004, and the
entire outstanding principal balance of the Revolving Note, and all accrued
interest, shall become due and payable not later than that date. Borrowers may
prepay the principal balance of the Revolving Note in whole or part at any time.
Until all Obligations have been fully repaid and this Agreement has terminated,
Bank shall retain its security interest in all Collateral then existing or
arising thereafter.

     2.2       Interest.
               --------

               a.   Subject to the terms and conditions of this Agreement, the
Loans shall bear interest as follows:

                    (1)  on amounts subject to a Pricing Option, at an annual
rate equal to the LIBOR Rate plus the Applicable LIBOR Margin; and

                                       9
<PAGE>

                    (2)  on amounts not subject to a Pricing Option, at an
annual rate equal to the Prime Rate plus the Applicable Prime Margin in effect
on each date; or

                    (3)  on amounts so selected by Agent, the Borrowers have the
right to use a LIBOR Pricing Option in connection with the Bank's overnight-
sweep LIBOR pricing program, with the amounts subject to such election priced on
a daily basis based upon the LIBOR Rate plus Applicable LIBOR Margin for a 30-
day LIBOR Interest Period.

               b.   Subject to the terms and conditions of this Agreement,
Borrowers may from time to time elect to have a Pricing Option apply to a
portion of the principal amount of outstanding Loans, as specified by Agent on
behalf of the Borrowers, for a permissible LIBOR Interest Period specified by
Agent. Agent shall make each such election by giving notice (which notice shall
be irrevocable) to Bank in the manner and by the deadline reasonably acceptable
to Bank.

               c.   Borrowers' right to elect a Pricing Option for any portion
of outstanding Loans is subject to the following limitations: (i) Borrowers may
not elect a Pricing Option at a time when an Event of Default has occurred and
has not been waived; (ii) no LIBOR Interest Period shall end later than the
maturity date of the Note evidencing the borrowing of the relevant principal
amount; (iii) the principal amount that can be subject to a Pricing Option is
$1,000,000 or a whole multiple thereof; (iv) once a Pricing Option has been
selected for a portion of the Loans, no other Pricing Option may apply to such
portion until the expiration of the LIBOR Interest Period applicable to the
first Pricing Option; and (v) there may be no more than five separate Pricing
Options at any given time.

               d.   Interest on the principal amount subject to a Pricing Option
is payable on the last day of the relevant LIBOR Interest Period. Interest on
the principal amount of Loans not subject to a Pricing Option is payable on the
first Business Day of each calendar month. In addition, all accrued interest is
payable at maturity (whether by acceleration, notice of intention to prepay or
otherwise).

               e.   Interest on the Loans shall be computed on the basis of a
360-day year and charged for the actual number of days involved. The interest
rate applicable to amounts not subject to any Pricing Option shall change
automatically upon each change in the Prime Rate. Upon the occurrence of an
Event of Default and until such Event of Default is waived, the Loans shall bear
interest at the Borrower Default Rate; this provision does not constitute a
waiver of any Event of Default or an agreement by Bank to permit any late
payments whatsoever.

               f.   Borrowers shall have the right to prepay the Loans in whole
at any time, or in part from time to time, without premium or penalty, provided
that, at any time when a Pricing Option is in effect, no prepayment of such
portion of the principal amount of the Loans as is subject to such Pricing
Option shall be made except on the last day of the applicable Interest Period.
Each notice of prepayment shall be irrevocable and shall obligate Borrowers to
prepay the amount stated therein on the date stated therein.

                                       10
<PAGE>

          g.   In no event shall the interest rate and other charges hereunder
exceed the highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto.  In the
event that a court determines that Bank has received interest and other charges
hereunder in excess of the highest permissible rate applicable hereto, such
excess shall be deemed received on account of, and shall automatically be
applied to reduce, the principal balance of the Loans, and the provisions hereof
shall be deemed amended to provide for the highest permissible rate.  If there
are no Obligations outstanding, the Bank shall refund to Borrowers such excess.

          h.   Borrowers' right to elect a LIBOR Pricing Option shall be
terminated automatically if Bank, by telephonic or telegraphic or other written
notice, notifies Agent on behalf of Borrowers that Eurodollar deposits which
have a maturity corresponding to the proposed LIBOR Interest Period, in an
amount equal to the amount requested by Borrowers to be subject to a LIBOR
Pricing Option, are not readily available in the London Inter-Bank Eurocurrency
Market, or that, by reason of circumstances affecting such market, adequate and
reasonable methods do not exist for ascertaining the interest rate applicable to
such deposits for the proposed LIBOR Interest Period.

          i.   Notwithstanding anything herein contained to the contrary, if at
any time any change in any law, regulation or official directive, or in the
interpretation thereof, by any governmental body charged with the administration
thereof, shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for Bank to fund or maintain its
funding in Eurodollars of any portion of the principal amount of the Note or
otherwise to give effect to Bank's obligations as contemplated hereby, (i) Bank
may by facsimile or other written notice thereof to Agent on behalf of Borrowers
declare Bank's obligations in respect of the LIBOR Pricing Option to be
terminated forthwith, and (ii) all LIBOR Pricing Options then in effect shall
forthwith cease to be in effect, and interest shall from and after such date be
calculated at the interest rate applicable to amounts to which no Pricing Option
applies; and (iii) Borrowers' right to elect LIBOR Pricing Options is terminated
until Bank notifies Agent on behalf of Borrowers that the right to elect LIBOR
Pricing Options is reinstated.

          j.   If, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) the compliance with an
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
cost to Bank of agreeing to make or of making, funding or maintaining Loans
subject to the LIBOR Pricing Option, then from time to time, upon written demand
by Bank if it shall at the time be the general policy or practice of Bank to
demand such compensation in similar circumstances under comparable provisions of
other credit agreements, Borrowers shall pay to Bank additional amounts
sufficient to compensate Bank for such increased cost and Bank shall be entitled
to additional compensation for only that portion of such costs incurred from and
after the date that is ten (10) days prior to the date Borrower receives such
notice..  A certificate as to the amount of such increased cost submitted to
Agent on behalf of Borrowers by Bank shall be conclusive and binding for all
purposes, absent manifest error.

                                       11
<PAGE>

          k.   If, with respect to any LIBOR Pricing Option the LIBOR Rate for
any LIBOR Interest Period will not adequately reflect the cost to Bank of making
a Loan subject to the relevant LIBOR Pricing Option for such LIBOR Interest
Period, Bank shall forthwith so notify Borrowers in writing, whereupon
Borrowers' right to elect any LIBOR Pricing Option shall be suspended until Bank
shall notify them that Bank has determined that the circumstances causing such
suspension no longer exist.  Bank shall use its best efforts to substitute a
comparable rate during such time that the LIBOR Pricing Option is so suspended.

     2.3  Applicable LIBOR Margins.
          ------------------------

          (a)  The Applicable LIBOR Margin ("LIBOR+") expressed as a percentage,
in effect on any date shall be determined based on the ratio of Total Funded
Debt to EBITDA of Borrowers (which shall be specified by "x" in the chart below
and determined pursuant to clause (b) of this paragraph), as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------
Total Funded Debt to EBITDA                     LIBOR +
--------------------------------------------------------
<S>                                             <C>

    x * 3.50                                    + 1.50%
--------------------------------------------------------

3.49 * x ** 2.0                                 +1.25%
--------------------------------------------------------

1.99 * x ** 1.0                                 +.75%
--------------------------------------------------------
</TABLE>
*  greater than or equal to
** greater than

          (b)  The Total Funded Debt to EBITDA in effect on a certain date is
determined as follows: the Borrowers shall calculate Total Funded Debt to EBITDA
each quarter and attach quarterly financial statements to such calculation and
deliver same to Bank at the time that the Bank receives the financial statements
of Borrowers delivered to Bank pursuant to Section 4.1 hereof; provided,
however, that if such financial statements or Total Funded Debt to EBITDA are
not delivered on a timely basis, are not accurate and correct, or are not
prepared in accordance with the requirements of this Agreement, then the Total
Funded Debt to EBITDA shall be the ratios determined by Bank in its sole
judgment.  If the Total Funded Debt to EBITDA as recalculated requires a change
in Applicable LIBOR Margin, the Applicable LIBOR Margin will change accordingly
starting on the first day of the calendar month following the Bank's  receipt of
such financial statements.  Notwithstanding the foregoing, the Applicable LIBOR
Margin in effect on the first day of the LIBOR Interest Period applicable to a
Pricing Option shall remain in effect for such entire LIBOR Interest Period with
respect to the amount of the Loan subject to such Pricing Option.

