Document:

Exhibit 10.77

 

FOURTH AMENDMENT TO LICENSE AGREEMENT

 

                This Fourth
Amendment to License Agreement (“Fourth Amendment”) is effective as of the 19th
day of April, 2004 (the “Effective Date”), by and among Gilead Sciences, Inc.
(formerly Triangle Pharmaceuticals, Inc.), a Delaware corporation having its
principal place of business at 333 Lakeside Drive, Foster City, CA 94404 (“COMPANY”)
and Emory University, a not-for-profit Georgia corporation with offices at 1380
South Oxford Road, N.E., Atlanta, Georgia 30322 (“LICENSOR”), and amends
certain terms of that certain License Agreement, dated April 17, 1996, between
LICENSOR and COMPANY, as amended by the First Amendment to License Agreement,
dated May 6, 1999 (“First Amendment”) and as further amended by the Second
Amendment to License Agreement dated July 10, 2000 (“Second Amendment”) and as
further amended by the Third Amendment to the License Agreement dated May 31,
2002 (such License Agreement as amended by the First, Second and Third
Amendments is referred to herein as the “Agreement”).

 

WHEREAS LICENSOR and COMPANY wish to clarify a fair
and equitable formula for Net Selling Price of Licensed Products which contain
as their active ingredients both Licensed Compounds and compounds other than
Licensed Compounds;

 

WHEREAS LICENSOR and COMPANY wish
to clarify definitions related to an expanded access program such as COMPANY’S
Global Access Program;

 

                NOW, THEREFORE,
for good and valuable consideration, the receipt and sufficiency of which are
acknowledged by each of the parties, COMPANY and LICENSOR hereby agree as
follows:

 

1.                                       Definitions.

1.1.                              Use of Existing Definitions. 
All terms used in this Fourth Amendment and not otherwise defined herein
shall have the same meanings ascribed to them in the Agreement.

1.2.                              Amendment of Definitions. 
The Agreement is hereby amended to provide that:

1.2.1.                     Sections 1.20 and 1.21 and 1.25 are deleted in their
entirety and replaced with the following:

“1.20       “Net Selling Price” of a product
(including a Licensed Product) shall mean, with respect to a particular fiscal
quarter, the gross invoice price (i.e. the total invoiced price therefore prior
to any deductions made pursuant to clauses (i) through (iv)) paid by a
purchaser of such product (including Distributors), to COMPANY, an Affiliate or
sublicensee of COMPANY and their sublicensees or any other party authorized by
COMPANY to sell that product (which shall not include Distributors)
(collectively the “Sellers”), plus, if applicable, the value of all properties
and services received in consideration of a Sale of such product, less only:

 

1

 

(i)                                     discounts, including cash and quantity
discounts, charge-back payments and rebates granted to managed health care
organizations or to federal, state and local governments, their agencies,
purchasers and reimbursers or to trade customers;

(ii)                                  credits or allowances actually granted upon
claims, damaged goods, rejections or returns of such Licensed Products,
including recalls;

(iii)                               freight, postage, shipping,
transportation and insurance charges actually allowed or paid for delivery of
Licensed Products to the extent billed; and

(iv)                              taxes (other than income taxes), duties
or other governmental charges levied on, absorbed or otherwise imposed on sale
of such Licensed Products, including without limitation value-added taxes, or
other governmental charges otherwise measured by the billing, when included in
the billing, as adjusted for rebates and refunds.

(a)           Notwithstanding the foregoing in this
Section 1.20, amounts received by COMPANY, its Affiliates or sublicensees for
the sale of Licensed Products among COMPANY, its Affiliates and sublicensees
for resale shall not be included in the computation of Net Selling Price
hereunder.

(b)           For purposes of this Section 1.20, “Distributor”
shall mean any third party (i) to which a Seller has granted (at any time
during the term) a right to sell or distribute a Licensed Product, (ii) that
sells Licensed Products to hospitals and/or pharmacies for their sale to or use
with patients (rather than to other third parties for resale to hospitals
and/or pharmacies for their sale to or use with patients), and (iii) that does
not make payments to COMPANY or such COMPANY Affiliate that are calculated on
the basis of a percentage of, or profit share on, such third party’s sales of
Licensed Products.  For purposes of
calculating Net Selling Price, no Distributor shall be deemed to be a
sublicensee of COMPANY or its Affiliates. 
Net Selling Price for the quantities of License Product sold by
Distributors shall be calculated based on the amount invoiced the Distributors
by COMPANY and/or its Affiliates and/or sublicensees of Affiliates and COMPANY
rather than by the Distributors to their customers.

(c)           Where Licensed Product is sold in the
form of a combination product containing one or more active ingredients in
addition to a Licensed Compound (“Combination Product”), Net Selling Price for
such

 

2

 

Combination Product for
purposes of determining royalties payable under this Agreement will be
calculated by multiplying the actual Net Selling Price of such Combination
Product by the fraction A/(A+B) where A is the Net Selling Price for the stock
keeping unit most comparable in formulation and dosing to that used for the
Combination Product of the Licensed Product containing the relevant Licensed
Compound as the sole active ingredient, if sold separately, in such country
during the relevant fiscal quarter, and B is the Net Selling Price for the
stock keeping unit, most comparable in formulation and dosing to that used for
the Combination Product, of any other active ingredient, if sold separately, in
such country during the relevant fiscal quarter.  For clarity, if there are three or more
active ingredients (including the Licensed Compound), additional B terms
calculated in the same manner, shall be included in the denominator so that
such fraction shall be A/(A+B1+ B2+...). 
If, on a country-by-country basis, one or more of the other active
ingredients in the Combination Product are not sold separately in said country,
Net Selling Price for the purpose of determining royalties payable under this
Agreement for the Combination Product shall be calculated by multiplying the
actual Net Selling Price of such Combination Product Combination Product of the
Licensed Product containing the relevant Licensed Compound as the sole active
ingredient, if sold separately, in such country during the relevant fiscal
quarter and C is the Net Selling Price for the Combination Product in such
country during the relevant fiscal quarter. 
If, on a country-by-country basis, the Licensed Product containing a
Licensed Compound as the sole active ingredient is not sold separately in said
country during the relevant fiscal quarter but one or more of the other active
ingredients in the Combination Product are sold separately in said country
during the relevant fiscal quarter, the Net Selling Price for the Combination
Product shall be calculated by multiplying the actual Net Selling Price of such
Combination Product by the fraction (1-(D/C)) where D is the Net Selling Price
for the stock keeping unit most comparable in formulation and dosing to that
used for the Combination Product of the product containing the other active
ingredient as the sole active ingredient and C is the Net Selling Price for the
Combination Product in such country during the relevant fiscal quarter.  If, on a country-by-country basis, the
Licensed Product containing a Licensed Compound as the sole active ingredient
is not sold separately and one or more of the other active ingredients in the
Combination Product are not sold separately in such country during the relevant
fiscal quarter Net Selling Price for the purposes of determining royalties of
the Combination Product shall be deemed to be the Net Selling Price of such
Combination Product multiplied by a fraction, the numerator of which is the
number of Licensed Compounds in such Combination Product and the denominator of
which is the number of all active ingredients in such Combination Product.”

 

3

 

“1.21       Intentionally left blank.”

“1.25       “Sale”
or “Sold” shall mean the sale, transfer, exchange or other disposition of
Licensed Products whether by gift or otherwise, subsequent to Registration in a
given country (if such Registration is required) by  a Seller to make such sale, transfer,
exchange or disposition, to any party that is not a Seller.  Sales of Licensed Products shall be deemed
consummated upon the first to occur of: (a) receipt of payment from the
purchase; (b) delivery of Licensed Products to the purchaser or a common
carrier; (c) release of Licensed Products from consignment; or (d) if otherwise
transferred, exchanged or disposed of, whether by gift or otherwise, when such
transfer, exchange, gift or other disposition occurs. Notwithstanding the
foregoing definition of Sale, to the extent COMPANY distributes any Licensed
Product under a Treatment IND or through an expanded access program or the
Global Access Program, only to the extent that the actual Net Selling Price
exceeds Fully Absorbed Costs therefor will such distribution be considered a
Sale. If the actual Net Selling Price exceeds the Fully Absorbed Costs, the
distribution shall be deemed to be a Sale with a deemed Net Selling Price
(prior to any application of Section 1.20(c)) for purposes of Section 3.4 of
the difference between the actual Net Selling Price and the Fully Absorbed Cost
therefor.”

 

1.2.2                        New Sections 1.29 and 1.30 are hereby
added.

 

“1.29:  “Global Access Program” shall mean a program
through which COMPANY provides Licensed Products to government agencies,
not-for-profit non-governmental organizations, physicians, pharmacies or
patients in identified countries at reduced costs. The countries are identified
on Exhibit C hereto, which Exhibit may be amended from time to time by the
Parties.”

“1.30:  “Fully Absorbed Costs” shall mean an amount
equal to COMPANY’s costs directly allocated to the production of Licensed Products
distributed under a Treatment IND or through an expanded access program or the
Global Access Program, consisting of: (i) direct labor, including all
resources utilized in support of COMPANY’s manufacturing operations;
(ii) materials; (iii) a reasonable allocation of overhead, facilities
expense (including depreciation over the expected life of the buildings and
equipment), and administrative costs directly in support of COMPANY’s
manufacturing operations and such Treatment IND distribution program, expanded
access program or the Global Access Program, if applicable, calculated by
COMPANY in accordance with reasonable cost accounting methods consistent with
the way COMPANY allocates such costs to other products; and
(iv) third-party costs.”

 

4

 

2.                                       Amendment of Other Provisions of the
Agreement.  The provisions of the Agreement, other than definitions, are hereby amended as follows:

 

2.1.                              Section 3.5(d) is deleted in its entirety
and replaced with the following:

 

“(d)         Commencing upon FDA Registration for a
Licensed Product and ending upon expiration of the second calendar year
following the year in which such FDA Registration is granted, COMPANY may
credit solely against running royalties (paid pursuant to Section 3.4), all
reasonable costs incurred by COMPANY after the date hereof (including any
reimbursements to LICENSOR pursuant to Section 7.1 for inter partes Patent Prosecution Activities, as
defined therein) in connection with any litigation, interference, opposition or
other inter partes action pertaining to the validity, enforceability,
allowability or subsistence of the Licensed Patents or whether COMPANY’s
practice of the Licensed Patents infringes a third party patent.  Until the end of such second calendar year,
the amount of such credits shall not exceed in any year one-half (1⁄2) of the
royalty payments due hereunder in such year. 
Commencing upon the third calendar year following the year in which such
FDA registration is granted, such credits shall not exceed in any year one-half
(1⁄2 ) of the Annual Minimum payments due in such year.  Such costs shall not be credited against any
other payments due to LICENSOR under this Agreement.”

 

2.2.                              In Section 4.2 (Right to Audit), first
sentence, insert “including records reasonably necessary to verify of the
accuracy of Net Selling Prices and Fully Absorbed Costs, “ prior to “required
to be furnished by COMPANY pursuant to Section 4.1 of the Agreement”.

 

3.             General Terms.

 

3.1                                 Unamended Terms of Agreement Remain in
Effect.  Except as expressly amended hereby, the
remaining terms of the Agreement shall remain in full force and effect.

 

3.2                                 Entire Agreement. 
The Agreement, as amended by this Fourth Amendment, constitutes the
entire agreement between LICENSOR and COMPANY regarding the subject matters
contained herein.

 

3.3                                 Conflicts.  In the event
of any conflict between the provisions of the Agreement and this Fourth
Amendment, the provisions of this Fourth Amendment shall govern and control.

 

3.4                                 Governing Law.  This
Fourth Amendment shall be governed by, and construed in accordance with, the
laws of the State of Georgia without regard to its conflicts of laws
principles.

 

5

 

 

3.5                                 Counterparts. 
This Fourth Amendment may be executed in any number of counterparts,
each of which shall be deemed an original and all of which shall constitute one
and the same instrument.

 

3.6                                 Survival of Provisions. 
If any provision of this Fourth Amendment is for any reason held to be
ineffective, unenforceable or illegal, such condition shall not affect the
validity or enforceability of any of the remaining portions hereof; provided,
further, that the parties shall negotiate in good faith to replace any
ineffective, unenforceable or illegal provision with an effective replacement
as soon as is practical.

 

IN WITNESS WHEREOF,
LICENSOR and COMPANY have each executed this Fourth Amendment through an
authorized officer as of the date first written above.

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  EMORY UNIVERSITY

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Todd Sherer

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  Asst. V.P. & Director OTT

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Date:

  	
  4-20-04

  

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  GILEAD SCIENCES,
  INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ John F. Milligan

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  Executive VP and CFO

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Date:

  	
  April 19, 2004

  

 

6

 

Exhibit C

	
   

  	
  Global Access Program Countries

  
	
   

  	
   

  
	
  Algeria

  	
   

  	
  Kenya

  	
   

  	
  Togo

  
	
  Angola

  	
   

  	
  Lesotho

  	
   

  	
  Tunisia

  
	
  Benin

  	
   

  	
  Liberia

  	
   

  	
  Uganda

  
	
  Botswana

  	
   

  	
  Libya

  	
   

  	
  Zambia

  
	
  Burkina
  Faso

  	
   

  	
  Madagascar

  	
   

  	
  Zimbabwe

  
	
  Burundi

  	
   

  	
  Malawi

  	
   

  	
   

  
	
  Cameroon

  	
   

  	
  Mali

  	
   

  	
   

  
	
  Cape
  Verde

  	
   

  	
  Mauritania

  	
   

  	
  Afghanistan

  
	
  Central
  African Republic

  	
   

  	
  Mauritius

  	
   

  	
  The
  Bahamas

  
	
  Chad

  	
   

  	
  Morocco

  	
   

  	
  Bangladesh

  
	
  Comoros

  	
   

  	
  Mozambique

  	
   

  	
  Bhutan

  
	
  Congo-Brazzaville

  	
   

  	
  Namibia

  	
   

  	
  Cambodia

  
	
  Cote
  d’Ivoire

  	
   

  	
  Niger

  	
   

  	
  Guyana

  
	
  Democratic
  Republic of Congo

  	
   

  	
  Nigeria

  	
   

  	
  Haiti

  
	
  Djibouti

  	
   

  	
  Rwanda

  	
   

  	
  Kiribati

  
	
  Egypt

  	
   

  	
  Sao
  Tome & Principe

  	
   

  	
  Laos

  
	
  Equatorial
  Guinea

  	
   

  	
  Senegal

  	
   

  	
  Maldives

  
	
  Eritrea

  	
   

  	
  Seychelles

  	
   

  	
  Myanmar

  
	
  Ethiopia

  	
   

  	
  Sierra
  Leone

  	
   

  	
  Nepal

  
	
  Gabon

  	
   

  	
  Somalia

  	
   

  	
  Samoa

  
	
  Gambia

  	
   

  	
  South
  Africa

  	
   

  	
  Solomon
  Islands

  
	
  Ghana

  	
   

  	
  Sudan

  	
   

  	
  Tuvalu

  
	
  Guinea

  	
   

  	
  Swaziland

  	
   

  	
  Vanuatu

  
	
  Guinea
  Bissau

  	
   

  	
  Tanzania

  	
   

  	
  Yeman

  
						

 

7Exhibit 10.1

 

 

 

CREDIT AGREEMENT

 

Dated as of January 31, 2005

 

among

 

QUIDEL CORPORATION

as Borrower,

 

BANK OF AMERICA, N.A.,

as Agent 

and

L/C Issuer,

and

The Other Lenders Party from time to time
hereto

 

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
  DEFINITIONS
  AND ACCOUNTING TERMS

  	
   

  
	
   

  	
  1.1

  	
  Defined Terms

  	
   

  
	
   

  	
  1.2

  	
  Other
  interpretive provisions

  	
   

  
	
   

  	
  1.3

  	
  Accounting
  Terms.

  	
   

  
	
   

  	
  1.4

  	
  Rounding

  	
   

  
	
   

  	
  1.5

  	
  References
  to Agreements and Laws

  	
   

  
	
   

  	
  1.6

  	
  Times of
  Day

  	
   

  
	
   

  	
  1.7

  	
  Letter of
  Credit Amounts

  	
   

  
	
  ARTICLE II

  	
  THE
  COMMITMENTS AND CREDIT EXTENSIONS

  	
   

  
	
   

  	
  2.1

  	
  Loans

  	
   

  
	
   

  	
  2.2

  	
  Borrowings,
  Conversions and Continuations of Loans

  	
   

  
	
   

  	
  2.3

  	
  Letters of
  Credit

  	
   

  
	
   

  	
  2.4

  	
  Intentionally
  Deleted

  	
   

  
	
   

  	
  2.5

  	
  Prepayments

  	
   

  
	
   

  	
  2.6

  	
  Termination
  or Reduction of Commitments

  	
   

  
	
   

  	
  2.7

  	
  Repayment
  of Loans

  	
   

  
	
   

  	
  2.8

  	
  Interest

  	
   

  
	
   

  	
  2.9

  	
  Fees

  	
   

  
	
   

  	
  2.10

  	
  Computation
  of Interest and Fees

  	
   

  
	
   

  	
  2.11

  	
  Evidence
  of Debt

  	
   

  
	
   

  	
  2.12

  	
  Payments
  Generally

  	
   

  
	
   

  	
  2.13

  	
  Sharing of
  Payments

  	
   

  
	
  ARTICLE III

  	
  TAXES,
  YIELD PROTECTION AND ILLEGALITY

  	
   

  
	
   

  	
  3.1

  	
  Taxes

  	
   

  
	
   

  	
  3.2

  	
  Illegality

  	
   

  
	
   

  	
  3.3

  	
  Inability
  to Determine Rates

  	
   

  
	
   

  	
  3.4

  	
  Increased
  Cost and Reduced Return; Capital Adequacy

  	
   

  
	
   

  	
  3.5

  	
  Compensation
  for Losses

  	
   

  
	
   

  	
  3.6

  	
  Matters Applicable to all Requests for
  Compensation

  	
   

  
	
   

  	
  3.7

  	
  Survival

  	
   

  
	
  ARTICLE IV

  	
  CONDITIONS
  PRECEDENT TO CREDIT EXTENSIONS

  	
   

  
	
   

  	
  4.1

  	
  Conditions of Initial Credit Extension

  	
   

  
	
   

  	
  4.2

  	
  Conditions
  to all Credit Extensions

  	
   

  
	
  ARTICLE V

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
  5.1

  	
  Existence,
  Qualification and Power; Compliance with Laws

  	
   

  
	
   

  	
  5.2

  	
  Authorization;
  No Contravention

  	
   

  
	
   

  	
  5.3

  	
  Governmental
  Authorization; Other Consents

  	
   

  
	
   

  	
  5.4

  	
  Binding
  Effect

  	
   

  
	
   

  	
  5.5

  	
  Financial
  Statements; No Material Adverse Effect

  	
   

  
	
   

  	
  5.6

  	
  Litigation

  	
   

  
	
   

  	
  5.7

  	
  No Default

  	
   

  
	
   

  	
  5.8

  	
  Ownership
  of Property; Liens

  	
   

  
	
   

  	
  5.9

  	
  Environmental
  Compliance

  	
   

  
					

 

i

 

	
   

  	
  5.10

  	
  Insurance

  	
   

  
	
   

  	
  5.11

  	
  Taxes

  	
   

  
	
   

  	
  5.12

  	
  ERISA
  Compliance

  	
   

  
	
   

  	
  5.13

  	
  Subsidiaries

  	
   

  
	
   

  	
  5.14

  	
  Margin
  Regulations; Investment Company Act; Public Utility Holding Company Act

  	
   

  
	
   

  	
  5.15

  	
  Disclosure

  	
   

  
	
   

  	
  5.16

  	
  Compliance
  with Laws

  	
   

  
	
   

  	
  5.17

  	
  Intellectual
  Property; Licenses, Etc.