          (c)  If any financial statements of Borrowers are later determined to
have been incorrect, and if the Total Funded Debt to EBITDA determined pursuant
to the correct information would result in a greater amount owing by Borrowers
for the relevant period than had been actually paid by Borrowers for such
period, Borrowers shall pay to Bank upon demand, the difference between the
amount actually paid for the relevant period and the amount owed

                                       12
<PAGE>

based on the Total Funded Debt to EBITDA determined pursuant to the correct
information, together with interest on the amount owed at the Borrower Default
Rate. If any financial statements of Borrowers are later determined to have been
incorrect, and if the Total Funded Debt to EBITDA determined pursuant to the
correct information will result in a lesser amount of money owing by Borrowers
for the relevant period than had actually been paid by Borrowers for such
period, then Borrowers shall receive from Bank to the ratable benefit of
Borrowers upon demand, the difference between the amount actually paid for the
relevant period and the amount owed based on the Total Funded Debt to EBITDA,
determined pursuant to the correct information.

          (d)  If any financial statements of Borrowers are later determined to
have been incorrect as a result of a retroactive change in Generally Accepted
Accounting Principles, and if the Total Funded Debt to EBITDA determined
pursuant to such changed information would result in a lesser amount owing by
Borrowers for the relevant period than had been actually paid by Borrowers for
such period, Bank upon demand shall rebate or credit the difference to Borrowers
between the amount actually paid for the relevant period and the amount owed
based on the Total Funded Debt to EBITDA determined pursuant to the changed
information.

     2.4. Accounting.  After the end of each calendar month, Bank will:
          -----------

          (a)  if Bank so elects, charge Agent or any Borrower's account for any
or all amounts then due to Bank under this Agreement for interest, expenses and
the like and notify Borrowers in writing of such charges; and

          (b)  render to Agent a statement of Borrowers' loan account with Bank
hereunder, which statement shall be considered correct and to have been accepted
by Borrowers and shall be conclusively binding upon Borrowers, absent manifest
error, unless a Borrower notifies Bank in writing of any discrepancy within
fifteen (15) Business Days from the mailing of such statement.  As used herein,
"Business Days" are days on which the principal office of Bank is open for the
transaction of its full banking business.

     2.5. Costs.  Borrowers shall pay to Bank its reasonable costs and expenses
          ------
(including, without limitation, reasonable attorneys' fees, court costs,
litigation and other expense) incurred or paid by Bank in negotiating,
documenting, administering and enforcing this Agreement and the Loan Documents
and in establishing, maintaining, protecting, perfecting or enforcing any of
Bank's rights or any Borrower's obligations, including, without limitation, any
and all such costs and expenses incurred or paid by Bank in defending Bank's
title or right to the Collateral or in collecting or enforcing payment of the
Collateral and all costs of filing financing, continuation or termination
statements or mortgages with respect to the Collateral.

     2.6. Banking Services.  Borrowers shall maintain a full financial services
          ----------------
relationship with Bank (including depository accounts and banking services) so
long as the fees related to such accounts and banking services are reasonable,
customary and consistent with fees being

                                       13
<PAGE>

charged to similarly-situated borrowers, excluding however any existing bank
account of one of the Borrowers in Maine.

     2.7. Use of Proceeds.  The proceeds of the Loans will be used only for
          ----------------
general corporate purposes.

     2.8. Maximum Interest Rate.  In no event shall the interest rate and other
          ----------------------
charges hereunder exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that a court determines that Bank has received interest and
other charges hereunder in excess of the highest permissible rate applicable
hereto, such excess shall be deemed received on account of, and shall
automatically be applied to reduce, the principal balance of the Loans, in the
inverse order of maturity, and the provisions hereof shall be deemed amended to
provide for the highest permissible rate. If there are no Obligations
outstanding, Bank shall refund to Borrowers such excess.

     2.9  Currency Option.  (a) Bank hereby provides to Borrowers the option to
          ----------------
choose to have its Loans made to Borrowers in freely tradable foreign currency
reasonable acceptable to the Bank (a "Foreign Currency") instead of U.S. Dollars
(the "Foreign Currency Option"). Any borrowing to be funded in a Foreign
Currency is subject to the following terms and conditions, notwithstanding
anything to the contrary in this Agreement:

          (i)  Agent must give Bank written notices of its intention to use the
               Foreign Currency Option at least 3 days prior to the actual
               funding date.  Such written notice shall specify the actual
               funding date, the principal amount of such funding and state that
               the Borrowers are not then in default under the terms of this
               Agreement.

          (ii) Borrowers' right to elect a Foreign Currency Option for any
               portion of outstanding Loans is subject to the following
               limitations: (A) the total number of Foreign Currency Options
               outstanding at any one time under this Agreement shall not exceed
               five; (B) Borrowers may not elect a Foreign Currency Option at a
               time when an Event of Default has occurred and has not been
               waived; (C) no Foreign Currency Option shall end later than the
               maturity date of the Note evidencing the borrowing of the
               relevant principal amount; (D) the principal amount that can be
               subject to a Foreign Currency Option is $500,000 (U.S. Dollars)
               or a whole multiple thereof, but shall not exceed $6,000,000 in
               the aggregate at any time; and (E) once a Foreign Currency Option
               has been selected for a portion of the Loans, no other Foreign
               Currency Option may apply to that same portion of the Loans until
               the expiration of the interest period applicable to such Foreign
               Currency Option (but nothing in this clause (E) shall be
               construed as prohibiting separate Foreign Currency Options on
               different portions of the Loans as contemplated by clause (A) of
               this paragraph).

                                       14
<PAGE>

          (iii)  Borrowers' right to elect a Foreign Currency Option shall be
                 suspended automatically if Bank, by telephonic or telegraphic
                 or other written notice, notifies Borrowers that foreign
                 currency contracts which have a maturity corresponding to the
                 proposed interest period, in an amount equal to the amount
                 requested to be subject to a Foreign Currency Option, are not
                 readily available. Such suspension shall end automatically upon
                 termination of the circumstances originally creating the
                 suspension.

     (b)  Notwithstanding anything herein contained to the contrary, if at any
time any change in any law, regulation or official directive, or in the
interpretation thereof, by any governmental body charged with the administration
thereof, shall make it unlawful, or any central bank or other governmental
authority shall assert that it is unlawful, for  Bank to fund or maintain its
funding in a Foreign Currency of any portion of the principal amount of the
Loans or otherwise to give effect to Bank's obligations as contemplated hereby,
(A) Bank may by facsimile or other written notice thereof to Borrowers declare
Bank's obligations in respect of the Foreign Currency Option to be terminated
forthwith, and (B) all Foreign Currency Options then in effect shall forthwith
cease to be in effect, and interest shall from and after such date be calculated
at the interest rate applicable to amounts to which no Foreign Currency Option
applies; and (C) Borrowers' right to elect Foreign Currency Options is
terminated until Bank notifies Agent that Borrowers' right to elect Foreign
Currency Options is reinstated.

     (c)  If, due to either (A) the introduction of or any change in or in the
interpretation of any law or regulation or (B) the compliance with an guideline
or request from any central bank or other governmental authority (whether or not
having the force of law), there shall be any increase in the cost to  Bank of
agreeing to make or of making, funding or maintaining Loans subject to the
Foreign Currency Option, then from time to time, upon written demand by Bank if
it shall at the time be the general policy or practice of Bank to demand such
compensation in similar circumstances under comparable provisions of other
credit agreements, Borrowers shall pay to Bank additional amounts sufficient to
compensate Bank for such increased cost.  A certificate as to the amount of such
increased cost submitted to Borrowers by  Bank shall be conclusive and binding
for all purposes, absent manifest error.