  	
   

  
	
   

  	
  5.18

  	
  Rights in
  Collateral; Priority of Liens.

  	
   

  
	
  ARTICLE VI

  	
  AFFIRMATIVE
  COVENANTS

  	
   

  
	
   

  	
  6.1

  	
  Financial
  Statements

  	
   

  
	
   

  	
  6.2

  	
  Certificates;
  Other Information

  	
   

  
	
   

  	
  6.3

  	
  Notices

  	
   

  
	
   

  	
  6.4

  	
  Payment of
  Obligations

  	
   

  
	
   

  	
  6.5

  	
  Preservation
  of Existence, Etc

  	
   

  
	
   

  	
  6.6

  	
  Maintenance
  of Properties; Application of Net Insurance/Condemnation Proceeds

  	
   

  
	
   

  	
  6.7

  	
  Maintenance
  of Insurance

  	
   

  
	
   

  	
  6.8

  	
  Compliance
  with Laws and Contractual Obligations.

  	
   

  
	
   

  	
  6.9

  	
  Books and
  Records

  	
   

  
	
   

  	
  6.10

  	
  Inspection
  Rights

  	
   

  
	
   

  	
  6.11

  	
  Use of
  Proceeds

  	
   

  
	
   

  	
  6.12

  	
  Financial
  Covenants

  	
   

  
	
   

  	
  6.13

  	
  Additional
  Guarantors

  	
   

  
	
   

  	
  6.14

  	
  Collateral
  Records

  	
   

  
	
   

  	
  6.15

  	
  Cash
  Management System

  	
   

  
	
   

  	
  6.16

  	
  Security
  Interests

  	
   

  
	
  ARTICLE VII

  	
  NEGATIVE
  COVENANTS

  	
   

  
	
   

  	
  7.1

  	
  Liens

  	
   

  
	
   

  	
  7.2

  	
  Investments

  	
   

  
	
   

  	
  7.3

  	
  Indebtedness

  	
   

  
	
   

  	
  7.4

  	
  Fundamental
  Changes

  	
   

  
	
   

  	
  7.5

  	
  Dispositions

  	
   

  
	
   

  	
  7.6

  	
  Restricted
  Payments

  	
   

  
	
   

  	
  7.7

  	
  Change in
  Nature of Business

  	
   

  
	
   

  	
  7.8

  	
  Transactions
  with Affiliates

  	
   

  
	
   

  	
  7.9

  	
  Burdensome
  Agreements

  	
   

  
	
   

  	
  7.10

  	
  Use of
  Proceeds

  	
   

  
	
   

  	
  7.11

  	
  Foreign
  Subsidiaries; OSC

  	
   

  
	
  ARTICLE VIII

  	
  EVENTS
  OF DEFAULT AND REMEDIES

  	
   

  
	
   

  	
  8.1

  	
  Events of
  Default

  	
   

  
	
   

  	
  8.2

  	
  Remedies
  Upon Event of Default

  	
   

  
					

 

ii

 

	
   

  	
  8.3

  	
  Application
  of Funds

  	
   

  
	
  ARTICLE IX

  	
  AGENT

  	
   

  
	
   

  	
  9.1

  	
  Appointment
  and Authorization Agent

  	
   

  
	
   

  	
  9.2

  	
  Delegation
  of Duties

  	
   

  
	
   

  	
  9.3

  	
  Liability
  of Agent

  	
   

  
	
   

  	
  9.4

  	
  Reliance by
  Agent

  	
   

  
	
   

  	
  9.5

  	
  Notice of
  Default

  	
   

  
	
   

  	
  9.6

  	
  Credit
  Decision; Disclosure of Information by Agent

  	
   

  
	
   

  	
  9.7

  	
  Indemnification
  of Agent

  	
   

  
	
   

  	
  9.8

  	
  Agent in
  its Individual Capacity

  	
   

  
	
   

  	
  9.9

  	
  Successor
  Agent

  	
   

  
	
   

  	
  9.10

  	
  Agent
  May File Proofs of Claim

  	
   

  
	
   

  	
  9.11

  	
  Guaranty
  Matters

  	
   

  
	
   

  	
  9.12

  	
  Collateral
  Matters

  	
   

  
	
  ARTICLE X

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
  10.1

  	
  Amendments,
  Etc

  	
   

  
	
   

  	
  10.2

  	
  Notices
  and Other Communications; Facsimile Copies.

  	
   

  
	
   

  	
  10.3

  	
  No Waiver;
  Cumulative Remedies

  	
   

  
	
   

  	
  10.4

  	
  Attorney
  Costs, Expenses and Taxes

  	
   

  
	
   

  	
  10.5

  	
  Indemnification
  by Borrower

  	
   

  
	
   

  	
  10.6

  	
  Payments
  Set Aside

  	
   

  
	
   

  	
  10.7

  	
  Successors
  and Assigns

  	
   

  
	
   

  	
  10.8

  	
  Confidentiality

  	
   

  
	
   

  	
  10.9

  	
  Set-off

  	
   

  
	
   

  	
  10.10

  	
  Interest
  Rate Limitation

  	
   

  
	
   

  	
  10.11

  	
  Counterparts

  	
   

  
	
   

  	
  10.12

  	
  Integration

  	
   

  
	
   

  	
  10.13

  	
  Survival
  of Representations and Warranties

  	
   

  
	
   

  	
  10.14

  	
  Severability

  	
   

  
	
   

  	
  10.15

  	
  Governing
  Law; Submission to Jurisdiction

  	
   

  
	
   

  	
  10.16

  	
  Waiver of
  Right to Trial by Jury

  	
   

  
	
   

  	
  10.17

  	
  USA
  Patriot Act Notice

  	
   

  
	
   

  	
  10.18

  	
  Time of
  the Essence

  	
   

  
	
   

  	
  10.19

  	
  Foreign
  Lenders

  	
   

  
					

 

iii

 

	
  SCHEDULES

  
	
   

  	
  1.1

  	
  IP Rights
  and Other Assets to be Sold in the Permitted Sale

  
	
   

  	
  2.1

  	
  Commitments
  and Pro Rata Shares

  
	
   

  	
  5.5

  	
  Material
  Adverse Effect

  
	
   

  	
  5.6

  	
  Litigation

  
	
   

  	
  5.9

  	
  Environmental Matters

  
	
   

  	
  5.13

  	
  Subsidiaries and Other Equity Investments

  
	
   

  	
  5.18

  	
  Existing UCC and IP Filings

  
	
   

  	
  6.16(c)

  	
  Deposit Accounts and Securities Accounts

  
	
   

  	
  7.1

  	
  Existing Liens

  
	
   

  	
  7.3

  	
  Existing Indebtedness

  
	
   

  	
  10.2

  	
  Agent’s
  Office, Certain Addresses for Notices

  
	
   

  
	
  EXHIBITS

  
	
   

  	
  A

  	
  Form of Loan Notice

  
	
   

  	
  B

  	
  Form of Note

  
	
   

  	
  C

  	
  Form of Guaranty

  
	
   

  	
  D

  	
  Form of Compliance Certificate

  
	
   

  	
  E

  	
  Form of Assignment and Assumption

  
	
   

  	
  F

  	
  Form of Security Agreement

  
	
   

  	
  G

  	
  Form of Landlord Waiver

  
	
   

  	
  H

  	
  Form of Deposit Account Control Agreement

  
	
   

  	
  I

  	
  Form of Securities Account Control Agreement

  
	
   

  	
  J

  	
  Form of Solvency Certificate

  
	
   

  	
  K-1

  	
  Form of Opinion of Counsel to Loan Parties

  
	
   

  	
  K-2

  	
  Form of Opinion of Oregon Counsel to Loan Parties

  
				

 

i

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT
(this “Agreement”) is entered into as of
January 31, 2005 among QUIDEL CORPORATION, a
Delaware corporation (“Borrower”),
each lender from time to time party hereto (collectively, “Lenders”
and individually, a “Lender”),
and BANK OF AMERICA, N.A., as Agent and L/C Issuer.

 

Borrower has requested that the Lenders
provide a revolving credit facility, and the Lenders are willing to do so on
the terms and conditions set forth herein. 
In consideration of the mutual covenants and agreements herein
contained, the parties hereto covenant and agree as follows:

 

ARTICLE I DEFINITIONS AND ACCOUNTING TERMS

 

1.1          Defined Terms.  As used in this Agreement, the following
terms shall have the meanings set forth below:

 

“Acquisition”
means any transaction or series of related transactions for the purpose of or
resulting, directly or indirectly, in (a) the acquisition of all or
substantially all of the assets of a Person, or of any business unit or
division of a Person, or of any portion of the assets of a Person if such
portion exceeds $2,000,000 in the aggregate, (b) the acquisition of all of
the Capital Stock of any Person, or otherwise causing any Person to become a wholly-owned
Subsidiary, or (c) a merger or consolidation or any other combination with
another Person.

 

“Administrative Questionnaire”
means an Administrative Questionnaire in a form supplied by Agent.

 

“Affiliate” means, with respect
to any Person, another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with
the Person specified.  “Control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ability to exercise
voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings
correlative thereto.  Without limiting
the generality of the foregoing, a Person shall be deemed to be Controlled by
another Person if such other Person possesses, directly or indirectly, power to
vote 10% or more of the
securities having ordinary voting power for the election of directors, managing
general partners or the equivalent.

 

“Agent” means Bank of America
in its capacity as administrative agent under any of the Loan Documents, or any
successor administrative agent.

 

“Agent’s Office” means Agent’s
address and, as appropriate, account as set forth on Schedule 10.2, or
such other address or account as Agent may from time to time notify Borrower
and Lenders.

 

“Agent-Related Persons”  means Agent, together with its Affiliates, and
the officers, directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.

 

“Aggregate Commitments” means
the Commitments of all Lenders.

 

2

 

“Agreement” means this Credit
Agreement.

 

“Applicable Rate” means from
time to time, the following percentages per annum, based upon the Funded Debt
to EBITDA Ratio (the “Financial Covenant) as set forth in the most recent
Compliance Certificate received by the Agent pursuant to Section 6.2(b).

 

Applicable Rate

 

	
  Pricing

  Level

  	
   

  	
  Funded Debt to EBITDA

  Ratio

  	
   

  	
  Commitment

  Fee

  	
   

  	
  Eurodollar Rate or

  IBOR Rate Margin

  or Standby

  Letters of Credit

  	
   

  	
  Base Rate

  Margin

  	
   

  
	
  1

  	
   

  	
  Greater than or equal to 2.00:1.00

  	
   

  	
  0.25

  	
  %

  	
  2.00

  	
  %

  	
  1.00

  	
  %

  
	
  2

  	
   

  	
  Less than 2.00:1.00 but greater than or equal to 1.50:1.00

  	
   

  	
  0.25

  	
  %

  	
  1.75

  	
  %

  	
  0.75

  	
  %

  
	
  3

  	
   

  	
  Less than 1.50:1.00 but greater than or equal to 1.00:1.00

  	
   

  	
  0.25

  	
  %

  	
  1.50

  	
  %

  	
  0.50

  	
  %

  
	
  4

  	
   

  	
  Less than 1.00:1.00 but greater than or equal to 0.50:1.00

  	
   

  	
  0.25

  	
  %

  	
  1.25

  	
  %

  	
  0.25

  	
  %

  
	
  5

  	
   

  	
  Less than 0.50

  	
   

  	
  0.25

  	
  %

  	
  1.00

  	
  %

  	
  0.00

  	
  %

  

 

Any increase or decrease in the Applicable
Rate resulting from a change in the Financial Covenant shall become effective
commencing on the 5th Business Day immediately following the date a
Compliance Certificate is delivered pursuant to Section 6.2(b); provided,
however, that if no Compliance Certificate is delivered when due in
accordance with such Section, then Pricing Level 1 shall apply commencing on
the 5th Business Day following the date such Compliance Certificate
was required to have been delivered to but excluding the date
such Compliance Certificate is received by Agent and, thereafter, the pricing
level indicated by such Compliance Certificate until such pricing level is
required to be adjusted pursuant to the terms of this definition.  The
Applicable Rate in effect from the Closing Date through the date a Compliance
Certificate is delivered pursuant to Section 6.2(b) for the reporting period
ending on December 31, 2005 shall
be determined based upon Pricing Level 1.

 

“Asset Sale”
means the sale by Borrower or any of its Subsidiaries to any Person other than
Borrower or its wholly-owned Guarantors of (i) any of the stock of any of
Borrower’s Subsidiaries (other than directors’ qualifying shares to the extent
required by law). 
(ii) substantially all of the assets of any division or line of
business of Borrower or any of its Subsidiaries, or (iii) any other assets
(whether tangible or intangible) of Borrower or any of its Subsidiaries (other
than (a) inventory and cash equivalents sold in the ordinary course of
business, (b) sales, assignments, transfers or dispositions of accounts in
the ordinary course of

 

3

 

business for
purposes of collection, (c) subleases of real property leases no longer
necessary to the business of Borrower and its Subsidiaries,
(d) non-exclusive licenses of immaterial IP Rights in the ordinary course
of business for not less than fair market value, (e) non-exclusive
licenses of IP Rights in the ordinary course of business solely in connection
with cooperative agreements with third parties for further development of such
IP Rights, and (f) any such other assets to the extent that the aggregate
value of such assets sold in any single transaction or related series of
transactions is equal to $100,000 or less).

 

“Assignment and Assumption”
means an Assignment and Assumption substantially in the form of Exhibit E.

 

“Attorney Costs” means and
includes all reasonable fees, expenses and disbursements of any law firm or
other external counsel and, without duplication, the allocated cost of internal
legal services and all expenses and disbursements of internal counsel.

 

“Attributable Indebtedness”
means, on any date, (a) in respect of any capital lease of any Person, the
capitalized amount thereof that would appear on a balance sheet of such Person
prepared as of such date in accordance with GAAP, and (b) in respect of
any Synthetic Lease Obligation, the capitalized amount of the remaining lease
payments under the relevant lease that would appear on a balance sheet of such
Person prepared as of such date in accordance with GAAP if such lease were
accounted for as a capital lease.

 

“Audited Financial Statements”
means the audited consolidated balance sheet of Borrower and its Subsidiaries
for the fiscal year ended December 31,
2003 and the related consolidated statements of income or operations,
shareholders’ equity and cash flows for such fiscal year of Borrower and its
Subsidiaries, including the notes thereto.

 

“Availability Period” means the
period from and including the Closing Date to the earliest of (a) the
Maturity Date, (b) the date of termination of the Aggregate Commitments
pursuant to Section 2.6, and (c) the date of termination of
the Commitment of each Lender to make Loans and of the obligation of the L/C
Issuer to make L/C Credit Extensions pursuant to Section 8.2.

 

“Bank of America” means Bank of
America, N.A. and its successors.

 

“Base Rate” means for any day a
fluctuating rate per annum equal to the higher of (a) the Federal Funds
Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as
publicly announced from time to time by Bank of America as its “prime rate.”  The “prime rate” is a rate set by Bank of
America based upon various factors including Bank of America’s costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate.  Any change in such
rate announced by Bank of America shall take effect at the opening of business
on the day specified in the public announcement of such change.

 

“Base Rate Loan” means a Loan
that bears interest based on the Base Rate.

 

“Borrower” has the meaning
specified in the introductory paragraph hereto.

 

4

 

“Borrowing” means a borrowing
consisting of simultaneous Loans of the same Type and, in the case of
Eurodollar Rate Loans or IBOR Rate Loans, having the same Interest Period made
by each of the Lenders pursuant to Section 2.1.

 

“Business Day” means any day
other than a Saturday, Sunday or other day on which commercial banks are
authorized to close under the Laws of, or are in fact closed in, the State of
California or the state where Agent’s Office is located and, if such day
relates to any Eurodollar Rate Loan or IBOR Rate Loan, means any such day on
which dealings in Dollar deposits are conducted by and between banks in the
London interbank Eurodollar market.

 

“Capital Stock”
means the capital stock or other equity interests of a Person.

 

“Cash” means
money, currency or a credit balance in a Deposit Account.

 

“Cash Collateral”
means the Cash deposited with the Agent as collateral when Borrower Cash
Collateralizes L/C Obligations.

 

“Cash Collateralize” has the
meaning specified in Section 2.3(g).