     (d)  Each Borrower hereby indemnifies Bank and holds Bank harmless from and
against any and all losses or expenses that Bank may sustain or incur as a
consequence of any prepayment  or any default by any Borrower in the payment of
the principal of or interest on any Foreign Currency Option or failure by a
Borrower to complete a borrowing of, a prepayment of or conversion of or to a
Foreign Currency Option after notice thereof has been given by any Borrower
including (but not limited to) any interest payable by Bank to lenders of funds
obtained by it in order to make or maintain its Foreign Currency Option
hereunder, and any other loss obtained by it in order to make or maintain its
Foreign Currency Option hereunder, and any other loss or expense incurred by
Bank by reason of the liquidation or re-employment of deposits or other funds
acquired by Bank to make, continue, convert into or maintain, a Foreign Currency
Option

                                       15
<PAGE>

     (e)  Without limiting and in addition to the provisions of this Agreement,
if for the purposes of obtaining judgment in any court in any jurisdiction with
respect to this Agreement or any other Loan Document to which a Borrower is
party it becomes necessary to convert into the currency of such jurisdiction
(the "Judgement Currency") any amount due hereunder in any currency other than
the Judgement Currency, then conversion shall be made at the rate of exchange
prevailing on the business day before the day of which judgment is given.  For
the purpose, "rate of exchange" means the rate at which Bank would, on the
relevant date at or about 12:00 noon (New York time), be prepared to sell a
similar amount of such currency in New York against the Judgement Currency.  In
the event that there is a change in the rate of exchange prevailing between the
business day before the day on which the judgement is given and the date of
payment of the amount due, the applicable credit party shall, on the date of
payment, pay such additional amounts (if any) as may be necessary to ensure that
the amount paid on such date is the amount in the Judgement Currency which when
converted at the rate of exchange prevailing on the date of payment is the
amount then due under this Agreement or such other applicable Loan Document in
such other currency.  Any additional amount due from Borrowers under this
Section will be due as a separate debt and shall not be affected by judgement
being obtained for any other sums due under or in respect of any of the Loan
Documents.

     2.10 Joint and Several Liability; Agent.
          ----------------------------------

          (a)  The obligations and liabilities of Borrowers, under, and all
representations, warranties and covenants of Borrowers in, this Agreement and
the Loan Documents shall be joint and several in all respects whatsoever.
Whenever the term "Borrower" or "Borrowers" is used in this Agreement or the
Loan Documents it shall mean each individual Borrower and all Borrowers jointly
and severally.

          (b)  Bank may deal with each Borrower as if it were the sole obligor,
without impairing in any way the liability of any other Borrower.  Without
limiting the generality of that right, Bank may in particular release, impair,
or fail to perfect an interest in any Collateral of any Borrower, waive defaults
by any Borrower, or extend, compromise or release the liability of any Borrower,
without the consent of any other Borrower.

          (c)  Borrowers represent that they have carefully considered the
alternatives to and the legal consequences of incurring joint and several
liability for the Obligations and have determined that by such arrangement they
are able to obtain financing on terms more favorable than otherwise, and that
under a joint and several loan facility they will each realize substantial
interest savings over alternative financing arrangements.

          (d)  All Borrowers hereby irrevocably appoint Agent as their
representative to deal with Bank on their behalf in all respects in connection
with this Agreement and the transactions contemplated herein.  All Borrowers
agree to be bound by all actions of Agent in all such respects.

                                       16
<PAGE>

               (e)  Bank may bring a separate action or actions on the
Obligations against each, any, or all of the Borrowers, whether action is
brought against any other or all of such Borrowers, or any one or more of the
Borrowers is or is not joined therein. Each Borrower agrees that any release
which may be given to any one or more of the Borrowers or any guarantor of the
Obligations shall not release any other Borrower from its obligations hereunder.
Each Borrower hereby waives any right to assert against Bank any defense (legal
or equitable), set off, counterclaim, or claims which such Borrower individually
may now or any time hereafter have against another Borrower or any other party
liable to Bank in any manner whatsoever.

               (f)  Any and all present and future debt and other obligations of
any Borrower to any other Borrower are hereby subordinated to the full payment
and performance of the Obligations; provided, however, such debt and other
obligations may be incurred and repaid, subject to the terms of this Agreement,
so long as no Default or Event of Default shall have occurred and not have been
waived.

               (g)  Each Borrower is presently informed as to the financial
condition of each of the other Borrowers and of all other circumstances which a
diligent inquiry would reveal and which bear upon the risk of nonpayment of the
Obligations. Each Borrower hereby covenants that it will continue to keep itself
informed as to the financial condition of all other Borrowers, the status of all
other Borrowers, and of all circumstances which bear upon the risk of
nonpayment. Absent a written request from any of the Borrowers to Bank for
information, each Borrower hereby waives any and all rights it may have to
require Bank to disclose to such Borrower any information which Bank may now or
hereafter acquire concerning the condition or circumstances of any of the
Borrowers.

               (h)  Each Borrower waives all rights to notices of default,
existence, creation, or incurring of new or additional indebtedness, and all
other notices of formalities to which such Borrower may, as a joint and several
Borrower hereunder, be entitled.

Section 3.     Representations and Warranties.
               -------------------------------

     Each Borrower hereby warrants and represents to Bank the following:

     3.1.      Organization and Qualification.  Each Borrower is duly organized
               -------------------------------
and validly existing in good standing under the laws of the jurisdiction of its
organization, has the power and authority (corporate and otherwise) to carry on
its business and to enter into and perform this Agreement, the Notes and each
Loan Document to which it is a party and is not qualified and licensed (nor is
such qualification or licensing required) to do business in any other
jurisdiction.  All information set forth in the Certificate of Borrower for such
Borrower, and in all attachments thereto, is true and correct.

     3.2.      Due Authorization.  The execution, delivery and performance by
               ------------------
each Borrower of this Agreement, the Notes and each Loan Document to which it is
a party have been duly authorized by all necessary corporate action, and will
not contravene any law or any

                                       17
<PAGE>

governmental rule or order binding on such Borrower, or the certificate of
incorporation or regulations of such Borrower, nor violate any material
agreement or instrument by which such Borrower is bound nor result in the
creation of a Lien on any assets of such Borrower except the Liens to Bank
granted herein. Each Borrower has duly executed and delivered this Agreement,
the Notes and each Loan Document to which it is a party and they are valid and
binding obligations of each Borrower enforceable according to their terms except
as limited by equitable principles and by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors generally. No
notice to or consent by any government body is needed in connection with this
transaction.

     3.3.  Litigation.  There are no suits or proceedings pending or, to the
           -----------
best knowledge of Borrowers, threatened against or affecting any Borrower, and
no proceedings before any governmental body pending or threatened against any
Borrower, except as listed on Exhibit 3.3 or which, if adversely determined,
would have a material negative affect on the Borrower's business, financial
condition or prospects.

     3.4.  Margin Stock.  No part of the Loans will be used to purchase or
           -------------
carry, or to reduce or retire or refinance any credit incurred to purchase or
carry, any margin stock (within the meaning of Regulations U and X of the Board
of Governors of the Federal Reserve System) or to extend credit to others for
the purpose of purchasing or carrying any margin stock.  If requested by Bank,
each Borrower will furnish to Bank statements in conformity with the
requirements of Federal Reserve Form U-1.  Margin Stock as defined in
Regulations U and X principally includes: (a) stocks that are registered on a
national securities exchange; (b) debt securities (bonds) that are convertible
into margin stocks; (c) any over-the-counter security designated as qualified
for trading in the National Market System under a designation plan approved by
the Securities and Exchange Commission (NMS security); and (d) shares of most
mutual funds, unless 95 per cent of the assets of the fund are continuously
invested in U.S. government, agency, state, or municipal obligations.

     3.5.  Business.  Each Borrower has all franchises, authorizations,
           ---------
patents, trademarks, copyrights and other rights necessary or appropriate to
conduct its business, except where the lack of such rights would not have a
material adverse effect on Borrower's business, assets or financial condition.
They are all in full force and effect and are not in known conflict with the
rights of others.  No Borrower is a party to or subject to any agreement or
restriction which in the opinion of such Borrower's management is so unusual or
burdensome that it might have a material adverse effect on such Borrower's
business, properties or prospects.  Each Borrower is in material compliance with
all material agreements applicable to it, including obligations to contribute to
any employee benefit plan or pension plan regulated by the federal Employee
Retirement Income Security Act ("ERISA").  See Exhibit 3.5.

     3.6.  Laws and Taxes.  Each Borrower is in material compliance with all
           ---------------
laws applicable to it, has filed all required tax returns and has paid all taxes
shown to be due and payable on those returns. No taxing authority has asserted
or assessed any additional tax liabilities against any Borrower. See Exhibit
3.6.

                                       18
<PAGE>

     3.7.   Environmental Laws.  (a) Each Borrower has obtained all material
            -------------------
permits, licenses and other authorizations which are required under
Environmental Laws and each Borrower is in compliance in all material respects
with all terms and conditions of such required permits, licenses and
authorizations, and is also in compliance in all material respects with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws;

            (b)  No Borrower is aware of, and has not received notice of, any
past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans which may interfere with or prevent
compliance or continued compliance in any material respect with Environmental
Laws, or may give rise to any material common law or legal liability, or
otherwise form the basis of any material claim, action, demand, suit,
proceeding, hearing, study or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling or the emission, discharge, release or threatened release
into the environment, of any pollutant, contaminant, chemical, or industrial,
toxic or hazardous substance or waste; and

            (c)  There is no material civil, criminal or administrative action,
suit, demand, claim, hearing, notice or demand letter, notice of violation,
investigation, or proceeding pending or, to the knowledge of any Borrower,
threatened against any Borrower, relating in any way to Environmental Laws.

     3.8.   Financial Condition.  All financial statements and information
            --------------------
relating to Borrowers which have been or may hereafter be delivered by Borrowers
to Bank are true and correct in all material respects and have been prepared in
accordance with Generally Accepted Accounting Principles. Borrowers do not have
any material obligations or liabilities of any kind not disclosed in that
financial information, and there has been no material adverse change in the
financial condition of Borrowers since the submission of such financial
information to Bank.

     3.9.   Solvency.  Each Borrower is Solvent and upon consummation of the
            ---------
transactions contemplated hereby will be Solvent.  "Solvent" means that:  (a)
the present fair salable value of a Borrower's assets is in excess of the total
amount of its liabilities (including contingent liabilities); (b) each Borrower
is able to pay its debts as they become due; and (c) no Borrower intends to or
believe it will incur obligations beyond its ability to pay as they mature.

Section 4.  Financial Statements and Information  .
            ------------------------------------  -

     4.1.   Financial Statements.  So long as any Obligations to Bank are
            ---------------------
outstanding, Borrowers shall maintain a standard and modern system for
accounting in accordance with Generally Accepted Accounting Principles and Agent
shall furnish to Bank:

            (a)  Within forty five (45) days after the end of the first three
fiscal quarters of each fiscal year, a copy of its balance sheet as of the end
of such quarter, and profit and loss statements and cash flow statements for
such quarter and for the year to date, which statements

                                       19
<PAGE>

shall be in reasonable detail, prepared and certified as complete and correct,
subject to changes resulting from year-end adjustments, by the principal
financial officer of the Agent and shall be in such form as is reasonably
acceptable to the Bank;

          (b)  Within one hundred and twenty (120) days after the end of each
fiscal year beginning with the current fiscal year, a copy of its financial
statements for such year including its balance sheet, profit and loss and
surplus statements for such year, which statements shall be audited by a firm of
independent certified public accountants acceptable to Bank (which acceptance
shall not be unreasonably withheld), and accompanied by a standard audit opinion
of such accountants without significant qualification;

          (c)  With the statements submitted under (a) and (b) above (being on a
quarterly and an annual basis), a certificate signed by the principal financial
officer of the Agent, (i) stating he is familiar with this Agreement and the
other Loan Documents and that no Default or Event of Default has occurred, or if
any such condition or event existed or exists, specifying it and describing what
action the Borrower has taken or proposes to take with respect thereto, and (ii)
setting forth, in summary form, figures showing the financial status of the
Borrowers in respect of the financial covenants and restrictions contained in
this Agreement;

          (d)  Promptly after any Responsible Officer of any Borrower obtains
knowledge of any condition or event which constitutes a Default or Event of
Default, a certificate of such person specifying the nature and period of the
existence thereof, and what action Borrowers have taken or is taking or proposes
to take in respect thereof;

          (e)  Promptly upon receipt thereof, copies of all letters to
management and all audit reports submitted to Borrowers by independent certified
public accountants in connection with each audit of the books of Borrowers made
by such accountants;

          (f)  Copies of all statements, notices and reports any Borrower shall
hereafter send to its creditors generally;

          (g)  Promptly upon the occurrence thereof, notice that a material
reportable event (as defined in Section 4043(b) of the Employee Retirement
Income Security Act of 1974 ("ERISA")) (a "Reportable Event") has occurred with
respect to any employee benefit plan maintained by a Borrower for its employees
(a "Plan"); and

          (h)  With reasonable promptness, such other information as Bank
requests.

If at any time a Borrower has any subsidiaries which have financial statements
that could be consolidated with those of such Borrower under generally accepted
accounting principles, the financial statements required by subsections (a) and
(b) above shall be the financial statements of Parent's consolidated world-wide
operations, consolidated US operations and consolidated European operations.

                                       20
<PAGE>

Section 5.  Covenants.  Each Borrower hereby covenants to Bank the following:
            ----------

     5.1.   Existence; Merger; Disposition of Assets.  Except with the prior
            -----------------------------------------
written consent of Bank, which consent shall not be unreasonably withheld, each
Borrower (a) will maintain its existence, (b) will not (i) change its capital
structure (except that sales of additional shares of common stock and treasury
stock transactions shall be permitted), (ii) merge or consolidate with any
corporation, partnership or other entity (except (A) in connection with any
acquisition or investment not prohibited by this Agreement, a Borrower may merge
or consolidate with another corporation or entity so long as the resulting
entity is fully liable as a Borrower under this Agreement, and (B) any Borrower
may merge or consolidate with another Borrower), or (iii) sell, lease, transfer
or otherwise dispose of all or substantially all of its assets (except (A) to
another Borrower or to a new Subsidiary which has complied or is complying with
Section 5.4 or (B) the sale, abandonment or other disposition of obsolete
assets).

     5.2.   Pledge or Encumbrance of Assets.  No Borrower will create, incur,
            --------------------------------
assume, cause or permit to occur or permit to continue in existence (i) any Lien
on any property or asset now owned or hereafter acquired by a Borrower, except
for Permitted Liens, (ii) any material impairment of the value or priority of
Bank's Lien in Collateral other than impairment in the value of Collateral
resulting from economic fluctuations in the value of assets (including
inventory) outside of the control of Borrowers, (iii) any condition or
circumstance allowing a notice of lien, levy or assessment to be filed against a
Borrower or an asset of such Borrower by any government authority, or (iv) a
seizure, attachment or other levy upon an asset of a Borrower by a judicial
officer.

     5.3.   Guarantees and Loans.  No Borrower will enter into any direct or
            ---------------------
indirect guarantees other than by endorsement of checks for deposit in the
ordinary course of such Borrower's business, nor make any advance or loan other
than in the ordinary course of as presently conducted except that a Borrower may
make loans or advances to its Affiliates and Subsidiaries.

     5.4.   Business.  Each Borrower will engage primarily in business of the
            ---------
same general character as that now conducted.  Each Borrower will not make any
investment in any other entity, through the direct or indirect holding of
securities or otherwise, except that a Borrower shall be permitted to (a)
conduct its business outside of the United States through newly formed, wholly-
owned (or as near to wholly-owned as legally possible where resident share or
other restrictions on such ownership apply) Subsidiaries, and (b) conduct its
business through newly-formed, wholly-owned domestic Subsidiaries so long as
Bank is notified in advance of such formation and Bank consents to such
formation (which consent shall not be unreasonably withheld or delayed) and each
such Subsidiary (if requested by Bank) (i) grants to Bank a first-priority and
perfectable security interest in its Accounts and the other classes of assets
that are Collateral hereunder, and (ii) executes in favor of Bank an agreement
whereby such Subsidiary is bound to abide by covenants and restrictions
substantially similar to those applicable to Borrowers hereunder, and (c) invest
in Permitted Investments.

                                       21
<PAGE>

     5.5.   Condition and Repair.  Each Borrower will maintain in good repair
            ---------------------
and working order, subject to normal wear and tear, all material properties used
in its business and from time to time will make all appropriate repairs and
replacements thereof.

     5.6.   Insurance.  Each Borrower will maintain, with financially sound and
            ----------
reputable insurers, insurance with respect to its properties and business
against loss or damage of the kinds and in the amounts customarily insured
against by corporations of established reputation engaged in the same or similar
businesses, together with any other insurance requested by Bank.  All such
policies relating to Collateral will name Bank as an additional insured and,
where applicable, as loss payee under a lender loss payable endorsement
satisfactory to Bank, and shall provide for thirty (30) days written notice to
Bank before such policy is altered or canceled.