 

“Change of Control” means, with
respect to any Person, an event or series of events by which:

 

(a)           any “person” or “group”
(as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, but excluding any employee benefit plan of such person or its
subsidiaries, and any person or entity acting in its capacity as trustee, agent
or other fiduciary or administrator of any such plan) becomes the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act
of 1934, except that a person or group shall be deemed to have “beneficial
ownership” of all securities that such person or group has the right tot
acquire (such right, an “option right”), whether such right is exercisable
immediately or only after the passage of time) directly or indirectly, of 30%
or more of the equity securities of such Person entitled to vote for members of
the board of directors or equivalent governing body of such Person on a fully
diluted basis (and taking into account all such securities that such person or
group has the right to acquire pursuant to any option right); or

 

(b)           during any period of 24 consecutive months, a majority of the members of
the board of directors or other equivalent governing body of such Person cease
to be composed of individuals (i) who were members of that board or
equivalent governing body on the first day of such period, (ii) whose
election or nomination to that board or equivalent governing body was approved
by individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent
governing body or (iii) whose election or nomination to that board or
other equivalent governing body was approved by individuals referred to in
clauses (i) and (ii) above constituting at the time of such election or
nomination at least a majority of that board or equivalent governing body
(excluding, in the case of both clause (ii) and clause (iii), any individual
whose initial nomination for, or assumption of office as, a member of that
board or equivalent governing body occurs as a result of an actual or
threatened solicitation of proxies or consents for the election or removal of
one or more directors by any person or group other than a solicitation for the
election of one or more directors by or on behalf of the board of directors).

 

5

 

“Closing Date” means the first
date all the conditions precedent in Section 4.1 are satisfied or waived
in accordance with Section 10.1.

 

“Code” means the Internal
Revenue Code of 1986.

 

“Collateral” shall mean any and
all assets and rights and interests in or to property of Borrower and each of
the other Loan Parties, whether real or personal, tangible or intangible, in
which a Lien is granted or purported to be granted pursuant to the Collateral
Documents.

 

“Collateral Documents” means
the Security Agreement, the Control Agreements, the Landlord Waivers, and all
agreements, instruments and documents now or hereafter executed and delivered
in connection with this Agreement pursuant to which Liens are granted or
purported to be granted to Agent in Collateral securing all or part of the
Obligations each in form and substance satisfactory to Agent.

 

“Commitment” means, as to each
Lender, its obligation to (a) make Loans to Borrower pursuant to Section
2.1, and (b) purchase participations in L/C Obligations, in an
aggregate principal amount at any one time outstanding not to exceed the amount
set forth opposite such Lender’s name on Schedule 2.1 or in the
Assignment and Assumption pursuant to which such Lender becomes a party hereto,
as applicable, as such amount may be adjusted from time to time in accordance
with this Agreement.

 

“Compliance Certificate” means
a certificate substantially in the form of Exhibit D.

 

“Contractual Obligation” means,
as to any Person, any provision of any security issued by such Person or of any
agreement, instrument or other undertaking to which such Person is a party or
by which it or any of its property is bound.

 

“Control” has the meaning
specified in the definition of “Affiliate.”

 

“Control Agreement”
means an agreement, satisfactory in form and substance to Agent substantially
in the form of Exhibit H or Exhibit I, as applicable, (with such
changes that are reasonably acceptable to Agent) and executed by the financial
institution or securities intermediary at which a Deposit Account or Securities
Account, as the case may be, is maintained, pursuant to which such financial
institution or securities intermediary confirms and acknowledges Agent’s security
interest in such account and agrees that the financial institution or
securities intermediary, as the case may be, will comply with instructions
originated by Agent as to disposition of funds in such account, without further
consent by Borrower or the applicable Subsidiary, as the case may be.

 

“Credit Extension” means each
of the following:  (a) a Borrowing
and (b) an L/C Credit Extension.

 

“Debtor Relief Laws” means the
Bankruptcy Code of the United States, and all other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or similar
debtor relief Laws of the United States or other applicable jurisdictions from
time to time in effect and affecting the rights of creditors generally.

 

6

 

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

 

“Default Rate” means
(a) when used with respect to Obligations other than L/C Fees and Lender
Swap Contracts an interest rate equal to (i) the Base Rate plus
(ii) the Applicable Rate, if any, applicable to Base Rate Loans plus
(iii) 2% per annum; provided, however, that with respect to
a Eurodollar Rate Loan or IBOR Rate Loan, the Default Rate shall be an interest
rate equal to the interest rate (including any Applicable Rate) otherwise
applicable to such Loan plus 2% per annum, and (b) when used with respect
to L/C Fees, a rate equal to the Applicable Rate plus 2% per annum, in all
cases to the fullest extent permitted by applicable Laws.

 

“Defaulting Lender” means any
Lender that (a) has failed to fund any portion of the Loans or
participations in L/C Obligations required to be funded by it hereunder within
one Business Day of the date required to be funded by it hereunder,
(b) has otherwise failed to pay over to Agent or any other Lender any
other amount required to be paid by it hereunder within one Business Day of the
date when due, unless the subject of a good faith dispute, or (c) has been
deemed insolvent or become the subject of a bankruptcy or insolvency
proceeding.

 

“Deposit Account”
means a demand, time, savings, passbook or similar account maintained with a
Person engaged in the business of banking, including a savings bank, savings
and loan association, credit union or trust company.

 

“Disposition” or “Dispose” means the sale, transfer,
license, lease or other disposition (including any sale and leaseback
transaction) of any property by any Person, including any sale, assignment,
transfer or other disposal, with or without recourse, of any notes or accounts
receivable or any rights and claims associated therewith.

 

“Dollar” and “$” mean lawful money of the United
States.

 

“Dormant Foreign Subsidiary”
means Metra Biosystems, GMBH, Metra Biosystems, (UK) Limited and Metra
Biosystems, Quidel Limited (Italy).

 

“EBITDA” means net income, less
income or plus loss from discontinued operations and extraordinary items, plus
income taxes, plus interest expense and debt issuance costs and commissions,
discounts and other fees and charges associated with initial incurrence of any
Indebtedness, plus depreciation, and amortization; provided that EBITDA shall
be determined after giving effect on a pro forma basis to any Permitted
Acquisitions that have been consummated to the extent either Agent has approved
the financial statements of the applicable acquired Persons or assets or such
financial statements are audited by a national accounting firm reasonably
acceptable to Agent (and in either case giving effect to pro forma adjustments
as determined by the Board of Directors of Borrower in good faith and approved
by Agent).

 

“Eligible Assignee” has the
meaning specified in Section 10.7(g).

 

“Environmental Laws” means any
and all Federal, state, local, and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions relating to
pollution and the protection of the environment or the release of any materials
into the environment, including

 

7

 

those related to hazardous
substances or wastes, air emissions and discharges to waste or public systems.

 

“Environmental Liability” means
any liability, contingent or otherwise (including any liability for damages,
costs of environmental remediation, fines, penalties or indemnities), of
Borrower, any other Loan Party or any of their respective Subsidiaries directly
or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation,
storage, treatment or disposal of any Hazardous Materials, (c) exposure to
any Hazardous Materials, (d) the release or threatened release of any
Hazardous Materials into the environment or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed or imposed
with respect to any of the foregoing.

 

“ERISA” means the Employee
Retirement Income Security Act of 1974.

 

“ERISA Affiliate” means any
trade or business (whether or not incorporated) under common control with
Borrower within the meaning of Section 414(b) or (c) of the Code (and
Sections 414(m) and (o) of the Code for purposes of provisions relating to
Section 412 of the Code).

 

“ERISA Event” means (a) a
Reportable Event with respect to a Pension Plan; (b) a withdrawal by
Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of
ERISA during a plan year in which it was a substantial employer (as defined in
Section 4001(a)(2) of ERISA) or a cessation of operations that is treated
as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan
or notification that a Multiemployer Plan is in reorganization; (d) the
filing of a notice of intent to terminate, the treatment of a Plan amendment as
a termination under Sections 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan;
(e) an event or condition which constitutes grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan; or (f) the imposition of any liability
under Title IV of ERISA, other than for PBGC premiums due but not delinquent
under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate.

 

“Eurodollar Base Rate” has the
meaning specified in the definition of Eurodollar Rate.

 

“Eurodollar Rate”
means for any Interest Period with respect to a Eurodollar Rate Loan, a rate
per annum determined by Agent pursuant to the following formula:

 

	
  Eurodollar Rate =

  	
  Eurodollar
  Base Rate

  	
   

  
	
   

  	
  1.00 –
  Eurodollar Reserve Percentage

  	
   

  

 

Where,

 

“Eurodollar Base Rate” means, for
such Interest Period (rounded upwards, as necessary, to the nearest 1/100 of
1%) the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA
LIBOR”), as published by Reuters (or other

 

8

 

commercially available source providing quotations of BBA LIBOR as
designated by Agent from time to time) at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Interest Period, for
Dollar deposits (for delivery on the first day of such Interest Period) with a
term equivalent to such Interest Period. 
If such rate is not available at such time for any reason, then the “Eurodollar
Base Rate” for such Interest Period shall be the rate per annum determined by
Agent to be the rate at which deposits in Dollars for delivery on the first day
of such Interest Period in same day funds in the approximate amount of the
Eurodollar Rate Loan being made, continued or converted by Bank of America and
with a term equivalent to such Interest Period would be offered by Bank of
America’s London Branch to major banks in the London interbank Eurodollar
market at their request at approximately 11:00 a.m. (London time) two Business
Days prior to the commencement of such Interest Period.

 

“Eurodollar Reserve
Percentage” means, for any day during any Interest Period, the
reserve percentage (expressed as a decimal, carried out to five decimal places)
in effect on such day, whether or not applicable to any Lender, under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System of the United States for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrency
liabilities”).  The Eurodollar Rate for
each outstanding Eurodollar Rate Loan shall be adjusted automatically as of the
effective date of any change in the Eurodollar Reserve Percentage.

 

“Eurodollar Rate Loan” means a
Loan that bears interest at a rate based on the Eurodollar Rate.

 

“Event of Default” has the
meaning specified in Section 8.1.

 

“Existing Credit Agreement”
has the meaning specified in Section 4.1(a)(x).

 

“Facilities” means any and all
real property (including all buildings, fixtures or other improvements located
thereon) now, hereafter or heretofore owned, leased, operated or used by
Borrower or any of its Subsidiaries or any of their respective predecessors or
Affiliates.

 

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

 

“First Priority Lien”
means, with respect to any Lien purported to be created in any Collateral
pursuant to any Collateral Document, that (i) such Lien is perfected and
has priority

 

9

 

over any other
Lien on such Collateral and (ii) such Lien is the only Lien (other than
Liens permitted pursuant to Section 7.1) to which such Collateral is
subject.

 

“Fixed Charge Coverage Ratio”
means the ratio of (a) EBITDA, minus income tax paid in cash, minus
cash dividends paid, minus capital expenditures (excluding any Permitted
Acquisitions constituting capital expenditures), to (b) the sum (without
duplication) of (i) interest expense, (ii) an amount equal to 15% of
the aggregate principal amount of Funded Debt that bears interest (other than
the current portion of Funded Debt to the extent included in clause (iii)
below) and (iii) the current portion of long term liabilities.

 

“FRB” means the Board of
Governors of the Federal Reserve System of the United States.

 

“Funded Debt” means all
outstanding Indebtedness for borrowed money and other interest-bearing
Indebtedness, including current and long term Indebtedness, less the
non-current portion of Subordinated Indebtedness.

 

“Funded Debt to EBITDA
Ratio” means, as at any date of determination, the ratio of
Funded Debt as at such date to EBITDA for the consecutive four fiscal quarters
ending on the last day of the most recently ended fiscal quarter.

 

“GAAP” means generally accepted
accounting principles in the United States set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or such other principles as may be approved by a
significant segment of the accounting profession in the United States, that are
applicable to the circumstances as of the date of determination, consistently
applied.

 

“Governing Body” means the
board of directors or other body having the power to direct or cause the
direction of the management and policies of a Person that is a corporation,
partnership, trust or limited liability company.

 

“Governmental Authority” means
any nation or government, any state or other political subdivision thereof, any
agency, authority, instrumentality, regulatory body, court, administrative
tribunal, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.

 

“Governmental Authorization”
means any permit, license, registration, authorization, plan, directive,
accreditation, consent, order or consent decree of or from, or notice to, any
Governmental Authority.

 

“Guarantee” means, as to any
Person, any (a) any obligation, contingent or otherwise, of such Person
guaranteeing or having the economic effect of guaranteeing any Indebtedness or
other obligation payable or performable by another Person (the “primary obligor”)
in any manner, whether directly or indirectly, and including any obligation of
such Person, direct or indirect, (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness or other
obligation, (ii) to purchase or lease property, securities or services for
the purpose of assuring the obligee in respect of such Indebtedness or other
obligation of the

 

10

 

payment or performance of such
Indebtedness or other obligation, (iii) to maintain working capital,
equity capital or any other financial statement condition or liquidity or level
of income or cash flow of the primary obligor so as to enable the primary obligor
to pay such Indebtedness or other obligation, or (iv) entered into for the
purpose of assuring in any other manner the obligee in respect of such
Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or
(b) any Lien on any assets of such Person securing any Indebtedness or
other obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person. 
The amount of any Guarantee shall be deemed to be an amount equal to the
stated or determinable amount of the related primary obligation, or portion
thereof, in respect of which such Guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
as determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a
corresponding meaning.

 

“Guarantor” or “Subsidiary Guarantor” means,
collectively, Pacific Biotech, Inc., a California corporation, Metra
Biosystems, Inc., a California corporation, Osteo Sciences Corporation, an
Oregon corporation and Litmus Concepts, Inc., a California corporation and any
other Subsidiary of Borrower that executes and delivers a counterpart of the
Guaranty from time to time after the Closing Date in accordance with Section
6.13.

 

“Guaranty” or “Subsidiary Guaranty” means the
Subsidiary Guaranty made by the Guarantor in favor of Agent and for the benefit
of the Lenders, substantially in the form of Exhibit C.

 

“Hazardous Materials” means all
explosive or radioactive substances or wastes and all hazardous or toxic
substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos-containing materials, polychlorinated
biphenyls, radon gas, infectious or medical wastes and all other substances or
wastes of any nature regulated pursuant to any Environmental Law.

 

“Hostile Acquisition”
means the acquisition of the capital stock or other equity interests of a
Person through a tender offer or similar solicitation of the owners of such
capital stock or other equity interests which has not been approved (prior to
such acquisition and which approval remains in effect) by resolutions of the
Governing Body of such Person.

 

“IBOR Rate”
means for any Interest Period with respect to any IBOR Rate Loan, a rate per
annum determined by Agent as of the first day of such Interest Period pursuant
to the following formula:

 

	
  IBOR Rate =

  	
  IBOR Base Rate

  
	
   

  	
  1.00 – Reserve Percentage

  

 

Where,

 

(a)           “IBOR Base Rate” means, for such
Interest Period, the interest rate at which Bank of America’s Grand Cayman
Banking Center, Grand Cayman, British West

 

11

 

Indies, would offer Dollar deposits for such Interest Period to other
major banks in the offshore Dollar interbank market.

 

(b)           “Reserve Percentage” means, for any
day during any Interest Period, the reserve percentage (expressed as a decimal,
carried out to five decimal places) in effect on such day, whether or not applicable
to any Lender, under regulations issued from time to time by the Board of
Governors of the Federal Reserve System of the United States for determining
the maximum reserve requirement (including any emergency, supplemental,
special, marginal or other reserve requirement) with respect to Eurocurrency
funding (currently referred to as “Eurocurrency liabilities” in Board
Regulation D).  The IBOR Rate for each
outstanding IBOR Rate Loan shall be adjusted automatically as of the effective
date of any change in the Reserve Percentage.

 

“IBOR Rate Loans”
means Loans that bear interest at a rate based on the IBOR Rate.

 

“Indebtedness” means, as to any
Person at a particular time, without duplication, all of the following, whether
or not included as indebtedness or liabilities in accordance with GAAP:

 

(a)           all
obligations of such Person for borrowed money and all obligations of such
Person evidenced by bonds, debentures, notes, loan agreements or other similar
instruments;

 

(b)           all
direct or contingent obligations of such Person arising under letters of credit
(including standby and commercial), bankers’ acceptances, bank guaranties,
surety bonds and similar instruments;

 

(c)           net
obligations of such Person under any Swap Contract;

 

(d)           all
obligations of such Person to pay the deferred purchase price of property or
services (other than trade accounts payable in the ordinary course of
business);

 

(e)           indebtedness
(excluding prepaid interest thereon) secured by a Lien on property owned or
being purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is limited in recourse;

 

(f)            capital
leases and Synthetic Lease Obligations; and

 

(g)           all
Guarantees of such Person in respect of any of the foregoing.

 

For all purposes hereof, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture (other than a joint
venture that is itself a corporation or limited liability company) in which
such Person is a general partner or a joint venturer, unless such Indebtedness
is expressly made non-recourse to such Person. 
The amount of any net obligation under any Swap Contract on any date
shall be deemed to be the Swap Termination Value thereof as of such date.  The amount of any capital lease or Synthetic
Lease Obligation as of any date shall be deemed to be the amount of
Attributable Indebtedness in respect thereof as of such date.

 

12

 

“Indemnified Liabilities” has
the meaning specified in Section 10.5.

 

“Indemnitees” has the meaning
specified in Section 10.5.

 

“Information” has the meaning
specified in Section 10.8.

 

“Interest Payment Date” means,
(a) as to any Loan other than a Base Rate Loan, the last day of each
Interest Period applicable to such Loan and the Maturity Date; provided,
however, that if any Interest Period for a Eurodollar Rate Loan or IBOR
Rate Loan exceeds three months, the respective dates that fall every three
months after the beginning of such Interest Period shall also be Interest
Payment Dates; and (b) as to any Base Rate Loan, the last Business Day of
each March, June, September and
December and the Maturity Date.

 

“Interest Period” means, (a) as
to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar
Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan
and ending on the date one, two, three
or six months thereafter, and (b) as to each IBOR Rate Loan, the
period commencing on the date such IBOR Rate Loan is disbursed or converted to
or continued as an IBOR Rate Loan and ending on the date one, two, three or six
months thereafter, in each case as selected by Borrower in its Loan Notice; provided
that:

 

(i)            any
Interest Period that would otherwise end on a day that is not a Business Day
shall be extended to the next succeeding Business Day unless such Business Day
falls in another calendar month, in which case such Interest Period shall end
on the next preceding Business Day;

 

(ii)           any
Interest Period that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and

 

(iii)          no
Interest Period shall extend beyond the Maturity Date.

 

“Investment”
means, as to any Person, any direct or indirect acquisition or investment by
such Person, whether by means of (a) the purchase or other acquisition of
capital stock or other securities of another Person, (b) a loan, advance
or capital contribution to, Guarantee or assumption of debt of, or purchase or
other acquisition of any other debt or equity participation or interest in,
another Person, including any partnership or joint venture interest in such
other Person, or (c) the purchase or other acquisition (in one transaction
or a series of transactions) of assets of another Person that constitute a business
unit.  For purposes of covenant
compliance, the amount of any Investment shall be the amount actually invested,
without adjustment for subsequent increases or decreases in the value of such
Investment. Without limiting the generality of the foregoing, the term “Investment”
shall include, without limitation, any Acquisition.

 

“IP Collateral”
means, collectively, the IP Rights that constitute Collateral under the
Security Agreement.

 

13

 

“IP Filing Office”
means the United States Patent and Trademark Office, the United States
Copyright Office or any successor or substitute office in which filings are
necessary or, in the opinion of Agent, desirable in order to create or perfect
Liens on any IP Collateral.

 

“IP Rights” has the meaning
specified in Section 5.17.

 

“IRS” means the United States
Internal Revenue Service.

 

“ISP” means, with respect to
any Letter of Credit, the “International Standby Practices 1998” published by
the Institute of International Banking Law & Practice (or such later
version thereof as may be in effect at the time of issuance).

 

“Issuer Documents” means with
respect to any Letter of Credit, the L/C Application, and any other document,
agreement and instrument entered into by the L/C Issuer and Borrower (or any
Subsidiary) or in favor of the L/C Issuer and relating to any such Letter of
Credit.

 

“Landlord Waiver” means any landlord waiver, mortgagee
waiver, bailee letter or any similar acknowledgement agreement of any landlord
in respect of any Real Property Asset or other location where any Collateral is
located, substantially in the form of Exhibit G annexed hereto,
with such changes thereto as may be agreed to by Agent in the reasonable
exercise of its discretion.

 

“Laws” means, collectively, all
international, foreign, Federal, state and local statutes, treaties, rules,
guidelines, regulations, ordinances, codes and administrative or judicial
precedents or authorities, including the interpretation or administration
thereof by any Governmental Authority charged with the enforcement,
interpretation or administration thereof, and all applicable administrative
orders, directed duties, requests, licenses, authorizations and permits of, and
agreements with, any Governmental Authority, in each case whether or not having
the force of law.

 

“L/C Advance” means, with
respect to each Lender, such Lender’s funding of its participation in any L/C
Borrowing in accordance with its Pro Rata Share.

 

“L/C Application” means an
application and agreement for the issuance or amendment of a Letter of Credit
in the form from time to time in use by the L/C Issuer.

 

“L/C Borrowing” means an
extension of credit resulting from a drawing under any Letter of Credit which
has not been reimbursed on the date when made or refinanced as a Borrowing.

 

“L/C Credit Extension” means,
with respect to any Letter of Credit, the issuance thereof or extension of the
expiry date thereof, or the increase of the amount thereof.

 

“L/C Expiration Date” means the
day that is thirty days prior to the first anniversary of the Maturity Date
then in effect (or, if such day is not a Business Day, the next preceding
Business Day).

 

“L/C Fee” has the meaning
specified in Section 2.3(i).

 

14

 

“L/C Issuer” means Bank of
America in its capacity as issuer of Letters of Credit hereunder, or any
successor issuer of Letters of Credit hereunder.

 

“L/C Obligations” means, as at
any date of determination, the aggregate undrawn amount of all outstanding
Letters of Credit plus the aggregate of all Unreimbursed Amounts,
including all L/C Borrowings. For all purposes of this Agreement, if on any
date of determination a Letter of Credit has expired by its terms but any
amount may still be drawn thereunder by reason of the operation of Rule 3.14 of
the ISP, such Letter of Credit shall be deemed to be “outstanding” in the
amount so remaining available to be drawn.

 

“L/C Sublimit” means an amount
equal to $6,000,000.  The L/C Sublimit is part of, and not in
addition to, the Aggregate Commitments.

 

“Leasehold Property”
means any leasehold interest of any Loan Party as lessee under any lease of
real property.

 

“Lender” has the meaning
specified in the introductory paragraph hereto and, as the context requires,
includes the L/C Issuer.

 

“Lending Office” means, as to
any Lender, the office or offices of such Lender described as such in such
Lender’s Administrative Questionnaire, or such other office or offices as a
Lender may from time to time notify Borrower and Agent.

 

“Lender Swap Contracts” means
any obligations of the Borrower or any other Loan Party under Swap Contracts to
which a Lender or its Affiliate is a party.

 

“Letter of Credit” means any
letter of credit issued hereunder.  A
Letter of Credit may be a commercial letter of credit or a standby letter of
credit.

 

“Lien” means any mortgage,
pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), charge, or preference, priority or other security
interest or preferential arrangement in the nature of a security interest of
any kind or nature whatsoever (including any conditional sale or other title
retention agreement, and any financing lease having substantially the same
economic effect as any of the foregoing).

 

“Loan” has the meaning specified
in Section 2.1.

 

“Loan Documents” means this
Agreement, each Note, each Issuer Document, the Agent Fee Letter and each Collateral Document and the Guaranty.

 

“Loan Notice” means a notice of
(a) a Borrowing, (b) a conversion of Loans from one Type to the
other, or (c) a continuation of Eurodollar Rate Loans or IBOR Rate Loans,
pursuant to Section 2.2(a), which, if in writing, shall be substantially
in the form of Exhibit A.

 

“Loan Parties” means,
collectively, Borrower and each Person (other than Agent, the L/C Issuer or any
Lender) executing a Loan Document including, without limitation, each Guarantor
and each Person executing a Collateral Document.

 

15

 

“Material Adverse Effect” means
(a) a material adverse change in, or a material adverse effect upon, the
business operations, properties, liabilities (actual or contingent), condition
(financial or otherwise) or prospects of Borrower and its Subsidiaries, taken
as a whole; (b) a material impairment of the ability of any Loan Party to
perform its obligations under any Loan Document to which it is a party; or
(c) a material adverse effect upon the legality, validity, binding effect
or enforceability against any Loan Party of any Loan Document to which it is a
party.  Notwithstanding the foregoing, at
any time there is entered a judgment or order or any Loan Party enters into a
settlement agreement, in each case with respect to the litigation described in
item number 1 in Schedule 5.6 (the “Specified Event”), the
occurrence of such Specified Event shall be deemed to have a Material Adverse
Effect unless within 10 Business Days of the Specified Event, Borrower delivers
to Agent a pro forma Compliance Certificate duly completed and duly signed by a
Responsible Officer of Borrower, which Compliance Certificate shall (i) set
forth calculations that are identical to the Compliance Certificate most
recently delivered to Agent pursuant to Section 6.2(b) other than a pro forma
adjustment of having the full amount payable under such judgment, order or
settlement agreement being paid on the last day of the four fiscal quarter
period covered by such Compliance Certificate (the “Previous Period”)
and other than a pro forma adjustment of having all other aspects of such judgment,
order or settlement being fully implemented (including injunctions and royalty
payments) during the Previous Period (it being understood that such pro forma
adjustments shall also make adjustments for the incurrence of Indebtedness to
make such payment on such last day and to otherwise fully implement such
judgment, order or settlement to the extent Loan Parties did not have
sufficient cash on hand to make such payment on such last day and to otherwise
fully implement such judgment, order or settlement), (ii) set forth
calculations that cover each of the next four fiscal quarter periods (one
covering the four fiscal quarter period ending one fiscal quarter after the
Previous Period, one covering the four fiscal quarter period ending two fiscal
quarters after the Previous Period, one covering the four fiscal quarter period
ending three fiscal quarters after the Previous Period, and one covering the
four fiscal quarter period ending four fiscal quarters after the Previous
Period), which calculations shall be based on financial forecast information
and assumptions that are reasonably satisfactory to Agent and Required Lenders
and which calculations shall have pro forma adjustments of having the full
amount payable under such judgment, order or settlement agreement being paid on
the last day of the applicable four fiscal quarter period and of otherwise
fully implementing such judgment, order or settlement, and (iii) certify
that none of the pro forma calculations described in clause (i) and (ii) above
shows that any Loan Party is or would be in default under the Credit Agreement;
provided that notwithstanding the foregoing, the Specified Event shall
be deemed to have a Material Adverse Effect if at the time of the Specified
Event or at any time thereafter, (x) any Loan Party or its accountants shall
have included a statement in such Loan Party’s financial statements to the
effect that the Specified Event would have or would likely have a material and
adverse effect on such Loan Party or its business (or any similar statement) or
(y) any Responsible Officer of any Loan Party is aware that any Loan Party or
its accountants is planning or intending to include such a statement (or any
similar statement) in such Loan Party’s financial statements.  Notwithstanding any Specified Event not being
deemed to have a Material Adverse Effect because the conditions set forth in
clauses (i), (ii) and (iii) in the immediately preceding sentence were
satisfied, such Specified Event shall be deemed to have a Material Adverse Event
at the time Borrower delivers (or is required to deliver) any Compliance
Certificate under Section 6.2(b) if any amounts under such judgment, order or
settlement are still payable at such time or if

 

16

 

any other aspect of such
judgment, order or settlement has yet to be fully implemented unless at the
time such Compliance Certificate is required to be delivered, Borrower delivers
to Agent such Compliance Certificate duly completed and duly signed by a Responsible
Officer of Borrower covering the applicable four fiscal quarter period (the “Applicable
Period”), which Compliance Certificate shall (i) set forth
calculations without any pro forma adjustments, (ii) set forth
calculations that are identical to the calculations described in clause (i) in
this sentence other than a pro forma adjustment of having the full amount
payable under such judgment, order or settlement agreement (excluding amounts
already paid) being paid on the last day of the Applicable Period and other
than a pro forma adjustment of having all other aspects of such judgment, order
or settlement being fully implemented (including injunctions and royalty
payments) during the Applicable Period (it being understood that such pro forma
adjustments shall also make adjustments for the incurrence of Indebtedness to
make such payment on such last day and to otherwise fully implement such
judgment, order or settlement to the extent Loan Parties did not have
sufficient cash on hand to make such payment on such last day and to otherwise
fully implement such judgment, order or settlement), (iii) set forth
calculations that cover each of the next four fiscal quarter periods (one
covering the four fiscal quarter period ending one fiscal quarter after the Applicable
Period, one covering the four fiscal quarter period ending two fiscal quarters
after the Applicable Period, one covering the four fiscal quarter period ending
three fiscal quarters after the Applicable Period, and one covering the four
fiscal quarter period ending four fiscal quarters after the Applicable Period),
which calculations shall be based on financial forecast information and
assumptions that are reasonably satisfactory to Agent and Required Lenders and
which calculations shall have a pro forma adjustment of having the full amount
payable under such judgment, order or settlement agreement (excluding amounts
already paid) being paid on the last day of the applicable four fiscal quarter
period and other than a pro forma adjustment of having all other aspects of
such judgment, order or settlement being fully implemented (including
injunctions and royalty payments) during the applicable four fiscal quarter
period and (iv) certify that none of the calculations or pro forma
calculations described in clauses (i), (ii) and (iii) in this sentence shows
that any Loan Party is or would be in default under the Credit Agreement.

 

“Maturity Date” means
June 30, 2008.

 

“Multiemployer Plan” means any
employee benefit plan of the type described in Section 4001(a)(3) of
ERISA, to which Borrower or any ERISA Affiliate makes or is obligated to make
contributions, or during the preceding five plan years, has made or been
obligated to make contributions.

 

“Net Asset Sale Proceeds,”
with respect to any Asset Sale, means Cash payments (including any Cash
received by way of deferred payment pursuant to, or by monetization of, a note
receivable or otherwise, but only as and when so received) received from such
Asset Sale, net of any bona fide direct costs and expenses incurred in
connection with such Asset Sale, including (i) sale, use or other
transaction taxes and income taxes paid or payable by Borrower or any of its
Subsidiaries as a direct result thereof (provided that with respect to
income taxes that are payable by Borrower or such Subsidiary, the amount shall
be limited to income taxes reasonably estimated to be actually payable by
Borrower or such Subsidiary within two years of the date of such Asset Sale as
a result of any gain recognized in connection with such Asset Sale) and
(ii) payment of the outstanding principal amount of, premium or penalty,
if any, and interest

 

17

 

on any
Indebtedness (other than the Loans) that is (a) secured by a Lien on the
stock or assets in question and that is required to be repaid under the terms
thereof as a result of such Asset Sale and (b) actually paid at the time
of receipt of such Cash payment to a Person that is not an Affiliate of any
Loan Party or of any Affiliate of a Loan Party.

 

“Net Insurance/Condemnation Proceeds”
means any Cash payments or proceeds received by Borrower or any of its
Subsidiaries (i) under any business interruption or casualty insurance
policy in respect of a covered loss thereunder or (ii) as a result of the
taking of any assets of Borrower or any of its Subsidiaries by any Person
pursuant to the power of eminent domain, condemnation or otherwise, or pursuant
to a sale of any such assets to a purchaser with such power under threat of
such a taking, in each case net of any bona fide direct costs and expenses
incurred by Borrower or any of its Subsidiaries in connection with any such
event described in clause (i) or (ii) above, including (a) any actual
third party costs and expenses (including reasonable legal fees and expenses)
incurred in connection with the adjustment or settlement of any claims of
Borrower or such Subsidiary in respect thereof, (b) sale, use or other
transaction taxes and income taxes paid or payable by Borrower or any of its
Subsidiaries as a direct result thereof (provided that with respect to
income taxes that are payable by Borrower or such Subsidiary, the amount shall
be limited to income taxes reasonably estimated to be actually payable by
Borrower or such Subsidiary within two years of the date of such event as a
result of any gain recognized in connection with such event) and
(c) payment of the outstanding principal amount of, premium or penalty, if
any, and interest on any Indebtedness (other than the Loans) that is (A) secured
by a Lien on the stock or assets in question and that is required to be repaid
under the terms thereof as a result of such event and (B) actually paid at
the time of receipt of such Cash payment to a Person that is not an Affiliate
of any Loan Party or of any Affiliate of a Loan Party.

 

“Net Worth” means, as of any
date of determination with respect to Borrower and its Subsidiaries, net worth
of Borrower and its Subsidiaries on a consolidated basis determined in
conformity with GAAP.

 

“Note” means a promissory note
made by Borrower in favor of a Lender evidencing Loans made by such Lender,
substantially in the form of Exhibit B.

 

“Obligations” means all
advances to, and debts, liabilities, obligations, covenants and duties of, any
Loan Party arising under any Loan Document or arising under any Lender Swap
Contracts or otherwise with respect to any Loan or Letter of Credit, in each
case, whether direct or indirect (including those acquired by assumption),
absolute or contingent, due or to become due, now existing or hereafter arising
and including interest and fees that accrue after the commencement by or
against any Loan Party or any Affiliate thereof of any proceeding under any
Debtor Relief Laws naming such Person as the debtor in such proceeding,
regardless of whether such interest and fees are allowed claims in such
proceeding.

 

“Organization Documents” means,
(a) with respect to any corporation, the certificate or articles of
incorporation and the bylaws (or equivalent or comparable constitutive
documents with respect to any non-U.S. jurisdiction); (b) with respect to
any limited liability company, the certificate or articles of formation or
organization and operating agreement; and (c) with respect to any
partnership, joint venture, trust or other form of business entity, the
partnership, joint

 

18

 

venture or other applicable
agreement of formation or organization and any agreement, instrument, filing or
notice with respect thereto filed in connection with its formation or
organization with the applicable Governmental Authority in the jurisdiction of
its formation or organization and, if applicable, any certificate or articles
of formation or organization of such entity.

 

“OSC” means Osteo Sciences
Corporation, an Oregon corporation.

 

“Outstanding Amount” means
(i) with respect to Loans on any date, the aggregate outstanding principal
amount thereof after giving effect to any borrowings and prepayments or
repayments of Loans occurring on such date; and (ii) with respect to any
L/C Obligations on any date, the amount of such L/C Obligations on such date
after giving effect to any L/C Credit Extension occurring on such date and any
other changes in the aggregate amount of the L/C Obligations as of such date,
including as a result of any reimbursements of outstanding unpaid drawings
under any Letters of Credit or any reductions in the maximum amount available
for drawing under Letters of Credit taking effect on such date.

 

“Participant” has the meaning
specified in Section 10.7(d).

 

“PBGC” means the Pension
Benefit Guaranty Corporation.

 

“Pension Plan” means any “employee
pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other
than a Multiemployer Plan, that is subject to Title IV of ERISA and is
sponsored or maintained by Borrower or any ERISA Affiliate or to which Borrower
or any ERISA Affiliate contributes or has an obligation to contribute, or in
the case of a multiple employer or other plan described in Section 4064(a) of
ERISA, has made contributions at any time during the immediately preceding five
plan years.