     5.7.   Taxes.  Each Borrower has paid and will pay all taxes, assessments
            ------
and other governmental charges imposed upon it or any of its assets or in
respect of any of its franchises, business, income or profits before any penalty
or interest accrues thereon, and all claims (including, without limitation,
claims for labor, services, materials and supplies) for sums which have become
due and payable and which by law have or might become a Lien or charge upon any
of its assets, provided that (unless any material item or property would be
lost, forfeited or materially damaged as a result thereof) no such charge or
claim need be paid if it is being contested in good faith by appropriate
proceedings promptly initiated and diligently conducted, if Bank is notified in
advance of such contest and if a Borrower establishes any reserve or other
appropriate provision required by generally accepted accounting principles and
deposits with Bank cash or bond in an amount acceptable to Bank.

     5.8.   Compliance with Law.  Each Borrower will comply with all federal,
            --------------------
state and local laws, regulations and orders applicable to it or its assets, in
all respects material to such Borrower's business, assets or prospects,
including without limitation all Environmental Laws.

     5.9.   Transactions with Affiliates.  Each Borrower will not (a) directly
            -----------------------------
or indirectly make or cause to be made any guarantee for the benefit of any of
its Affiliates (other than another Borrower), (b) directly or indirectly make or
cause to be made any loans or advances to or investments in any of its
Affiliates (other than another Borrower), except such transactions with
Subsidiaries valued at not in excess of $1,000,000 relating to any one matter or
$3,000,000 in the aggregate for all Subsidiaries (provided, that existing debt
owed by the Belgian and Italian operating subsidiaries of the Agent or any
Borrower, as applicable, in the aggregate amount of approximately Euro 7,883,944
shall not count against this limitation), or (c) enter into any transaction with
any of its Affiliates (other than another Borrower) except sales of goods or
inventory to or from Subsidiaries in the ordinary course of business.

     5.10.  Indebtedness.  No Borrower will  incur, create, assume or permit to
            -------------
exist indebtedness for borrowed money (other than the Obligations), or
indebtedness on account of deposits, advances or progress payments under
contracts, or notes, bonds, debentures or similar obligations, unless the
creditor relating to any new indebtedness and such Borrower have entered into an
intercreditor agreement with Bank effectively subordinating such new
indebtedness to all

                                       22
<PAGE>

Obligations on terms reasonably satisfactory to Bank. Notwithstanding the
foregoing, any Borrower is permitted to enter the following: (a) an Indenture by
and between Agent and Star Bank, National Association, as Trustee, dated as of
September 1, 1996, for the issuance of up to $23,000,000 of convertible
subordinated debentures (herein, the "Subordinated Indebtedness") and Agent is
hereby permitted to issue the Subordinated Indebtedness; (b) a leaseline of up
to $2,000,000 from PNC Bank, N.A.; (c) the secured credit facility between Viral
Antigens, Inc. and AMSOUTH Bank; and (d) the BEF 6,000,000 line of credit
facility for the Belgian operating subsidiary.

     5.11.  Leases.  No Borrower will enter into any operating or capital lease
            -------
of real or personal property as lessee if the aggregate rentals due under such
lease and all other leases then in effect would exceed $500,000 in any fiscal
year.

     5.12.  Management.  At least one of William J. Motto or John A. Kraeutler
            -----------
shall be employed full-time in at least one of the following positions:
Chairman of the Board, Chief Executive Officer or President.

     5.13.  Depository.  At all times the Bank shall be Borrowers' principal
            -----------
depository in which the majority of Borrowers' operating funds and accounts are
deposited and Bank shall be the principal bank of account of Borrowers except as
provided for in Section 2.6 of this Agreement.

     5.14   Stock Repurchases.  No Borrower will redeem or repurchase any shares
            ------------------
of its capital stock in any fiscal year in a total amount exceeding $2,500,000.

     5.15   Fixed Charge Coverage Ratio.  At the end of each fiscal quarter on a
            ----------------------------
rolling four quarter basis, Borrowers shall maintain a Fixed Charge Coverage
Ratio of at least: (a) 0.5:1.0 for the period ending December 31, 2001; (b)
1.0:1.0 for each period ending from January 1, 2002 through September 30, 2002,
and (c) 1.25:1.0 for each period ending from and after October 1, 2002. "Fixed
Charge Coverage Ratio" means the ratio of (a) EBITDA for a given period to (b)
required principal payments on Funded Indebtedness plus income taxes, plus
interest expense, plus unfunded capital expenditures and paid dividends, for
such time period.

     5.16   Tangible Net Worth.  Borrowers shall maintain a Tangible Net Worth
            -------------------
as of the end of each fiscal period of at least $26,500,000 on a consolidated
basis.

     5.17.  Funded Debt Ratio.  At the end of each fiscal quarter of Borrowers
            ------------------
during the term of this Agreement on a rolling four quarter basis, the ratio of
Borrowers' Funded Debt to EBITDA shall not exceed: (a) 8.65:1.0 at the period
ending December 31, 2001, (b) 6.50:1.0 at each period end commencing March 31,
2002 and continuing until June 30, 2002, and (c) 4.0:1.0 at each period end
thereafter commencing September 30, 2002.

     5.18   Representations.  Each Borrower covenants that the representations
            ----------------
set forth herein will continue to be correct so long as this Agreement is in
effect.  Each Borrower will,

                                       23
<PAGE>

within three days of its knowledge thereof, give written notice to Bank of the
existence of any event which would prohibit such Borrower from continuing to
make the representations set forth in this Agreement.

Section 6.  Security.
            ---------

     6.1.   Security Interest of Bank.  To induce Bank to make the Loans, and
            --------------------------
as security for all Obligations, each Borrower hereby assigns to Bank as
Collateral and grants to Bank a continuing pledge and security interest in the
following property of such Borrower (together with all proceeds and products
thereof and all additions and accessions thereto, replacements thereof,
supporting obligations therefor, guaranties thereof, insurance or condemnation
proceeds thereof, documents related thereto, all sales of accounts constituting
a right of payment therefrom, all tort or other claims against third parties
arising out of damage thereto or destruction thereof, all property received
wholly or partly in trade or exchange therefor, all fixtures attached or
appurtenant thereto, all leases thereof, and all rents, revenues, issues,
profits and proceeds arising from the sale, lease, encumbrance, collection or
any other temporary or permanent disposition thereof, or any other interest
therein,  the "Collateral"), whether now owned or existing or hereafter acquired
or arising and regardless of where located:

            (a)     all Accounts, all Inventory, all Equipment, all General
Intangibles, all Investment Property;

            (b)     all instruments, chattel paper, electronic chattel paper,
documents, securities, moneys, cash, letters of credit, letter of credit rights,
promissory notes, warrants, dividends, distributions, contracts, agreements,
contract rights or other property, owned by a Borrower or in which a Borrower
has in interest, including but not limited to, those which now or hereafter are
in the possession or control of Bank or in transit by mail or carrier to or in
the possession of any third party acting on behalf of Bank, without regard to
whether Bank received the same in pledge, for safekeeping, as agent for
collection or transmission or otherwise or whether Bank had conditionally
released the same, and the proceeds thereof, all rights to payment from, and all
claims against Bank, and any deposit accounts of a Borrower with Bank, including
all demand, time, savings passbook or other accounts and all deposits therein;

            (c)     all assets and all personal property now owned or hereafter
acquired; all now owned and hereafter acquired inventory, equipment, fixtures,
goods, accounts, chattel paper, documents, instruments, farm  products, general
intangibles, supporting obligations, software, and all rents, issues, profits,
products and proceeds thereof, wherever any of  the foregoing is located; and

            (d)     all cash, instruments, documents, securities, money or other
property, owned by a Borrower or in which a Borrower has an interest, which now
or hereafter are at any time in the possession or control of Bank or in transit
by mail or carrier to or in the possession of any third party acting on behalf
of Bank, without regard to whether Bank received the same in pledge, for
safekeeping, as agent for collection or transmission or otherwise or whether
Bank had

                                       24
<PAGE>

conditionally released the same, and any deposit accounts of any Borrower with
Bank, including all demand, time, savings, passbook or other accounts.

     6.2.   Representations in Exhibit 6.2.  Each Borrower represents and
            -------------------------------
warrants that the representations and warranties set forth in Exhibit 6.2, the
Specific Representations Exhibit, are true and correct.  Except as otherwise
permitted hereunder and without the prior written consent of Bank (which consent
shall not be unreasonably withheld), no Borrower shall change its name, transfer
its executive offices or maintain records with respect to Accounts at any
location other than its present executive offices specified in that Exhibit.