 

“Permitted Acquisition”
means an Acquisition with respect to which all of the following conditions
shall have been satisfied (or Requisite Lenders shall have otherwise approved
such Acquisition):

 

(a)           the Person, division or
business being acquired (the “Target”)
shall (i) be in such lines of business such that Borrower will be in
compliance with Section 7.7 after giving effect to such Acquisition, and
(ii) have EBITDA (calculated utilizing the definition of EBITDA as if
Target were a Subsidiary) for the most recent consecutive four fiscal quarter
period exceeding zero; provided that this clause (a) shall not apply to the
extent no Person, division or business is being acquired in connection with
such Acquisition;

 

(b)           such Acquisition shall
not be a Hostile Acquisition;

 

(c)           the assets so acquired
shall be transferred free and clear of any Liens (except to the extent
permitted by Section 7.1), no Indebtedness shall be incurred, guaranteed,
assumed or consolidated in connection with such Acquisition (except to the
extent permitted by Section 7.3), and, if assets so acquired shall be
owned by a Subsidiary (after giving effect to such Acquisition),  Agent shall have received Lien searches reasonably
satisfactory to Agent with respect to the assets of, and equity interests in,
any business being acquired

 

19

 

(d)           the Total Consideration
paid or payable with respect to such Acquisition (excluding consideration paid
or payable with Capital Stock of Borrower) shall not exceed $10,000,000 and,
after giving effect to such Acquisition, the aggregate amount of the Total
Consideration paid or payable for all such Acquisitions consummated during the
term of this Agreement commencing on the Closing Date (excluding consideration
paid or payable with Capital Stock of Borrower) shall not exceed $20,000,000 in
the aggregate;

 

(e)           before and after giving
effect to such Acquisition, (i) all representations and warranties
contained in the Loan Documents shall be true and correct on and as of the date
of consummation of such Acquisition and (ii) no Default or Event of
Default shall exist, including with respect to the covenants contained in Section
6.12, before and after giving effect to such Acquisition, based on the
financial statements most recently delivered to Agent pursuant to Sections
6.1(a) or 6.1(b) as adjusted on a pro forma basis including the
Target based on pro forma assumptions acceptable to Agent;

 

(f)            Agent shall have
received a First Priority Lien in substantially all of the personal property
and mixed property assets being acquired (except for Liens securing
Indebtedness permitted under Section 7.3(f)) and all filings, recordings
and other actions with respect thereto shall be reasonably satisfactory in form
and substance to Agent and Agent shall have received an opinion of counsel in
each applicable jurisdiction reasonably satisfactory to it to the effect that
Agent has been granted a perfected security interest in such assets and as to
such other matters as Agent may reasonably require;

 

(g)           to the extent any
representation or warranty herein makes reference to one or more of the
Schedules to this Agreement, Borrower shall make revisions to such Schedules,
in each case as of the date of the consummation of such Acquisition and
notwithstanding that such representation or warranty may expressly state that
it is made as of an earlier date, reasonably acceptable to Agent, solely to
take into account the consummation of such Acquisition;

 

(h)           Borrower and its
Subsidiaries shall have obtained all material permits, licenses, authorizations
or consents from all Governmental Authorities and all material consents of
other Persons, in each case that are necessary in connection with such proposed
Acquisition or the continued operation of the business being acquired in such
proposed Acquisition, prior to or concurrently with the consummation thereof,
and each of the foregoing shall be in full force and effect;

 

(i)            subject to the waiver
by Agent in its reasonable discretion, all applicable waiting periods with
respect to such proposed Acquisition shall have expired without any action
being taken or threatened by any competent authority which would restrain,
prevent or otherwise impose adverse conditions on such Acquisition (including
the Pre-Merger/Hart-Scott-Rodino Act, as amended), and no action, request for
stay, petition for review or rehearing, reconsideration or appeal with respect
to any of the foregoing shall be pending, and the time for any applicable
Governmental Authority to take action to set aside its consent on its own
motion shall have expired;

 

(j)            Agent shall have
received a certificate from the Borrower’s insurance broker or other evidence
satisfactory to it that all insurance required to be maintained pursuant to

 

20

 

Section 6.7
is in full force and effect with respect to the assets being acquired in such
Acquisition and that Agent on behalf of the Lenders has been named as
additional insured, mortgagee and loss payee thereunder to the extent required
under Section 6.7;

 

(k)           after giving effect to
such Acquisition, the sum of (i) the amount by which the Aggregate
Commitments exceeds Total Outstandings plus (ii) the amount of cash held
by Borrower and its Subsidiaries, shall exceed $20,000,000;

 

(l)            after giving effect to
such Acquisition, the ratio of Funded Debt as at the date of such Acquisition
to EBITDA for the consecutive four fiscal quarters ending on the last day of
the most recently ended fiscal quarter for which this Agreement requires
Borrower to deliver financial statements is at least 0.25 below the applicable
maximum Funded Debt to EBITDA Ratio covenant level for the most recently ended
fiscal quarter set forth in Section 6.12(b);

 

(m)          such Acquisition shall
be made by Borrower or a wholly-owned Subsidiary of Borrower and if such
Acquisition involves acquisition of the Capital Stock of any Person, such
Acquisition shall be for 100% of the outstanding Capital Stock of such Person
and such Person shall be a Person incorporated or organized under the laws of
the United States of America or any state thereof; and

 

(n)           (i) at least ten
Business Days prior to the closing of such Acquisition, Borrower shall have
delivered to Agent and each Lender all available financial statements of the
Target and, if requested by Agent or any Lender, (ii) within five Business
Days prior to the closing of such Acquisition, Borrower shall have delivered to
Agent and any Lender, such other documents and agreements relating to such
Acquisition as Agent or such Lender may reasonably request, and (iii) on or
prior to the closing date of such Acquisition, Borrower shall have delivered to
Agent and each Lender (1) a copy of the purchase agreement pursuant to
which such Acquisition will be consummated, (2) unless waived by Agent in
its reasonable discretion, a consent to the assignment of such purchase
agreement to Agent for collateral purposes, which consent shall be in form and
substance satisfactory to Agent; (3) a copy of each material services
agreement, consulting agreement, lease, credit or financing agreement or other
material agreement relating to such Acquisition to be in effect after the
consummation of such Acquisition, (4) unless waived by Agent in its
reasonable discretion, an opinion of counsel to the sellers addressed to Agent
and the Lenders or permitting them to rely thereon, (5) such other
information or reports as Agent may reasonably request with respect to such
Acquisition, and (6) an executed officer’s certificate in form and
substance reasonably satisfactory to Agent and Requisite Lenders certifying
that such Acquisition satisfies all of the conditions set forth in this
definition and attaching thereto a Compliance Certificate.

 

“Permitted Sale”
means the sale by Borrower on or before December 31, 2005 of (i) all
of the Capital Stock of Quidel Deutschland, a wholly-owned Subsidiary of
Borrower, and (ii) certain IP Rights and certain other assets described in
Schedule 1.1, for an aggregate total consideration (for both clauses (i) and
(ii)) of approximately $500,000.

 

“Person” means any natural
person, corporation, limited liability company, trust, joint venture,
association, company, partnership, Governmental Authority or other entity.

 

21

 

“Plan” means any “employee
benefit plan” (as such term is defined in Section 3(3) of ERISA) established by
Borrower or, with respect to any such plan that is subject to Section 412 of
the Code or Title IV of ERISA, any ERISA Affiliate.

 

“Pledged Collateral”
has the meaning given such term in the Security Agreement.

 

“Pro Rata Share” means, with
respect to each Lender at any time, a fraction (expressed as a percentage,
carried out to the ninth decimal place), the numerator of which is the amount
of the Commitment of such Lender at such time and the denominator of which is
the amount of the Aggregate Commitments at such time; provided that if
the commitment of each Lender to make Loans and the obligation of the L/C
Issuer to make L/C Credit Extensions have been terminated pursuant to Section
8.2, then the Pro Rata Share of each Lender shall be determined based on
the Pro Rata Share of such Lender immediately prior to such termination and
after giving effect to any subsequent assignments made pursuant to the terms
hereof.  The initial Pro Rata Share of
each Lender is set forth opposite the name of such Lender on Schedule 2.1
or in the Assignment and Assumption pursuant to which such Lender becomes a
party hereto, as applicable.

 

“Quidel Deutschland”
means Quidel Deutschland GmbH, a German company.

 

“Real Property Asset”
means, at any time of determination, any interest then owned by any Loan Party
in any real property.

 

“Register” has the meaning
specified in Section 10.7(c).

 

“Reportable Event” means any of
the events set forth in Section 4043(c) of ERISA, other than events for which
the 30 day notice period has been waived.

 

“Request for Credit Extension”
means (a) with respect to a Borrowing, conversion or continuation of
Loans, a Loan Notice and (b) with respect to an L/C Credit Extension, a
L/C Application.

 

“Required Lenders” means, as of
any date of determination, Lenders having more than 50% of the Aggregate
Commitments or, if the commitment of each Lender to make Loans and the
obligation of the L/C Issuer to make L/C Credit Extensions have been terminated
pursuant to Section 8.2, Lenders holding in the aggregate more than 50%
of the Total Outstandings (with the aggregate amount of each Lender’s risk
participation and funded participation in L/C Obligations being deemed “held”
by such Lender for purposes of this definition); provided that the
Commitment of, and the portion of the Total Outstandings held or deemed held
by, any Defaulting Lender shall be excluded for purposes of making a
determination of Required Lenders.

 

“Responsible Officer” means the
chief executive officer, president, chief financial officer, treasurer or
assistant treasurer of a Loan Party.  Any
document delivered hereunder that is signed by a Responsible Officer of a Loan
Party shall be conclusively presumed to have been authorized by all necessary
corporate, partnership and/or other action on the part of such Loan Party and
such Responsible Officer shall be conclusively presumed to have acted on behalf
of such Loan Party.

 

22

 

“Restricted Payment” means any
dividend or other distribution (whether in cash, securities or other property)
with respect to any capital stock or other equity interest of Borrower or any
Subsidiary, or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
capital stock or other equity interest or of any option, warrant or other right
to acquire any such capital stock or other equity interest or any payment or
prepayment of principal of, premium, if any, or interest on, or redemption,
purchase, retirement, defeasance (including in-substance or legal defeasance),
sinking fund or similar payment with respect to any Subordinated Indebtedness.

 

“Securities Account”
means an account to which a financial asset is or may be credited in accordance
with an agreement under which the Person maintaining the account undertakes to
treat the Person for whom the account is maintained as entitled to exercise the
rights that comprise the financial asset.

 

“Security Agreement” means the
Security Agreement by and among Borrower, Guarantors, the Agent and each of the
other grantors party thereto executed and delivered on the Closing Date,
substantially in the form of Exhibit F annexed hereto, as such
Security Agreement may thereafter be amended, supplemented or otherwise
modified from time to time.

 

“Senior Debt” means, as of any
date of determination, Funded Debt as at such date minus Subordinated
Indebtedness as at such date.

 

“Senior Debt to EBITDA
Ratio” means, as at any date of determination, the ratio of
Senior Debt as at such date to EBITDA for the consecutive four fiscal quarters
ending on the last day of the most recently ended fiscal quarter.

 

“Solvency Certificate”
means an officer’s certificate of each Loan Party substantially in the form of Exhibit
J with appropriate attachments.

 

“Solvent”, with respect to any
Person, means that as of the date of determination both (i)(a) the then
fair saleable value of the tangible and intangible property of such Person,
including Capital Stock owned by such Person, is (1) greater than the
total amount of liabilities (including contingent liabilities) of such Person and
(2) not less than the amount that will be required to pay the probable
liabilities on such Person’s then existing debts as they become absolute and
due considering all financing alternatives and potential asset sales reasonably
available to such Person; (b) such Person’s capital is not unreasonably
small in relation to its business or any contemplated or undertaken
transaction; and (c) such Person does not intend to incur, or reasonably
believe that it will incur, debts beyond its ability to pay such debts as they
become due; and (ii) such Person is “solvent” within the meaning given that
term and similar terms under applicable laws relating to fraudulent transfers
and conveyances.  For purposes of this
definition, the amount of any contingent liability at any time shall be
computed as the amount that, in light of all of the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.

 

“Specified Event” has the
meaning assigned to such term in the definition of the term Material Adverse
Effect.

 

23

 

“Subordinated Indebtedness”
means unsecured Indebtedness incurred by Borrower or any Subsidiary to the
sellers in connection with any Permitted Acquisition or otherwise in accordance
with Section 7.3(e), the terms of which Indebtedness (including the
covenants, events of default and subordination provisions thereof) and all
documentation relating thereto shall be in form and substance satisfactory to
Agent and Required Lenders, it being understood that there shall be no payments
of any kind thereunder (other than payment of scheduled interest, the amounts
and frequency of which are acceptable to Agent and other Required Lenders and
other payments (if any) acceptable to Agent and Required Lenders)  prior to the seventeen month anniversary
after the Maturity Date then in effect and all payments thereunder shall be
subordinated in right of payment to the Obligations pursuant to subordination
provisions acceptable to Agent and Required Lenders in their sole discretion.

 

“Subordinated Liabilities”
means liabilities subordinated to the Obligations in a manner acceptable to
Agent in its sole discretion.

 

“Subsidiary” of a Person means
a corporation, partnership, joint venture, limited liability company or other
business entity of which a majority of the shares of securities or other
interests having ordinary voting power for the election of directors or other
governing body (other than securities or interests having such power only by
reason of the happening of a contingency) are at the time beneficially owned,
or the management of which is otherwise controlled, directly, or indirectly
through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references
herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or
Subsidiaries of Borrower.

 

“Subsidiary Guarantor”
or “Guarantor” means,
collectively, Pacific Biotech, Inc., a California corporation, Metra Biosystems,
Inc., a California corporation, Osteo Sciences Corporation, an Oregon
corporation and Litmus Concepts, Inc., a California corporation and any other
Subsidiary of Borrower that executes and delivers a counterpart of the Guaranty
from time to time after the Closing Date in accordance with Section 6.13.

 

“Swap Contract” means
(a) any and all rate swap transactions, basis swaps, credit derivative
transactions, forward rate transactions, commodity swaps, commodity options,
forward commodity contracts, equity or equity index swaps or options, bond or
bond price or bond index swaps or options or forward bond or forward bond price
or forward bond index transactions, interest rate options, forward foreign
exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all
transactions of any kind, and the related confirmations, which are subject to
the terms and conditions of, or governed by, any form of master agreement
published by the International Swaps and Derivatives Association, Inc., any
International Foreign Exchange Master Agreement, or any other master agreement
(any such master agreement, together with any related schedules, a “Master Agreement”), including any
such obligations or liabilities under any Master Agreement.

 

24

 

“Swap Termination Value” means,
in respect of any one or more Swap Contracts, after taking into account the
effect of any legally enforceable netting agreement relating to such Swap
Contracts, (a) for any date on or after the date such Swap Contracts have
been closed out and termination value(s) determined in accordance therewith,
such termination value(s), and (b) for any date prior to the date
referenced in clause (a), the amount(s) determined as the mark-to-market
value(s) for such Swap Contracts, as determined based upon one or more
mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include a Lender or any Affiliate of a
Lender).

 

“Synthetic Lease Obligation”
means the monetary obligation of a Person under (a) a so-called synthetic,
off-balance sheet or tax retention lease, or (b) an agreement for the use
or possession of property creating obligations that do not appear on the
balance sheet of such Person but which, upon the insolvency or bankruptcy of
such Person, would be characterized as the indebtedness of such Person (without
regard to accounting treatment).

 

“Taxes” has the meaning
specified in Section 3.1(a).

 

“Threshold Amount” means
$1,000,000.

 

“Total Liabilities” means the
sum of current liabilities plus long term liabilities.

 

“Total Consideration” means,
with respect to any Acquisition, (without duplication) the sum of (a) the
total amount of cash paid in connection with such Acquisition, (b) all
Indebtedness incurred in connection with such Acquisition, (c) the amount
of direct and contingent liabilities assumed in connection with such Acquisition
(excluding normal trade payables, accruals and indemnities), (d) the
amount of Indebtedness payable to the seller in connection with such
Acquisition, (e) the value of payments that Borrower or a Subsidiary is
obligated to make in the future under any covenant not to compete, consulting
agreements, “earn-up” or “earn-out” agreements and other deferred payment
obligations incurred in connection with any Acquisition accrued in accordance
with GAAP, and (f) the amounts paid or to be paid under “earn-out” and “earn-up”
agreements and similar contingent payment agreements in connection with such
Acquisition, as reasonably estimated by the Borrower and satisfactory to the
Agent in its reasonable discretion.

 

“Total Outstandings” means the
aggregate Outstanding Amount of all Loans and all L/C Obligations.

 

“Type” means, with respect to a
Loan, its character as a Base Rate Loan or a Eurodollar Rate Loan or an IBOR
Rate Loan.

 

“UCC” means
the Uniform Commercial Code as in effect in any applicable jurisdiction.

 

“Unfunded Pension Liability”
means the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s
assets, determined in accordance with the assumptions used for funding the
Pension Plan pursuant to Section 412 of the Code for the applicable plan year.

 

“United States” and “U.S.” mean the United States of
America.

 

25

 

“Unreimbursed Amount” has the
meaning specified in Section 2.3(c)(i).

 

1.2          Other Interpretive
Provisions.  With reference to this
Agreement and each other Loan Document, unless otherwise specified herein or in
such other Loan Document:

 

(a)           The meanings of defined
terms are equally applicable to the singular and plural forms of the defined terms.

 

(b)           The words “herein,”
“hereto,” “hereof” and “hereunder” and words of similar
import when used in any Loan Document shall refer to such Loan Document as a
whole and not to any particular provision thereof.

 

(i)            Article, Section,
Exhibit and Schedule references are to the Loan Document in which such
reference appears.

 

(ii)           The term “including”
is by way of example and not limitation.

 

(iii)          The term “documents”
includes any and all instruments, documents, agreements, certificates, notices,
reports, financial statements and other writings, however evidenced, whether in
physical or electronic form.

 

(iv)          any reference in this
Agreement or any other Loan Document to any law, statute, regulation, rule or
other legislative action shall mean such law, statute, regulation, rule or
other legislative action as amended, supplemented, restated or otherwise
modified from time to time and any successor thereto, and shall include any
rule or regulation promulgated thereunder

 

(c)           In the computation of
periods of time from a specified date to a later specified date, the word “from”
means “from and including;” the words “to” and “until”
each mean “to but excluding;” and the word “through” means “to
and including.”

 

(d)           Section headings herein
and in the other Loan Documents are included for convenience of reference only
and shall not affect the interpretation of this Agreement or any other Loan
Document.

 

1.3          Accounting Terms.

 

(a)           All accounting terms
not specifically or completely defined herein shall be construed in conformity
with, and all financial data (including financial ratios and other financial
calculations) required to be submitted pursuant to this Agreement shall be
prepared in conformity with, GAAP applied on a consistent basis, as in effect
from time to time, applied in a manner consistent with that used in preparing
the Audited Financial Statements, except as otherwise specifically
prescribed herein.

 

(b)           If at any time any
change in GAAP would affect the computation of any financial ratio or
requirement set forth in any Loan Document, and either Borrower or the Required
Lenders shall so request, Agent, Lenders and Borrower shall negotiate in good
faith to amend such ratio or requirement to preserve the original intent
thereof in light of such

 

26

 

change in GAAP
(subject to the approval of the Required Lenders); provided  that,
until so amended, (i) such ratio or requirement shall continue to be
computed in accordance with GAAP prior to such change therein and
(ii) Borrower shall provide to Agent and Lenders financial statements and
other documents required under this Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.

 

1.4          Rounding.  Any financial ratios required to be
maintained by Borrower pursuant to this Agreement shall be calculated by
dividing the appropriate component by the other component, carrying the result
to one place more than the number of places by which such ratio is expressed
herein and rounding the result up or down to the nearest number (with a
rounding-up if there is no nearest number).