     6.3.   Provisions Concerning Accounts.  (a) Each Borrower represents and
            -------------------------------
warrants that each Account reflected in its books and records submitted to Bank
is, or will at the time it arises be, owned by such Borrower free and clear of
all Liens in favor of any third party, will be a bona fide existing obligation
created by the final sale and delivery of goods or the completed performance of
services by such Borrower in the ordinary course of its business, will be for a
liquidated amount maturing as stated in the supporting data covering such
transaction, and will not be subject to any known deduction, offset,
counterclaim, return privilege or other condition except as reflected on
Borrowers' books and records delivered to Bank. No Borrower shall re-date any
invoices. Any allowances between a Borrower and its customers will be in
accordance with the usual customary practices of such Borrower, as they exist on
the date of this Agreement.

            (b)    After Default, Bank or its designee may at any time notify
Account Debtors that Accounts have been assigned to Bank or of Bank's security
interest therein, and after default by Borrowers hereunder collect the same
directly and charge all collection costs and expenses to a Borrower's account.

            (c)    Bank shall not be liable to Borrowers or any third person for
the correctness, validity or genuineness of any instruments or documents
released or endorsed to a Borrower by Bank (which shall automatically be deemed
to be without recourse to Bank in any event), or for the existence, character,
quantity, quality, condition, value or delivery of any goods purporting to be
represented by any such documents; and Bank, by accepting a Lien in the
Collateral, or by releasing any Collateral to a Borrower, shall not be deemed to
have assumed any obligation or liability to any supplier or Account Debtor of a
Borrower or to any other third party, and Borrowers agree to indemnify and
defend Bank and hold it harmless in respect to any claim or proceeding arising
out of any matter referred to in this subparagraph.

            (d)    A Borrower shall immediately notify Bank if it becomes aware
of a receivership petition or a petition under any chapter of the federal
bankruptcy act being filed (or pending) by or against an Account Debtor owing
such Borrower more than $150,000, or if an Account Debtor owing such Borrower
such an amount dissolves, makes an assignment for the benefit of creditors,
becomes insolvent, fails or goes out of business. After the occurrence of an
Event of Default, no discount, credit or allowance shall be given with respect
to an Account in excess of $100,000 without the Bank's consent.

                                       25
<PAGE>

            (e)    Upon the occurrence of an Event of Default, each Borrower
appoints Bank and Bank's designees as its attorney-in-fact to endorse such
Borrower's name on any checks, notes, acceptances, money orders, drafts or other
forms of payment or security that may come into Bank's possession; to sign a
Borrower's name on any invoice or bill of lading relating to any Accounts, on
drafts against Account Debtors, on schedules and assignments of Accounts, on
verifications of Accounts, on notices to Account Debtors, and on proofs of
claim, releases of lien or any other documents needed to collect Accounts; to
notify post office authorities to change the address for delivery of a
Borrower's mail to an address designated by Bank, to receive and open all mail
addressed to any Borrower and to retain all mail relating to Collateral and
forward all other mail to such Borrower; to send requests for verification of
Accounts to customers or Account Debtors, and to do all things necessary to
carry out or enforce this Agreement.  Each Borrower ratifies and approves all
acts of Bank or its designees as attorney-in-fact.  Bank or its designees as
attorney-in-fact will not be liable for any acts or omissions, or for any error
of judgment or mistake of fact or law except for bad faith.  This power, being
coupled with an interest, is irrevocable until all Obligations have been fully
satisfied.  Any person dealing with Bank shall be entitled to conclusively rely
on any written or oral statement of Bank or its designee that this power of
attorney is in effect.  Bank will not exercise this power of attorney until an
Event of Default has occurred.

            (f)    If any Accounts in excess of $500,000 shall arise out of a
contract with the United States of America or any department, agency,
subdivision or instrumentality thereof, Borrowers shall promptly notify Bank
thereof in writing and take all other action requested by Bank to perfect Bank's
Lien in such Accounts under the provisions of the Federal laws on assignment of
claims.

     6.4.   Liens.  each Borrower represents and warrants that: it has good and
            ------
marketable title to the Collateral, and the Liens granted to Bank pursuant to
this Agreement are fully perfected first priority Liens in and to the Collateral
with priority over the rights of every person other than such Borrower in the
Collateral and other than as described in the definition of "Permitted Liens";
each Borrower is the owner of all personal property in its possession or shown
on its books and records; and all assets of such Borrower are owned free, clear
and unencumbered, except for Permitted Liens.

     6.5.   Further Assurances.  (a) Each Borrower shall execute and deliver to
            -------------------
Bank at Bank's request  all financing statements, continuation statements,
fixture filings, endorsements of filings, mortgages, schedules of accounts,
letters of authority and all other documents that Bank may reasonably request,
in form satisfactory to Bank, to perfect and maintain perfected Bank's security
interest in the Collateral and to fully consummate all transactions contemplated
under this Agreement.  Each Borrower hereby irrevocably appoints Bank and Bank's
designee as such Borrower's true and lawful attorney-in-fact with power to sign
the name of such Borrower on any such documents.  Each Borrower ratifies and
approves all acts of Bank and its designees as attorney-in-fact.  Bank or its
designees as attorney-in-fact will not be liable for any acts or omissions, or
for any error of judgment or mistake of fact or law, except for bad faith.

                                       26
<PAGE>

            (b)    If any Collateral, including proceeds, consists of a letter
of credit or an advice of credit in excess of $500,000, or an instrument, money,
negotiable documents, chattel paper or similar property (collectively,
"Negotiable Collateral") Borrowers shall, immediately upon receipt thereof,
endorse and assign such Negotiable Collateral over to Bank and deliver actual
physical possession of the Negotiable Collateral to Bank, along with causing the
execution and delivery of any control agreement deemed necessary by Bank to
perfect its interest in such Negotiable Collateral. In addition, Borrowers shall
assign and deliver to Bank certain specific promissory notes for certain foreign
subsidiaries of Agent.

            (c)    Bank may, at any time or times hereafter upon reasonable
notice, during Borrowers usual business hours, or during the usual business
hours of any third party having control over the records of Borrowers, inspect
and verify the Collateral and Borrowers books and records in order to verify the
amount or condition of, or any other matter relating to, the Collateral and
Borrowers financial condition. Borrowers shall promptly deliver to Bank copies
of all books and records requested by Bank.

     6.6.   Reinstatement of Lien.  If, at any time after payment in full by
            ----------------------
Borrowers of all Obligations and termination of Bank's Liens, any payments on
Obligations secured by Collateral theretofore made by any Borrower or any other
person must be disgorged by Bank for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of a Borrower or such
other person), this Agreement and Bank's Liens granted hereunder shall be
reinstated as to all disgorged payments as though such payment had not been
made, and Borrowers shall sign and deliver to Bank all documents and things
necessary to reperfect all terminated Liens.

     6.7.   Other Amounts Deemed Loans.  If a Borrower fails to pay any tax,
            ---------------------------
assessment, government charge or levy or to maintain insurance within the time
permitted by this Agreement, or to discharge any Lien prohibited hereby, or to
comply with any other obligation, Bank may, but shall not be required to, pay,
satisfy, discharge or bond the same for the account of such Borrower, and to the
extent permitted by law and at the option of Bank all monies so paid out shall
be deemed Loans.

     6.8.   Borrower Remains Liable.  Each Borrower shall remain liable under
            ------------------------
any contracts and agreements included in the Collateral to perform all of its
duties and obligations thereunder to the same extent as if this Agreement had
not been executed, and Bank shall not have any obligation or liability under
such contracts and agreements by reason of this Agreement or otherwise.

     6.9.   Financing Statements.  Each Borrower hereby authorizes Bank to file
            --------------------
a copy of this Agreement as a Financing Statement with appropriate county and
state government authorities necessary to perfect Bank's security interest in
the Collateral as set forth herein.  Each Borrower hereby further authorizes
Bank to file UCC Financing Statements on behalf of such Borrower and Bank with
respect to the Collateral.

                                       27
<PAGE>

Section 7.  Conditions Precedent.
            ---------------------

     7.1.   Conditions to Loans.  Bank shall not make any Loan until Borrowers
            --------------------
have delivered to Bank, in addition to this Agreement and the Note, the
following in form and substance satisfactory to Bank:

            (a)  all appropriate financing statements (Form UCC-1) and all
consents or waivers of mortgagees, and all items of Negotiable Collateral.

            (b)  a Certificate of Borrower in the form of Exhibit 3.1, and all
attachments thereto.

            (c)  UCC searches, tax lien and litigation searches, insurance
certificates, notices, filings or other documents which Bank may require to
reflect, perfect, or protect the priority of Bank's priority Lien in the
Collateral and to fully consummate this transaction.

            (d)  a favorable opinion of counsel to Borrowers, substantially in
the form of Exhibit 7.1(d).

            (e)  payment by Borrowers of all fees and expenses of Bank's counsel
and all recording fees and taxes, if any.

            (f)  executed copies of all documents set forth on Bank's document
list for this transaction.

            (g)  such additional information and materials as Bank may
reasonably request.

     7.2.   Conditions to each Loan. Bank will not make any Loan if there has
            ------------------------
occurred, and has not been waived, any Default or Event of Default.

Section 8.  Events of Default and Remedies.
            -------------------------------

     8.1.   Events of Default. Any of the following events shall be an Event of
            ------------------
Default:

            (a)  any representation or warranty made by any Borrower or officer
of any Borrower herein, or in any other Loan Document or any document furnished
to Bank by any Borrower under this Agreement, is incorrect in any material
respect when made or when reaffirmed; provided that if the same shall be
susceptible of being cured by Borrowers, including elimination of all adverse
effects thereof, no Event of Default shall exist with respect thereto unless the
same shall remain uncured for a period of thirty (30) days after Borrowers shall
have received written notice thereof; or

                                       28
<PAGE>

          (b)  Borrowers default in the payment of any principal or interest on
any Obligation when due and payable, by acceleration or otherwise, and such
default continues for a period of five (5) business days thereafter; or

          (c)  Any Borrower fails to observe or perform any covenant, condition
or agreement to be observed or performed pursuant to the terms hereof, provided
such default continues unremedied for 30 days after written notice thereof to
Borrowers by Bank, unless such failure or nonperformance is curable and
Borrowers shall, after delivery of such notice, be diligently proceeding to
correct such failure or nonperformance and shall in fact correct such failure or
non-performance within ninety (90) days of the delivery of such notice
(provided, further, that this additional 90 day-cure period shall not be
applicable to a violation of Sections 8.1(b), 5.15, 5.16 or 5.17 of this
Agreement); or

          (d)  Any Borrower fails to keep its assets insured as required herein,
or material uninsured damage to or loss, theft or destruction of the Collateral
occurs; or

          (e)  an Insolvency Event occurs with respect to any Borrower or any
guarantor of an Obligation; or

          (f)  Any Borrower defaults under the terms of any indebtedness or
lease involving total payment obligations of such Borrower in excess of $250,000
which is not cured within the time period permitted pursuant to the terms and
conditions of such indebtedness or lease, or an event occurs which gives any
creditor or lessor the right to accelerate the maturity of any such indebtedness
or lease payments; or

          (g)  final judgment for the payment of money in excess of $500,000 is
rendered against any Borrower and remains undischarged for 60 days (or the
period for appeal thereof has lapsed) during which execution is not effectively
stayed or bonded; or

          (h)  any event occurs which might, in Bank's opinion, have an material
adverse effect on the Collateral or on a Borrower's financial condition,
operations or prospects; or

          (i)  a Reportable Event occurs with respect to any Plan, other than a
Reportable Event caused solely by a decrease in employment or a Reportable Event
for which the 30-day notice requirements of Section 4043(a) of ERISA have been
waived by the Pension Benefit Guaranty Corporation (the "PBGC"); or a trustee is
appointed by a United States District Court to administer any Plan; or the PBGC
institutes proceedings to terminate any Plan; or

          (j)  an Event of Default occurs and is continuing under any Loan
Document; or

          (k)  a change occurs in the identity of the individuals comprising the
Board of Directors of a Borrower such that the directors in office on the date
of execution hereof at any time fail to constitute a majority of such Borrower's
Board of Directors then in office; or

                                       29
<PAGE>

          (l)  an Event of Default occurs and is continuing under the terms and
conditions of the Indenture by and between Agent and Star Bank, National
Association, as Trustee, dated as of September 1, 1996 or the terms of such
Indenture are materially amended without the prior written consent of Bank.

     8.2. Remedies.  If any Event of Default shall occur and be continuing:
          ---------

          (a)  Bank may cease advancing money hereunder, and/or declare all
Obligations to be due and payable immediately (and, upon the occurrence of an
Event of Default based on an Insolvency Event, all Obligations shall become
automatically due and payable without a declaration by Bank), whereupon they
shall immediately become due and payable without presentment, demand, protest,
or notice of any kind, all of which are hereby expressly waived by Borrowers.

          (b)  Bank may set off against the Obligations, all Collateral,
balances, credits, deposits, accounts or monies of any Borrower then or
thereafter held with Bank, including amounts represented by certificates of
deposit.

          (c)  Bank may resort to the rights and remedies of a secured party
under the Uniform Commercial Code including the right to enter any premises of
any Borrower, with or without legal process and take possession of the
Collateral and remove it and any records pertaining thereto and/or remain on
such premises and use it for the purpose of collecting, preparing and disposing
of the Collateral.

          (d)  Bank may dispose of the Collateral as is or at its election may
refurbish, repair, improve, process, finish, operate, demonstrate and prepare
for sale the Collateral, and may store, ship, reclaim, recover, protect,
advertise for sale or lease, and insure the Collateral; if any Collateral
consists of documents, Bank may proceed either as to the documents or as to the
goods represented thereby; Bank's failure to take steps to preserve rights
against any parties or property shall not be deemed to be failure to exercise
reasonable care with respect to the Collateral.

          (e)  Bank may in its sole discretion pay, purchase, contest or
compromise any encumbrance, charge or lien which in the opinion of Bank appears
to be prior or superior to its Lien, and pay all expenses incurred in connection
therewith.

          (f)  Bank may sell the Collateral at public or private sale, and
Borrowers shall be credited with the net proceeds of such sale only when they
are actually received by Bank; any requirement of reasonable notice of any
disposition of the Collateral shall be satisfied if such notice is sent to
Borrowers, as provided in the Notices Section of this Agreement, 10 days prior
                              -------
to such disposition.

          (g)  A Borrower shall upon request of Bank assemble the Collateral and
any records pertaining thereto and make them available at a place designated by
Bank.

                                       30
<PAGE>

           (h)  Bank may use, in connection with any assembly or disposition of
the Collateral, any trademark, trade name, tradestyle, copyright, patent right,
trade secret or technical process used or utilized by any Borrower.

     8.3.  Cumulative Remedies.  No remedy set forth herein is exclusive of any
           -------------------
other available remedy or remedies, but each is cumulative and in addition to
every other remedy given under this Agreement or any other agreement or now or
hereafter existing at law or in equity or by statute. Bank may pursue its rights
and remedies concurrently or in any sequence, and no exercise of one right or
remedy shall be deemed to be an election. If a Borrower fails to comply with
this Agreement, no remedy of law will provide adequate relief to Bank, and Bank
shall be entitled to temporary and permanent injunctive relief without the
necessity of proving actual damages.

     8.4.  Fees and Expenses.  Upon a sale, lease or other disposition of the
           -----------------
Collateral, the proceeds shall be applied first to the expenses of retaking,
holding, storing, processing and preparing for sale, selling and the like, and,
to the extent permitted by law, to reasonable attorneys' fees and legal
expenses, and then to the satisfaction of the Obligations secured by this
Agreement.  Borrowers shall be liable for any deficiency.

Section 9. Miscellaneous Provisions.
           ------------------------

     9.1.  Delays and Waiver.  No delay or omission to exercise any right shall
           -----------------
impair any such right or be a waiver thereof, but any such right may be
exercised from time to time and as often as may be deemed expedient. A waiver on
one occasion shall be limited to that particular occasion.

     9.2.  Waiver by Borrower.  Each Borrower waives notice of non-payment,
           ------------------
demand, presentment, protest, or notice of protest of any Accounts or other
Collateral, and all other notices; consents to any renewals or extensions of
time of payment thereof; and generally waives any and all suretyship defenses
and defenses in the nature thereof.

     9.3.  Complete Agreement.  This Agreement and the Exhibits are the complete
           ------------------
agreement of the parties hereto and supersede all previous understandings
relating to the subject matter hereof. This Agreement may be amended only by an
instrument in writing which explicitly states that it amends this Agreement, and
is signed by the party against whom enforcement of the amendment is sought. This
Agreement may be executed in counterparts, each of which will be an original and
all of which will constitute a single agreement.