 

1.5          References to Agreements
and Laws.  Unless otherwise expressly
provided herein, (a) references to Organization Documents, agreements
(including the Loan Documents) and other contractual instruments shall be
deemed to include all subsequent amendments, restatements, extensions,
supplements and other modifications thereto, but only to the extent that such
amendments, restatements, extensions, supplements and other modifications are
not prohibited by any Loan Document; and (b) references to any Law shall
include all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting such Law.

 

1.6          Times of Day.  Unless otherwise specified, all references
herein to times of day shall be references to Pacific  time (daylight or standard, as
applicable).

 

1.7          Letter of Credit
Amounts.  Unless otherwise specified,
all references herein to the amount of a Letter of Credit at any time shall be
deemed to mean the maximum face amount of such Letter of Credit after giving
effect to all increases thereof contemplated by such Letter of Credit or the Issuer
Documents related thereto, whether or not such maximum face amount is in effect
at such time.

 

ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS

 

2.1          Loans.  Subject to the terms and conditions set forth
herein, each Lender severally agrees to make loans (each such loan, a “Loan”)
to Borrower from time to time, on any Business Day during the Availability
Period, in an aggregate amount not to exceed at any time outstanding the amount
of such Lender’s Commitment; provided, however, that after giving
effect to any Borrowing, (i) the Total Outstandings shall not exceed the
Aggregate Commitments, and (ii) the aggregate Outstanding Amount of the
Loans of any Lender, plus such Lender’s Pro Rata Share of the
Outstanding Amount of all L/C Obligations shall not exceed such Lender’s
Commitment.  Within the limits of each
Lender’s Commitment, and subject to the other terms and conditions hereof,
Borrower may borrow under this Section 2.1, prepay under Section 2.5,
and reborrow under this Section 2.1. 
Loans may be Base Rate Loans or Eurodollar Rate Loans or IBOR Rate
Loans, as further provided herein.

 

The amount of each Lender’s Commitment is set
forth opposite its name on Schedule 2.1 annexed hereto and the original
Aggregate Commitment is $30,000,000; provided that the

 

27

 

amount of the Commitments of each Lender
shall be adjusted to give effect to any assignments of such Commitments
pursuant to Section 10.7 and shall be reduced from time to time by the amount
of any reductions thereto made pursuant to Section 2.5.  Each Lender’s Commitment shall expire
immediately and without further action on the Maturity Date and all Loans and
all other amounts owed hereunder with respect to the Loans and the Commitments
shall be paid in full no later than that date.

 

2.2          Borrowings, Conversions
and Continuations of Loans.

 

(a)           Each Borrowing, each
conversion of Loans from one Type to the other, and
each continuation of Eurodollar Rate Loans or IBOR Rate Loans shall be made
upon Borrower’s irrevocable notice to Agent, which may be given by
telephone.  Each such notice must be
received by Agent not later than 11:00 a.m. (i) three Business Days (in
the case of Eurodollar Rate Loans) or one Business Day (in the case of IBOR
Rate Loans) prior to the requested date of any Borrowing of, conversion to or
continuation of Eurodollar Rate Loans or IBOR Rate Loans or of any conversion
of Eurodollar Rate Loans or IBOR Rate Loans to Base Rate Loans, and
(ii) on the requested date of any Borrowing of Base Rate Loans.  Borrower shall have the option to borrow or
continue IBOR Rate Loans or convert Loans into IBOR Rate Loans only so long as
Bank of America, N.A. is the sole Lender under this Agreement.  Each telephonic notice by Borrower pursuant
to this Section 2.2(a) must be confirmed promptly by delivery to Agent
of a written Loan Notice, appropriately completed and signed by a Responsible
Officer of Borrower.  Each Borrowing of,
conversion to or continuation of Eurodollar Rate Loans or IBOR Rate Loans shall
be in a principal amount of $2,000,000 or a whole multiple of $500,000 in
excess thereof.  Except
as provided in Sections 2.3(c) and 2.4(c), each Borrowing of or
conversion to Base Rate Loans shall be in a principal amount of $500,000 or a
whole multiple of $100,000 in excess thereof.  Each Loan Notice (whether telephonic or
written) shall specify (i) whether Borrower is requesting a Borrowing, a
conversion of Loans from one Type to the other, or a continuation of Eurodollar
Rate Loans or IBOR Rate Loans, (ii) the requested date of the Borrowing,
conversion or continuation, as the case may be (which shall be a Business Day),
(iii) the principal amount of Loans to be borrowed, converted or
continued, (iv) the Type of Loans to be borrowed or to which existing
Loans are to be converted, and (v) if applicable, the duration of the
Interest Period with respect thereto.  If
Borrower fails to specify a Type of Loan in a Loan Notice or if Borrower fails
to give a timely notice requesting a conversion or continuation, then the
applicable Loans shall be made as, or converted to, Base Rate Loans.  Any such automatic conversion to Base Rate
Loans shall be effective as of the last day of the Interest Period then in
effect with respect to the applicable Eurodollar Rate Loans or IBOR Rate
Loans.  If Borrower requests a Borrowing
of, conversion to, or continuation of Eurodollar Rate Loans or IBOR Rate Loans
in any such Loan Notice, but fails to specify an Interest Period, it will be
deemed to have specified an Interest Period of one month.

 

(b)           Following receipt of a
Loan Notice, Agent shall promptly notify each Lender of the amount of its Pro
Rata Share of the applicable Loans, and if no timely notice of a conversion or
continuation is provided by Borrower, Agent shall notify each Lender of the
details of any automatic conversion to Base Rate Loans described in the
preceding subsection.  In the case of a
Borrowing, each Lender shall make the amount of its Loan available to Agent in immediately
available funds at Agent’s Office not later than 1:00 p.m. on the Business Day

 

28

 

specified
in the applicable Loan Notice.  Upon
satisfaction of the applicable conditions set forth in Section 4.2 (and,
if such Borrowing is the initial Credit Extension, Section 4.1), Agent
shall make all funds so received available to Borrower in like funds as
received by Agent either by (i) crediting the account of Borrower on the
books of Bank of America with the amount of such funds or (ii) wire transfer
of such funds, in each case in accordance with instructions provided to (and
reasonably acceptable to) Agent by Borrower; provided, however,
that if, on the date the Loan Notice with respect to such Borrowing is given by
Borrower, there are L/C Borrowings outstanding, then the proceeds of such
Borrowing first, shall be applied, to the payment in full of any such
L/C Borrowings, and second, shall be made available to Borrower as
provided above.

 

(c)           Except as otherwise
provided herein, a Eurodollar Rate Loan or IBOR Rate Loan may be continued or
converted only on the last day of an Interest Period for such Eurodollar Rate
Loan or IBOR Rate Loan, as applicable. 
During the existence of a Default, no Loans may be requested as,
converted to or continued as Eurodollar Rate Loans or IBOR Rate Loans without
the consent of the Required Lenders, and during the existence of an Event of
Default, the Required Lenders may demand that any or all of the then
outstanding Eurodollar Rate Loans or IBOR Rate Loans be converted immediately
to Base Rate Loans and Borrower agrees to pay all amounts due under Section
3.5 in accordance with the terms thereof due to any such conversion.

 

(d)           Agent shall promptly
notify Borrower and Lenders of the interest rate applicable to any Interest
Period for Eurodollar Rate Loans or IBOR Rate Loans upon determination of such
interest rate.  The determination of the
Eurodollar Rate or the IBOR Rate by Agent shall be conclusive in the absence of
manifest error.

 

(e)           After giving effect to
all Borrowings, all conversions of Loans from one Type to the other, and all continuations of Loans as the same Type,
there shall not be more than 6 Interest Periods in effect with respect to
Loans.

 

2.3          Letters of Credit.

 

(a)           The Letter of Credit
Commitment.

 

(i)            Subject to the terms
and conditions set forth herein, (A) the L/C Issuer agrees, in reliance
upon the agreements of the other Lenders set forth in this Section 2.3,
(1) from time to time on any Business Day during the period from the
Closing Date until the day that is thirty days prior to the Maturity Date, to
issue Letters of Credit for the account of Borrower or its Subsidiaries, and to amend or extend Letters of Credit previously issued by it, in accordance
with subsection (b) below, and (2) to honor drawings under the Letters of
Credit; and (B) the Lenders severally agree to participate in Letters of
Credit issued for the account of Borrower or its Subsidiaries and any drawings thereunder; provided
that after giving effect to any L/C Credit Extension with respect to any Letter
of Credit, (x) the Total Outstandings shall not exceed the Aggregate
Commitments, (y) the aggregate Outstanding Amount of the Loans of any
Lender, plus such Lender’s Pro Rata Share of the Outstanding Amount of
all L/C Obligations shall

 

29

 

not
exceed such Lender’s Commitment, or (z) the Outstanding Amount of the L/C
Obligations shall not exceed the L/C Sublimit. 
Each request by Borrower for the issuance or amendment of a Letter of
Credit shall be deemed to be a representation by Borrower that the L/C Credit
Extension so requested complies with the conditions set forth in the proviso to
the preceding sentence.  Within the
foregoing limits, and subject to the terms and conditions hereof, Borrower’s
ability to obtain Letters of Credit shall be fully revolving,  and accordingly Borrower may, during
the foregoing period, obtain Letters of Credit to replace Letters of Credit
that have expired or that have been drawn upon and reimbursed.

 

(ii)           The L/C Issuer shall
not issue any Letter of Credit, if:

 

(A)          subject to Section 2.3(b)(iv), the
expiry date of such requested commercial Letter of Credit would occur more than
twelve months after the date of issuance or last extension or such standby Letter of Credit would occur
more than twenty-four months after the date of issuance or last extension, unless the Required Lenders have approved such
expiry date; or

 

(B)           the
expiry date of such requested Letter of Credit would occur after the L/C Expiration
Date, unless all the Lenders have approved such expiry date.

 

(C)           the
expiry date of such requested Letter of Credit would occur after the Maturity
Date, unless Borrower shall have Cash Collateralized 105% of the maximum
aggregate L/C Obligations of such Letter of Credit.

 

(iii)          The L/C Issuer shall be
under no obligation to issue any Letter of Credit if:

 

(A)          any order, judgment or
decree of any Governmental Authority or arbitrator shall by its terms purport
to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any
Law applicable to the L/C Issuer or any request or directive (whether or not
having the force of law) from any Governmental Authority with jurisdiction over
the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the
issuance of letters of credit generally or such Letter of Credit in particular
or shall impose upon the L/C Issuer with respect to such Letter of Credit any
restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise
compensated hereunder) not in effect on the Closing Date, or shall impose upon
the L/C Issuer any unreimbursed loss, cost or expense which was not applicable
on the Closing Date and which the L/C Issuer in good faith deems material to
it;

 

(B)           the
issuance of such Letter of Credit would violate any Laws or one or more
policies of the L/C Issuer;

 

30

 

(C)           except as otherwise
agreed by Agent and the L/C Issuer, such Letter of Credit is in an initial face
amount less than $100,000, in the case of a commercial Letter of Credit, or $500,000, in the case of a standby
Letter of Credit;

 

(D)          such
Letter of Credit is to be denominated in a currency other than Dollars; or

 

(E)           a default of any Lender’s
obligations to fund under Section 2.3(c) exists or any Lender is at such
time a Defaulting Lender hereunder, unless the L/C Issuer has entered into
satisfactory arrangements with Borrower or such Lender to eliminate the L/C
Issuer’s risk with respect to such Lender; or

 

(F)           such
Letter of Credit contains any provisions for automatic reinstatement of the
stated amount after any drawing thereunder.

 

(iv)          The L/C Issuer shall not
amend any Letter of Credit if the L/C Issuer would not be permitted at such
time to issue such Letter of Credit in its amended form under the terms hereof.

 

(v)           The L/C Issuer shall be
under no obligation to amend any Letter of Credit if (A) the L/C Issuer
would have no obligation at such time to issue such Letter of Credit in its
amended form under the terms hereof, or (B) the beneficiary of such Letter
of Credit does not accept the proposed amendment to such Letter of Credit.

 

(b)           Procedures for
Issuance and Amendment of Letters of Credit; Extension of Letters of Credit.

 

(i)            Each Letter of Credit
shall be issued or amended, as the case may be, upon the request of Borrower
delivered to the L/C Issuer (with a copy to Agent) in the form of a L/C
Application, appropriately completed and signed by a Responsible Officer of
Borrower.  Such L/C Application must be
received by the L/C Issuer and Agent not later than 11:00 a.m. at least two
Business Days (or such later date and time as Agent and the L/C Issuer may
agree in a particular instance in their sole discretion) prior to the proposed
issuance date or date of amendment, as the case may be.  In the case of a request for an initial
issuance of a Letter of Credit, such L/C Application shall specify in form and
detail satisfactory to the L/C Issuer: 
(A) the proposed issuance date of the requested Letter of Credit
(which shall be a Business Day); (B) the amount thereof; (C) the
expiry date thereof; (D) the name and address of the beneficiary thereof;
(E) the documents to be presented by such beneficiary in case of any
drawing thereunder; (F) the full text of any certificate to be presented
by such beneficiary in case of any drawing thereunder; and (G) such other
matters as the L/C Issuer may require. 
In the case of a request for an amendment of any outstanding Letter of
Credit, such L/C Application shall specify in form and detail satisfactory to
the L/C

 

31

 

Issuer
(A) the Letter of Credit to be amended; (B) the proposed date of
amendment thereof (which shall be a Business Day); (C) the nature of the
proposed amendment; and (D) such other matters as the L/C Issuer may
require.  Additionally, Borrower shall
furnish to the L/C Issuer and Agent such other documents and information
pertaining to such requested Letter of Credit issuance or amendment, including
any Issuer Documents, as the L/C Issuer or Agent may require.

 

(ii)           Promptly after receipt
of any L/C Application at the address set forth in Section 10.2 for
receiving L/C Applications and related correspondence, the L/C Issuer will
confirm with Agent (by telephone or in writing) that Agent has received a copy
of such L/C Application from Borrower and, if not, the L/C Issuer will provide
Agent with a copy thereof.  Unless the
L/C Issuer has received written notice from any Lender, Agent or any Loan
Party, at least one Business Day prior to the requested date of issuance or
amendment of the applicable Letter of Credit, that one or more applicable
conditions in Article IV shall not then be satisfied, then, subject to the
terms and conditions hereof, the L/C Issuer shall, on the requested date, issue
a Letter of Credit for the account of Borrower (or the applicable Subsidiary) or enter into the applicable
amendment, as the case may be, in each case in accordance with the L/C Issuer’s
usual and customary business practices. 
Immediately upon the issuance of each Letter of Credit, each Lender
shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the L/C Issuer a risk participation in such Letter of Credit in
an amount equal to the product of such Lender’s Pro Rata Share times the
amount of such Letter of Credit.

 

(iii)          Promptly after its
delivery of any Letter of Credit or any amendment to a Letter of Credit to an
advising bank with respect thereto or to the beneficiary thereof, the L/C
Issuer will also deliver to Borrower and Agent a true and complete copy of such
Letter of Credit or amendment.

 

(iv)          If Borrower so requests
in any applicable L/C Application, the L/C Issuer may, in its sole and absolute
discretion, agree to issue a standby Letter of Credit that has automatic
extension provisions (each, an “Auto-Extension Letter of
Credit”); provided that any such Auto-Extension Letter of Credit
must permit the L/C Issuer to prevent any such extension at least once in each
twelve-month period (commencing with the date of issuance of such Letter of
Credit) by giving prior notice to the beneficiary thereof not later than a day
(the “Non-Extension Notice Date”) in each
such twelve-month period to be agreed upon at the time such Letter of Credit is
issued.  Unless otherwise directed by the
L/C Issuer, Borrower shall not be required to make a specific request to the
L/C Issuer for any such extension.  Once
an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed
to have authorized (but may not require) the L/C Issuer to permit the extension
of such Letter of Credit at any time to an expiry date not later than the day
that is thirty days prior to the Maturity Date; provided, however, that the L/C
Issuer shall not permit any such extension if (A) the L/C Issuer has
determined that it would not be permitted, or would have no obligation, at such

 

32

 

time to issue
such Letter of Credit in its revised form (as extended) under the terms hereof
(by reason of the provisions of clause (ii) or (iii) of Section 2.3(a) or
otherwise), or (B) it has received notice (which may be by telephone or in
writing) on or before the day that is five Business Days before the
Non-Extension Notice Date (1) from Agent that the Required Lenders have
elected not to permit such extension or (2) from Agent, any Lender or any
Loan Party that one or more of the applicable conditions specified in Section
4.2 is not then satisfied, and in each such case directing the L/C Issuer
not to permit such extension.

 

(v)           If any Letter of Credit
contains provisions providing for automatic reinstatement of the stated amount
after any drawing thereunder, (A) unless otherwise directed by the L/C
Issuer, Borrower shall not be required to make a specific request to the L/C
Issuer to permit such reinstatement, and (B) Agent and the Lenders hereby
authorize and direct the L/C Issuer to permit such automatic reinstatement,
whether or not a Default then exists, unless the L/C Issuer has received a
notice (which may be by telephone or in writing) on or before the day that is
two Business Days before the reinstatement date from Agent, the Required
Lenders or any Loan Party that one or more of the applicable conditions
specified in Section 4.2 is not then satisfied and directing the L/C
Issuer to cease permitting such automatic reinstatement of such Letter of
Credit.

 

(c)           Drawings and
Reimbursements; Funding of Participations.

 

(i)            Upon receipt from the
beneficiary of any Letter of Credit of any notice of a drawing under such
Letter of Credit, the L/C Issuer shall notify Borrower and Agent thereof.  Not later than 11:00 a.m. on the date of any
payment by the L/C Issuer under a Letter of Credit (each such date, an “Honor Date”),
Borrower shall reimburse the L/C Issuer through Agent in an amount equal to the
amount of such drawing.  If Borrower
fails to so reimburse the L/C Issuer by such time, Agent shall promptly notify
each Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the
amount of such Lender’s Pro Rata Share thereof. 
In such event, Borrower shall be deemed to have requested a Borrowing of
Base Rate Loans to be disbursed on the Honor Date in an amount equal to the
Unreimbursed Amount, without regard to the minimum and multiples specified in Section
2.2 for the principal amount of Base Rate Loans, but subject to the amount
of the unutilized portion of the Aggregate Commitments and the conditions set
forth in Section 4.2 (other than the delivery of a Loan Notice).  Any notice given by the L/C Issuer or Agent
pursuant to this Section 2.3(c)(i) may be given by telephone if
immediately confirmed in writing; provided that the lack of such an
immediate confirmation shall not affect the conclusiveness or binding effect of
such notice.

 

(ii)           Each Lender (including
Lender acting as L/C Issuer) shall upon any notice pursuant to Section 2.3(c)(i) make funds available to Agent for the account of
the L/C Issuer at the Agent’s Office in an amount equal to its Pro Rata Share
of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day
specified in such notice by Agent, whereupon, subject to the provisions of Section
2.3(c)(iii),

 

33

 

each
Lender that so makes funds available shall be deemed to have made a Base Rate
Loan to Borrower in such amount.  Agent
shall remit the funds so received to the L/C Issuer.

 

(iii)          With respect to any
Unreimbursed Amount that is not fully refinanced by a Borrowing of Base Rate
Loans because the conditions set forth in Section 4.2 cannot be
satisfied or for any other reason, Borrower shall be deemed to have incurred
from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount
that is not so refinanced, which L/C Borrowing shall be due and payable on
demand (together with interest) and shall bear interest at the Default
Rate.  In such event, each Lender’s
payment to Agent for the account of the L/C Issuer pursuant to Section 2.3(c)(ii) shall be deemed payment in respect of its
participation in such L/C Borrowing and shall constitute an L/C Advance from
such Lender in satisfaction of its participation obligation under this Section 2.3.

 

(iv)          Until
each Lender funds its Loan or L/C Advance pursuant to this Section 2.3(c)
to reimburse the L/C Issuer for any amount drawn under any Letter of Credit,
interest in respect of such Lender’s Pro Rata Share of such amount shall be
solely for the account of the L/C Issuer.

 

(v)           Each Lender’s
obligation to make Loans or L/C Advances to reimburse the L/C Issuer for
amounts drawn under Letters of Credit, as contemplated by this Section
2.3(c), shall be absolute and unconditional and shall not be affected by
any circumstance, including (A) any set-off, counterclaim, recoupment,
defense or other right which such Lender may have against the L/C Issuer,
Borrower or any other Person for any reason whatsoever; (B) the occurrence
or continuance of a Default, or (C) any other occurrence, event or
condition, whether or not similar to any of the foregoing; provided, however,
that each Lender’s obligation to make Loans pursuant to this Section 2.3(c)
is subject to the conditions set forth in Section 4.2 (other than
delivery by Borrower of a Loan Notice). 
No such making of an L/C Advance shall relieve or otherwise impair the
obligation of Borrower to reimburse the L/C Issuer for the amount of any
payment made by the L/C Issuer under any Letter of Credit, together with
interest as provided herein.

 

(vi)          If any Lender fails to
make available to Agent for the account of the L/C Issuer any amount required
to be paid by such Lender pursuant to the foregoing provisions of this Section
2.3(c) by the time specified in Section 2.3(c)(ii), the L/C Issuer
shall be entitled to recover from such Lender (acting through Agent), on
demand, such amount with interest thereon for the period from the date such
payment is required to the date on which such payment is immediately available
to the L/C Issuer at a rate per annum equal to the Federal Funds Rate from time
to time in effect.  A certificate of the
L/C Issuer submitted to any Lender (through Agent) with respect to any amounts
owing under this clause (vi) shall be conclusive
absent manifest error.

 

34

 

(d)           Repayment of
Participations.

 

(i)            At any time after the
L/C Issuer has made a payment under any Letter of Credit and has received from
any Lender such Lender’s L/C Advance in respect of such payment in accordance
with Section 2.3(c), if Agent receives for the account of the L/C Issuer
any payment in respect of the related Unreimbursed Amount or interest thereon
(whether directly from Borrower or otherwise, including proceeds of Cash
Collateral applied thereto by Agent), Agent will distribute to such Lender its
Pro Rata Share thereof (appropriately adjusted, in the case of interest
payments, to reflect the period of time during which such Lender’s L/C Advance
was outstanding) in the same funds as those received by Agent.

 

(ii)           If any payment received
by Agent for the account of the L/C Issuer pursuant to Section 2.3(c)(i)
is required to be returned under any of the circumstances described in Section
10.6 (including pursuant to any settlement entered into by the L/C Issuer
in its discretion), each Lender shall pay to Agent for the account of the L/C
Issuer its Pro Rata Share thereof on demand of Agent, plus interest thereon
from the date of such demand to the date such amount is returned by such
Lender, at a rate per annum equal to the Federal Funds Rate from time to time
in effect.

 

(e)           Obligations Absolute.  The
obligation of Borrower to reimburse the L/C Issuer for each drawing under each
Letter of Credit and to repay each L/C Borrowing shall be absolute,
unconditional and irrevocable, and shall be paid strictly in accordance with
the terms of this Agreement under all circumstances, including the following:

 

(i)            any
lack of validity or enforceability of such Letter of Credit, this Agreement, or
any other Loan Document;

 

(ii)           the existence of any
claim, counterclaim, set-off, defense or other right that Borrower or any
Subsidiary may have at any time against any beneficiary or any transferee of
such Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the L/C Issuer or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by such
Letter of Credit or any agreement or instrument relating thereto, or any
unrelated transaction;

 

(iii)          any draft, demand,
certificate or other document presented under such Letter of Credit proving to
be forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under such Letter of Credit;

 

(iv)          any payment by the L/C
Issuer under such Letter of Credit against presentation of a draft or
certificate that does not strictly comply with the terms of such Letter of
Credit; or any payment made by the L/C Issuer under such Letter of Credit to
any Person purporting to be a trustee in bankruptcy,

 

35

 

debtor-in-possession,
assignee for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any transferee of such
Letter of Credit, including any arising in connection with any proceeding under
any Debtor Relief Law; or

 

(v)           any other circumstance
or happening whatsoever, whether or not similar to any of the foregoing,
including any other circumstance that might otherwise constitute a defense
available to, or a discharge of, Borrower or any Subsidiary.

 

Borrower shall promptly examine a copy of each Letter of Credit and
each amendment thereto that is delivered to it and, in the event of any claim
of noncompliance with Borrower’s instructions or other irregularity, Borrower
will immediately notify the L/C Issuer. 
Borrower shall be conclusively deemed to have waived any such claim
against the L/C Issuer and its correspondents unless such notice is given as
aforesaid.

 

(f)            Role of L/C Issuer.  Each
Lender and Borrower agree that, in paying any drawing under a Letter of Credit,
the L/C Issuer shall not have any responsibility to obtain any document (other
than any sight draft, certificates and documents expressly required by the
Letter of Credit) or to ascertain or inquire as to the validity or accuracy of
any such document or the authority of the Person executing or delivering any
such document.  None of the L/C Issuer,
any Agent-Related Person nor any of the respective correspondents, participants
or assignees of the L/C Issuer shall be liable to any Lender for (i) any
action taken or omitted in connection herewith at the request or with the approval
of Lenders or the Required Lenders, as applicable; (ii) any action taken
or omitted in the absence of gross negligence or willful misconduct; or (iii)
the due execution, effectiveness, validity or enforceability of any document or
instrument related to any Letter of Credit or L/C Application.  Borrower hereby assumes all risks of the acts
or omissions of any beneficiary or transferee with respect to its use of any
Letter of Credit; provided, however, that this assumption is not
intended to, and shall not, preclude Borrower’s
pursuing such rights and remedies as it may have against the beneficiary or
transferee at law or under any other agreement. 
None of the L/C Issuer, any Agent-Related Person, nor any of the
respective correspondents, participants or assignees of the L/C Issuer, shall
be liable or responsible for any of the matters described in clauses (i)
through (v) of Section 2.3(e); provided, however, that
anything in such clauses to the contrary notwithstanding, Borrower may have a
claim against the L/C Issuer, and the L/C Issuer may be liable to Borrower, to
the extent, but only to the extent, of any direct, as opposed to consequential
or exemplary, damages suffered by Borrower which Borrower proves were caused by
the L/C Issuer’s willful misconduct or gross negligence or the L/C Issuer’s
willful failure to pay under any Letter of Credit after the presentation to it
by the beneficiary of a sight draft and certificate(s) strictly complying with
the terms and conditions of a Letter of Credit.  In furtherance and not in
limitation of the foregoing, the L/C Issuer may accept documents that appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary, and the L/C Issuer shall
not be responsible for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason.

 

36

 

(g)           Cash Collateral.  Upon the request of Agent, (i) if the
L/C Issuer has honored any full or partial drawing request under any Letter of
Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as
of the day that is thirty days prior to the Maturity Date, any Letter of Credit
for any reason remains outstanding and partially or wholly undrawn, Borrower
shall immediately Cash Collateralize the then Outstanding Amount of all L/C
Obligations (in an amount equal to such Outstanding Amount determined as of the
date of such L/C Borrowing or the day that is thirty days prior to the Maturity
Date, as the case may be).  Sections
2.3(a), 2.5 and 8.2(c) set forth certain additional requirements to
deliver Cash Collateral hereunder.  For
purposes hereof, “Cash Collateralize” means to pledge and deposit with
or deliver to Agent, for the benefit of the L/C Issuer and the Lenders, as
collateral for the L/C Obligations, cash or deposit account balances pursuant
to documentation in form and substance satisfactory to Agent and the L/C Issuer
(which documents are hereby consented to by Lenders).  Derivatives of such term have corresponding
meanings.  Borrower hereby grants to
Agent, for the benefit of the L/C Issuer and Lenders, a security interest in
all such cash, deposit accounts and all balances therein and all proceeds of
the foregoing.  Cash collateral shall be
maintained in blocked, non-interest bearing deposit accounts at Bank of
America.

 

(h)           Applicability of
ISP98 and UCP.  Unless otherwise expressly agreed by
the L/C Issuer and Borrower when a Letter of Credit is issued, (i) the
rules of the ISP shall apply to each standby Letter of Credit, and
(ii) the rules of the Uniform Customs and Practice for Documentary
Credits, as most recently published by the International Chamber of Commerce
(the “ICC”) at the time of issuance shall apply to each commercial
Letter of Credit.

 

(i)            L/C Fees.  Borrower shall pay to Agent for the account
of each Lender in accordance with its Pro Rata Share an L/C fee (the “L/C
Fee”) (i) for each commercial Letter of Credit equal to the then
applicable commercial letter of credit fees of the L/C Issuer then in effect,
and (ii) for each standby Letter of Credit equal to the Applicable Rate times
the daily maximum amount available to be drawn under such Letter of Credit
(whether or not such maximum amount is then in effect under such Letter of
Credit).  L/C Fees shall be
(i) computed on a quarterly basis in arrears and (ii) due and payable
on the first Business Day after the end of each March, June, September and
December, commencing with the first such date to occur after the issuance of
such Letter of Credit, on the L/C Expiration Date and thereafter on
demand.  If there is any change in the
Applicable Rate during any quarter, the daily maximum amount of each standby
Letter of Credit shall be computed and multiplied by the Applicable Rate
separately for each period during such quarter that such Applicable Rate was in
effect.  Notwithstanding anything to the
contrary contained herein, upon the request of the Required Lenders, while any
Event of Default exists, all L/C Fees shall accrue at the Default Rate.

 

(j)            Fronting Fee and
Documentary and Processing Charges Payable to L/C Issuer. 
During the time that there are two or more Lenders party to this
Agreement, Borrower shall pay directly to the L/C Issuer for its own
account a fronting fee with respect to each Letter of Credit in the amounts
equal to 1/8 of 1% per annum, payable on the actual daily maximum amount
available to be drawn under such Letter of Credit (whether or not such maximum
amount is then in effect under such Letter of Credit).  Such fronting fee shall be due and payable on
the first Business Day after the end of each March, June, September and December, commencing with the first
such date to occur after the issuance of such Letter of

 

37

 

Credit, on the
L/C Expiration Date and thereafter on demand.  In addition, without regard to the number of
Lenders party to this Agreement, Borrower shall pay directly to the L/C Issuer
for its own account the customary issuance, presentation, amendment and other
processing fees, and other standard costs and charges, of the L/C Issuer
relating to letters of credit as from time to time in effect.  Such individual customary fees and standard
costs and charges are due and payable on demand and are nonrefundable.

 

(k)           Conflict with Issuer
Documents.  In the event of any
conflict between the terms hereof and the terms of any Issuer Documents, the
terms hereof shall control.

 

(l)            Letters of Credit
Issued for Subsidiaries. 
Notwithstanding that a Letter of Credit issued or outstanding hereunder
is in support of any obligations of, or is for the account of, a Subsidiary,
Borrower shall be obligated to reimburse the L/C Issuer hereunder for any and
all drawings under such Letter of Credit. 
Borrower hereby acknowledges that the issuance of Letters of Credit for
the account of Subsidiaries inures to the benefit of Borrower, and that
Borrower’s business derives substantial benefits from the businesses of such
Subsidiaries.

 

2.4          Intentionally Deleted.

 

2.5          Prepayments.

 

(a)           Voluntary
Prepayments.  Borrower may, upon notice
to Agent, at any time or from time to time voluntarily prepay Loans in whole or
in part without premium or penalty; but with accrued interest thereon and any
amounts due under Section 3.5, provided that (i) such notice must
be received by Agent not later than 11:00 a.m. (A) three Business Days
prior to any date of prepayment of Eurodollar Rate Loans or IBOR Rate Loans and
(B) on the date of prepayment of Base Rate Loans; (ii) any prepayment
of Eurodollar Rate Loans or IBOR Rate Loans shall be in a principal amount of
$2,000,000 or a whole multiple of $500,000 in excess thereof; and
(iii) any prepayment of Base Rate Loans shall be in a principal amount of
$500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if
less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and
amount of such prepayment and the Type(s) of Loans to be prepaid.  Agent will promptly notify each Lender of its
receipt of each such notice, and of the amount of such Lender’s Pro Rata Share
of such prepayment.  If such notice is
given by Borrower, Borrower shall make such prepayment and the payment amount
specified in such notice shall be due and payable on the date specified
therein.  Any prepayment of a Eurodollar
Rate Loan or IBOR Rate Loan shall be accompanied by all accrued interest
thereon, together with any additional amounts required pursuant to Section
3.5.  Each such prepayment shall be
applied to the Loans of Lenders in accordance with their respective Pro Rata Shares.

 

(b)           Intentionally Deleted.

 

(c)           Mandatory
Prepayments from Excess Utilization. 
If for any reason the Total Outstandings at any time exceed the
Aggregate Commitments then in effect, Borrower shall immediately prepay Loans
but with accrued interest thereon and any amounts due under Section 3.5, and/or
Cash Collateralize the L/C Obligations in an aggregate amount equal to

 

38

 

such excess; provided, however,
that Borrower shall not be required to Cash Collateralize the L/C Obligations
pursuant to this Section 2.5(c) unless after the prepayment in full of
the Loans the Total Outstandings exceed the Aggregate Commitments then in
effect.

 

(d)           Mandatory
Prepayments and Mandatory Reductions of Commitments.  The Loans shall be prepaid and/or the
Aggregate Commitments shall be permanently reduced in the amounts and under the
circumstances set forth below, and all such prepayments and/or reductions to be
applied as set forth below or as more specifically provided in Section 2.5(e)(ii):

 

(i)            Mandatory
Prepayments and Reductions From Net Asset Sale
Proceeds.  No later than the date of
receipt by Borrower or any of its Subsidiaries of any Net Asset Sale Proceeds
in respect of any Asset Sale, Borrower shall either (1) prepay Loans
and/or permanently reduce the Aggregate Commitments in accordance with Section 2.5(e)(ii),
in each case, in an aggregate amount equal to such Net Asset Sale Proceeds or
(2), so long as no Default or Event of Default shall have occurred and be continuing
and to the extent that the aggregate Net Asset Sale Proceeds from the Closing
Date through the date of determination that are so reinvested or proposed to be
so reinvested under this Section 2.5(d)(i) (together with the
aggregate Net Insurance/Condemnation Proceeds similarly applied from the
Closing Date through the date of determination under Section 2.5(d)(ii)
or Section 6.6(b)(ii)) do not exceed $1,500,000 (plus the Net Asset
Sale Proceeds from the Permitted Sale not exceeding $500,000 to the extent such
Net Asset Sale Proceeds are so reinvested), deliver to Agent an officer’s
certificate setting forth (x) that portion of such Net Asset Sale Proceeds
that Borrower or such Subsidiary intends to reinvest in equipment or other
productive assets of the general type used in the business of Borrower and its
Subsidiaries within 180 days of such date of receipt and (y) the proposed
use of such portion of the Net Asset Sale Proceeds and such other information
with respect to such reinvestment as Agent may reasonably request, and Borrower
shall, or shall cause one or more of its Subsidiaries to, promptly and
diligently apply such portion to such reinvestment purposes; provided, however,
that, pending such reinvestment, such portion of the Net Asset Sale Proceeds
shall be applied to prepay outstanding Loans (without a reduction in the
Aggregate Commitments) to the full extent thereof.  In addition, Borrower shall, no later than
180 days after receipt of such Net Asset Sale Proceeds that have not
theretofore been applied to the Obligations hereunder or that have not been so
reinvested as provided above, make an additional prepayment of the Loans
(and/or the Aggregate Commitments shall be permanently reduced) as set forth
above in the full amount of all such Net Asset Sale Proceeds.