     9.4.  Severability.  If any part of this Agreement or the application
           ------------
thereof to any person or circumstance is held invalid, the remainder of this
Agreement shall not be affected thereby.  The section headings herein are
included for convenience only and shall not be deemed to be a part of this
Agreement.

                                       31
<PAGE>

     9.5.  Binding Effect.  This Agreement shall be binding upon and inure to
           --------------
the benefit of the respective legal representatives, successors and assigns of
the parties hereto; however, a Borrower may not assign any of its rights or
delegate any of its obligations hereunder.  Bank (and any subsequent assignee)
may, upon thirty days notice to Borrowers, transfer and assign this Agreement
and deliver the Collateral to the assignee, who shall thereupon have all of the
rights of Bank; and Bank (or such subsequent assignee who in turn assigns as
aforesaid) shall then be relieved and discharged of any responsibility or
liability with respect to this Agreement and said Collateral.  Bank may also
assign partial interests or participations in the Loans to other persons.  Bank
may disclose to all prospective and actual assignees and participants all
financial, business and other information about Borrowers which Bank may possess
at any time.

     9.6.  Subsidiaries.  If a Borrower has any Subsidiaries incorporated in
           ------------
the United States of America or any State thereof (specifically excluding
however Viral Antigens, Inc.) at any time during the term of this Agreement, the
term "Borrower" in each representation, warranty and covenant herein shall mean
"the Borrower and each Subsidiary incorporated in the United States of America
or any State thereof (specifically excluding however Viral Antigens, Inc.)
individually and in the aggregate," and such Borrower shall cause each such
Subsidiary to be in compliance therewith.

     9.7.  Notices.  Any notices under or pursuant to this Agreement shall be
           -------
deemed duly sent when delivered in hand or when mailed by registered or
certified mail, return receipt requested, addressed as follows:

     To Borrowers:  Meridian Bioscience, Inc., as agent for itself and for
                    Meridian Bioscience Corporation
                    Omega Technologies, Inc.
                    Gull Laboratories, Inc.
                    BIODESIGN Incorporated
                    3471 River Hills Drive
                    Cincinnati, Ohio  45244
                    Attention:  Chief Financial Officer

     With copy to:  James M. Jansing, Esq.
                    Keating, Muething & Klekamp
                    1400 Provident Tower
                    One E. 4th Street
                    Cincinnati, Ohio  45202

     To Bank:       Fifth Third Bank
                    38 Fountain Square Plaza
                    Cincinnati, Ohio 45263
                    Attention:  Commercial Loan Department

     Either party may change such address by sending notice of the change to the
other party.

                                       32
<PAGE>

     9.8.  Governing Law; Jurisdiction.  All acts and transactions hereunder
           ---------------------------
and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the domestic laws of the State of
Ohio.  Each Borrower agrees that the state and federal courts in Hamilton
County, Ohio or any other court in which Bank initiates proceedings have
exclusive jurisdiction over all matters arising out of this Agreement, and that
service of process in any such proceeding shall be effective if mailed to such
Borrower at its address described in the Notices section of this Agreement.
BANK AND BORROWERS HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS
ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

     IN WITNESS WHEREOF, the Borrowers and the Bank have executed this Agreement
by their duly authorized officers as of the date first above written.

MERIDIAN BIOSCIENCE                MERIDIAN BIOSCIENCE, INC.
CORPORATION

By:  _________________________     By: __________________________

Its: _________________________     Its:  ________________________

OMEGA TECHNOLOGIES, INC.           GULL LABORATORIES, INC.

By:  _________________________     By: __________________________

Its: _________________________     Its:  ________________________

BIODESIGN INCORPORATED             FIFTH THIRD BANK

By:  _________________________     By: __________________________

Its: _________________________     Its:  ________________________

                                       33
<PAGE>

                                EXHIBIT 2.1(c)
                                --------------

                                REVOLVING NOTE

                                                                Cincinnati, Ohio
$20,000,000                                                   September 20, 2001

     Meridian Bioscience, Inc., an Ohio corporation, Meridian Bioscience
Corporation  an Ohio corporation ("Corp."), Omega Technologies, Inc., an Ohio
corporation ("Omega"), Gull Laboratories, Inc. a Utah corporation ("Gull") and
BIODESIGN Incorporated, a Maine corporation (collectively and jointly and
severally the "Borrowers" and individually a "Borrower"), for value received,
hereby promises to pay to the order of  FIFTH THIRD BANK (the "Bank") at its
offices, 38 Fountain Square Plaza, Cincinnati, Ohio 45263, in lawful money of
the United States of America and in immediately available funds, the principal
sum of $20,000,000 or such lesser unpaid principal amount as may be advanced by
the Bank pursuant to the terms of the Loan and Security Agreement of even date
herewith by and among the Borrowers and the Bank, as same may be amended from
time to time (the "Agreement").  This Note shall mature and be payable in full
on September 15, 2004, or such later date as may be determined and agreed upon
between Bank and Borrowers pursuant to the Agreement.

     The principal balance hereof outstanding from time to time shall bear
interest as set forth in the Agreement.  Interest will be calculated based on a
360-day year and charged for the actual number of days elapsed, and will be
payable as set forth in the Agreement.  After the occurrence of an Event of
Default, this Note shall bear interest (computed and adjusted in the same
manner, and with the same effect, as interest hereon prior to maturity), payable
on demand, at a rate per annum equal to six percent (6%) above the rate that
would otherwise be in effect, until paid, and whether before or after the entry
of judgment hereon.

     The principal amount of each loan made by the Bank and the amount of each
prepayment made by the Borrowers shall be recorded by the Bank on the schedule
attached hereto or in the regularly maintained data processing records of the
Bank.  The aggregate unpaid principal amount of all loans set forth in such
schedule or in such records shall be presumptive evidence of the principal
amount owing and unpaid on this Note.  However, failure by Bank to make any such
entry shall not limit or otherwise affect Borrowers' obligations under this Note
or the Agreement.

     This Note is the Revolving Note referred to in the Agreement, and is
entitled to the benefits, and is subject to the terms, of the Agreement.  The
principal of this Note is prepayable in the amounts and under the circumstances,
and its maturity is subject to acceleration upon the terms, set forth in the
Agreement.  Except as otherwise expressly provided in the Agreement, if any
payment on this Note becomes due and payable on a day other than one on which
Bank is

                                       34
<PAGE>

open for business (a "Business Day"), the maturity thereof shall be extended to
the next Business Day, and interest shall be payable at the rate specified
herein during such extension period.

     In no event shall the interest rate on this Note exceed the highest rate
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto.  In the event that a court
determines that Bank has received interest and other charges under this Note in
excess of the highest permissible rate applicable hereto, such excess shall be
deemed received on account of, and shall automatically be applied to reduce the
amounts due to Bank from the Borrowers under this Note, other than interest, and
the provisions hereof shall be deemed amended to provide for the highest
permissible rate.  If there are no such amounts outstanding, Bank shall refund
to Borrowers such excess.

     Borrowers and all endorsers, sureties, guarantors and other persons liable
on this Note hereby waive presentment for payment, demand, notice of dishonor,
protest, notice of protest and all other demands and notices in connection with
the delivery, performance and enforcement of this Note, and consent to one or
more renewals or extensions of this Note.

     This Note may not be changed orally, but only by an instrument in writing.

     This Note is being delivered in, is intended to be performed in, shall be
construed and enforceable in accordance with, and be governed by the internal
laws of, the State of Ohio without regard to principles of conflict of laws.
Borrowers agree that the State and federal courts in Hamilton County, Ohio or
any other court in which Bank initiates proceedings have exclusive jurisdiction
over all matters arising out of this Note, and that service of process in any
such proceeding shall be effective if mailed to Borrowers at their address
described in the Notices section of the Agreement.  BORROWERS HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE.

                                       35
<PAGE>

MERIDIAN BIOSCIENCE                MERIDIAN BIOSCIENCE, INC.
CORPORATION

By:____________________________    By:__________________________

Its: ____________________________  Its:_________________________

OMEGA TECHNOLOGIES, INC.           GULL LABORATORIES, INC.

By:  _________________________     By: __________________________

Its: _________________________     Its:  ________________________

BIODESIGN INCORPORATED

By:  _________________________

Its: _________________________

                                       36

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