 

(ii)           Prepayments and
Reductions from Net Insurance/Condemnation Proceeds.  No later than three (3) Business Days
following the date of receipt by Agent, Borrower or any of its Subsidiaries of
any Net Insurance/Condemnation Proceeds that are required to be applied to
prepay the Loans and/or reduce the Aggregate Commitments pursuant to Section
6.6(b), Borrower shall either (1) prepay Loans and/or permanently
reduce the Aggregate Commitments in

 

39

 

accordance
with Section 2.5(e)(ii), in each case, in an aggregate amount equal to
such Net Insurance/Condemnation Proceeds or (2), so long as no Default or Event
of Default shall have occurred and be continuing and to the extent that the
aggregate Net Insurance/Condemnation Proceeds from the Closing Date through the
date of determination that are so reinvested or proposed to be so reinvested
under this Section 2.5(d)(ii) or under Section 6.6(b)(ii)
(together with the aggregate Net Asset Sale Proceeds similarly applied from the
Closing Date through the date of determination under Section 2.5(d)(i))
do not exceed $1,500,000 (plus the Net Asset Sale Proceeds from the Permitted
Sale not exceeding $500,000 to the extent such Net Asset Sale Proceeds are so
reinvested), deliver to Agent an officer’s certificate setting forth
(x) that portion of such Net Insurance/Condemnation Proceeds that Borrower
or such Subsidiary intends to reinvest in equipment or other productive assets
of the general type used in the business of Borrower and its Subsidiaries
within 180 days of such date of receipt and (y) the proposed use of such
portion of the Net Insurance/Condemnation Proceeds and such other information
with respect to such reinvestment as Agent may reasonably request, and Borrower
shall, or shall cause one or more of its Subsidiaries to, promptly and
diligently apply such portion to such reinvestment purposes; provided, however,
that, pending such reinvestment, such portion of the Net Insurance/Condemnation
Proceeds shall be applied to prepay outstanding Loans (without a reduction in
the Aggregate Commitments) to the full extent thereof.  In addition, Borrower shall, no later than
180 days after receipt of such Net Insurance/Condemnation Proceeds that have
not theretofore been applied to the Obligations hereunder or that have not been
so reinvested as provided above, make an additional prepayment of the Loans
(and/or the Aggregate Commitments shall be permanently reduced) as set forth
above in the full amount of all such Net Insurance/Condemnation Proceeds.

 

(e)           Application of
Prepayments and Reductions of Aggregate Commitments.

 

(i)            Application of
Voluntary Prepayments by Type of Loans. 
Any voluntary prepayments pursuant to Section 2.5(a) shall be applied as
specified by Borrower in the applicable notice of prepayment; provided that in
the event Borrower fails to specify the Type of Loans to which any such
prepayment shall be applied, such prepayment shall be applied to repay Base
Rate Loans to the full extent thereof before application to Eurodollar Rate
Loans and IBOR Rate Loans, in each case in a manner that minimizes the amount
of any payment required to be made by Borrower pursuant to Section 3.5.

 

(ii)           Application of
Mandatory Prepayments by Type of Loans. 
Except as provided in Section 2.5(c), any amount required to be applied
as a mandatory prepayment of the Loans and/or a reduction of the Aggregate
Commitments shall be applied first to prepay the Loans to the full extent
thereof and to permanently reduce the Aggregate Commitments by the amount of
such prepayment, and second, to the extent of any remaining portion of such
amount, to further permanently reduce the Aggregate Commitments to the full
extent thereof.  Any

 

40

 

mandatory
prepayments pursuant to this Section 2.5 shall be applied as specified
by Borrower in written notice to Agent; provided that in the event Borrower
fails to specify the Type of Loan to which any such prepayment shall be
applied, such prepayment shall be applied to repay Base Rate Loans to the full
extent thereof before application to Eurodollar Rate Loans and IBOR Rate Loans,
in each case in a manner that minimizes the amount of any payment required to
be made by Borrower pursuant to Section 3.5.  Any mandatory reduction of the Aggregate
Commitments pursuant to this Section 2.5(e) shall be in proportion to
each Lender’s Pro Rata Share.

 

2.6          Termination or Reduction
of Commitments.  Borrower may, upon
notice to Agent, terminate the Aggregate Commitments, or from time to time
permanently reduce the Aggregate Commitments; provided that (i) any
such notice shall be received by Agent not later than 11:00 a.m. five Business
Days prior to the date of termination or reduction, (ii) any such partial reduction
shall be in an aggregate amount of $5,000,000 or any whole multiple of
$1,000,000 in excess thereof, (iii) Borrower shall not terminate or reduce
the Aggregate Commitments if, after giving effect thereto and to any concurrent
prepayments hereunder, the Total Outstandings would exceed the Aggregate
Commitments, and (iv) if, after giving effect to any reduction of the Aggregate
Commitments, the L/C Sublimit exceeds the amount of the Aggregate Commitments,
such Sublimit shall be automatically reduced by the amount of such excess.  Agent will promptly notify the Lenders of any
such notice of termination or reduction of the Aggregate Commitments.  Any reduction of the Aggregate Commitments
shall be applied to the Commitment of each Lender according to its Pro Rata
Share.  All fees accrued until the
effective date of any termination of the Aggregate Commitments shall be paid on
the effective date of such termination.

 

2.7          Repayment of Loans.  Borrower shall repay to Lenders on the
Maturity Date the aggregate principal amount of Loans outstanding on such date.

 

2.8          Interest.

 

(a)           Subject to the
provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall
bear interest on the outstanding principal amount thereof for each Interest
Period at a rate per annum equal to the Eurodollar Rate for such Interest
Period plus the Applicable Rate; (ii) each IBOR Rate Loan shall
bear interest on the outstanding principal amount thereof for each Interest
Period at a rate per annum equal to the IBOR Rate for such Interest Period plus
the Applicable Rate and (iii) each Base Rate Loan shall bear interest on
the outstanding principal amount thereof from the applicable borrowing date at
a rate per annum equal to the Base Rate plus the Applicable Rate.

 

(b)           (i)        If
any amount of principal of any Loan is not paid when due (without regard to any
applicable grace periods), whether at stated maturity, by acceleration or
otherwise, such amount shall thereafter bear interest at a fluctuating interest
rate per annum at all times equal to the Default Rate to the fullest extent
permitted by applicable Laws.

 

(ii)           If any amount (other
than principal of any Loan) payable by Borrower under any Loan Document is not
paid when due (without regard to any

 

41

 

applicable
grace periods), whether at stated maturity, by acceleration or otherwise, then
upon the request of the Required Lenders, such amount shall thereafter bear
interest at a fluctuating interest rate per annum at all times equal to the
Default Rate to the fullest extent permitted by applicable Laws.

 

(iii)          Upon the request of the
Required Lenders, while any Event of Default exists, Borrower shall pay
interest on the principal amount of all outstanding Obligations hereunder at a
fluctuating interest rate per annum at all times equal to the Default Rate to
the fullest extent permitted by applicable Laws.

 

(iv)          Accrued
and unpaid interest on past due amounts (including interest on past due
interest) shall be due and payable upon demand.

 

(c)           Interest on each Loan
shall be due and payable in arrears on each Interest Payment Date applicable
thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable
in accordance with the terms hereof before and after judgment, and before and
after the commencement of any proceeding under any Debtor Relief Law.

 

2.9          Fees.  In addition to certain fees described in
subsections (i) and (j) of Section 2.3:

 

(a)           Commitment Fee.  Borrower
shall pay to Agent for the account of each Lender in accordance with its Pro
Rata Share, a commitment fee equal to the Applicable Rate times the
actual daily amount by which the Aggregate Commitments exceed the sum of
(i) the Outstanding Amount of Loans and (ii) the Outstanding Amount of
L/C Obligations.  The commitment fee
shall accrue at all times during the Availability Period, including at any time
during which one or more of the conditions in Article IV is not met, and
shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December,
commencing with the first such date to occur after the Closing Date, and on the
Maturity Date.  The commitment fee shall
be calculated quarterly in arrears, and if there is any change in the
Applicable Rate during any quarter, the actual daily amount shall be computed
and multiplied by the Applicable Rate separately for each period during such
quarter that such Applicable Rate was in effect.

 

(b)           Agent’s Fees.  Borrower shall pay to Agent for Agent’s own account,
fees in the amounts and at the times specified in the letter agreement, dated
as of January 31, 2005 (the “Agent Fee Letter”), between Borrower and
Agent.  Such fees shall be fully earned
when paid and shall be nonrefundable for any reason whatsoever.

 

2.10        Computation of Interest
and Fees.  All computations of
interest for Base Rate Loans when the Base Rate is determined by Bank of
America’s “prime rate” shall be made on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed. 
All other computations of fees and interest shall be made on the basis
of a 360-day year and actual days elapsed (which results in more fees or
interest, as applicable, being paid than if computed on the basis of a 365-day
year).  Interest shall accrue on each
Loan for the day on which the Loan is made, and shall not accrue on a Loan, or
any portion thereof, for the day on which the Loan or

 

42

 

such portion is paid, provided that
any Loan that is repaid on the same day on which it is made shall, subject to Section
2.12(a), bear interest for one day.

 

2.11        Evidence of Debt.

 

(a)           The Credit Extensions
made by each Lender shall be evidenced by one or more accounts or records
maintained by such Lender and by Agent in the ordinary course of business.  The accounts or records maintained by Agent
and each Lender shall be conclusive absent manifest error of the amount of the
Credit Extensions made by Lenders to Borrower and the interest and payments
thereon.  Any failure to so record or any
error in doing so shall not, however, limit or otherwise affect the obligation
of Borrower hereunder to pay any amount owing with respect to the
Obligations.  In the event of any conflict
between the accounts and records maintained by any Lender and the accounts and
records of Agent in respect of such matters, the accounts and records of Agent
shall control in the absence of manifest error. 
Upon the request of any Lender made through Agent, Borrower shall
execute and deliver to such Lender (through Agent) a Note, which shall evidence
such Lender’s Loans in addition to such accounts or records.  Each Lender may attach schedules to its Note
and endorse thereon the date, Type (if applicable), amount and maturity of its
Loans and payments with respect thereto.

 

(b)           In addition to the
accounts and records referred to in subsection (a), each Lender and Agent shall
maintain in accordance with its usual practice accounts or records evidencing
the purchases and sales by such Lender of participations in Letters of
Credit.  In the event of any conflict
between the accounts and records maintained by Agent and the accounts and
records of any Lender in respect of such matters, the accounts and records of
Agent shall control in the absence of manifest error.

 

2.12        Payments Generally.

 

(a)(i)        All
payments to be made by Borrower shall be made without condition or deduction
for any counterclaim, defense, recoupment or setoff.  Except as otherwise
expressly provided herein, all payments by Borrower hereunder shall be made to
Agent, for the account of the respective Lenders to which such payment is owed,
at the Agent’s Office in Dollars and in immediately available funds not later
than 12:00 noon on the date specified herein.  Agent will promptly distribute to each Lender
its Pro Rata Share (or other applicable share as provided herein) of such
payment in like funds as received by wire transfer to such Lender’s Lending
Office.  All payments received by Agent
after 12:00 noon shall be deemed received on the next succeeding Business Day
and any applicable interest or fee shall continue to accrue.

 

(a)(ii)On each date when the payment of any principal, interest or fees
are due hereunder or under any Note, Borrower agrees to maintain on deposit in
an ordinary checking account maintained by Borrower with Agent (as such account
shall be designated by Borrower in a written notice to Agent from time to time,
the “Borrower Account”) an amount sufficient to pay such principal,
interest or fees in full on such date. 
Borrower hereby authorizes Agent (A) to deduct automatically all
principal, interest or fees when due hereunder or under any Note from the
Borrower Account, and (B) if and to the extent any payment of principal,
interest or fees under this Agreement or any Note is not made when due to
deduct any such amount from any or all of the accounts of Borrower maintained
at Agent.  Agent agrees to provide
written notice to

 

43

 

Borrower of
any automatic deduction made pursuant to this Section 2.12(a)(ii) showing in reasonable detail the amounts of such
deduction.  Lenders agree to reimburse
Borrower based on their Pro Rata Share for any amounts deducted from such
accounts in excess of amount due hereunder and under any other Loan Documents.

 

(a)           If any payment to be
made by Borrower shall come due on a day other than a Business Day, payment
shall be made on the next following Business Day, and such extension of time
shall be reflected in computing interest or fees, as the case may be.

 

(b)           Unless Borrower or any
Lender has notified Agent, prior to the date any payment is required to be made
by it to Agent hereunder, that Borrower or such Lender, as the case may be,
will not make such payment, Agent may assume that Borrower or such Lender, as
the case may be, has timely made such payment and may (but shall not be so
required to), in reliance thereon, make available a corresponding amount to the
Person entitled thereto.  If and to the
extent that such payment was not in fact made to Agent in immediately available
funds, then:

 

(i)            if Borrower failed to
make such payment, each Lender shall forthwith on demand repay to Agent the
portion of such assumed payment that was made available to such Lender in
immediately available funds, together with interest thereon in respect of each
day from and including the date such amount was made available by Agent to such
Lender to the date such amount is repaid to Agent in immediately available
funds at the Federal Funds Rate from time to time in effect; and

 

(ii)           if any Lender failed to
make such payment, such Lender shall forthwith on demand pay to Agent the
amount thereof in immediately available funds, together with interest thereon
for the period from the date such amount was made available by Agent to
Borrower to the date such amount is recovered by Agent (the “Compensation
Period”) at a rate per annum equal to the Federal Funds Rate from time to
time in effect. If such Lender pays such amount to Agent, then such amount
shall constitute such Lender’s Loan included in the applicable Borrowing.  If such Lender does not pay such amount
forthwith upon Agent’s demand therefor, Agent may make a demand therefor upon
Borrower, and Borrower shall pay such amount to Agent, together with interest
thereon for the Compensation Period at a rate per annum equal to the rate of
interest applicable to the applicable Borrowing.  Nothing herein shall be deemed to relieve any
Lender from its obligation to fulfill its Commitment or to prejudice any rights
which Agent or Borrower may have against any Lender as a result of any default
by such Lender hereunder.

 

A notice of Agent to any Lender or Borrower with respect to any amount
owing under this subsection (c) shall be conclusive, absent manifest error.

 

(c)           If any Lender makes
available to Agent funds for any Loan to be made by such Lender as provided in
the foregoing provisions of this Article II, and such funds are not made
available to Borrower by Agent because the conditions to the applicable Credit

 

44

 

Extension set forth in Article IV are
not satisfied or waived in accordance with the terms hereof, Agent shall return
such funds (in like funds as received from such Lender) to such Lender, without
interest.

 

(d)           The obligations of the
Lenders hereunder to make Loans and to fund participations in Letters of Credit
are several and not joint.  The failure
of any Lender to make any Loan or to fund any such participation on any date
required hereunder shall not relieve any other Lender of its corresponding
obligation to do so on such date, and no Lender shall be responsible for the
failure of any other Lender to so make its Loan or purchase its participation.

 

(e)           Nothing herein shall be
deemed to obligate any Lender to obtain the funds for any Loan in any
particular place or manner or to constitute a representation by any Lender that
it has obtained or will obtain the funds for any Loan in any particular place
or manner.

 

2.13        Sharing of Payments.  If, other than as expressly provided
elsewhere herein, any Lender shall obtain on account of the Loans made by it,
or the participations in L/C Obligations held by it, any payment (whether
voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) in excess of its ratable share (or other share contemplated
hereunder) thereof, such Lender shall immediately (a) notify Agent of such
fact, and (b) purchase from the other Lenders such participations in the
Loans made by them and/or such subparticipations in the participations in L/C
Obligations held by them, as the case may be, as shall be necessary to cause
such purchasing Lender to share the excess payment in respect of such Loans or
such participations, as the case may be, pro rata with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from the purchasing Lender under any of the circumstances described
in Section 10.6 (including pursuant to any settlement entered into by
the purchasing Lender in its discretion), such purchase shall to that extent be
rescinded and each other Lender shall repay to the purchasing Lender the
purchase price paid therefor, together with an amount equal to such paying
Lender’s ratable share (according to the proportion of (i) the amount of
such paying Lender’s required repayment to (ii) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered,
without further interest thereon. 
Borrower agrees that any Lender so purchasing a participation from
another Lender may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off, but subject to Section
10.9) with respect to such participation as fully as if such Lender were
the direct creditor of Borrower in the amount of such participation.  Agent will keep records (which shall be
conclusive and binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the Lenders following
any such purchases or repayments.  Each
Lender that purchases a participation pursuant to this
Section shall from and after such purchase have the right to give all notices,
requests, demands, directions and other communications under this Agreement
with respect to the portion of the Obligations purchased to the same extent as
though the purchasing Lender were the original owner of the Obligations
purchased.

 

45

 

ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY

 

3.1          Taxes.

 

(a)           Any and all payments by
Borrower to or for the account of Agent or any Lender under any Loan Document
shall be made free and clear of and without deduction for any and all present
or future taxes, duties, levies, imposts, deductions, assessments, fees,
withholdings or similar charges, and all liabilities with respect thereto,
excluding, in the case of Agent and each Lender, taxes imposed on or measured
by its overall net income, and franchise taxes imposed on it (in lieu of net
income taxes), by the jurisdiction (or any political subdivision thereof) under
the Laws of which Agent or such Lender, as the case may be, is organized or
maintains a lending office (all such non-excluded taxes, duties, levies,
imposts, deductions, assessments, fees, withholdings or similar charges, and
liabilities being hereinafter referred to as “Taxes”).  If Borrower shall be required by any Laws to
deduct any Taxes from or in respect of any sum payable under any Loan Document
to Agent or any Lender, (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section), each of Agent and
such Lender receives an amount equal to the sum it would have received had no
such deductions been made, (ii) Borrower shall make such deductions,
(iii) Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable Laws, and (iv)
within 30 days after the date of such payment, Borrower shall furnish to Agent
(which shall forward the same to such Lender) the original or a certified copy
of a receipt evidencing payment thereof.

 

(b)           In addition, Borrower
agrees to pay any and all present or future stamp, court or documentary taxes
and any other excise or property taxes or charges or similar levies which arise
from any payment made under any Loan Document or from the execution, delivery,
performance, enforcement or registration of, or otherwise with respect to, any
Loan Document (hereinafter referred to as “Other Taxes”).

 

(c)           If Borrower shall be
required to deduct or pay any Taxes or Other Taxes from or in respect of any
sum payable under any Loan Document to Agent or any Lender (excluding Taxes for
which Borrower is not responsible under Section 3.1(e)), Borrower
shall also pay to Agent or to such Lender, as the case may be, at the time
interest is paid, such additional amount that Agent or such Lender specifies is
necessary to preserve the after-tax yield (after factoring in all taxes,
including taxes imposed on or measured by net income) that Agent or such Lender
would have received if such Taxes or Other Taxes had not been imposed.

 

(d)           Borrower agrees to
indemnify Agent and each Lender for (i) the full amount of Taxes and Other
Taxes (including any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this Section but excluding Taxes for
which Borrower is not responsible under Section 3.1(e)) paid by Agent
and such Lender, (ii) amounts payable under Section 3.1(c) and
(iii) any liability (including additions to tax, penalties, interest and
expenses) arising therefrom or with respect thereto, in each case whether or not
such Taxes or Other Taxes were correctly or legally imposed or asserted by the
relevant

 

46

 

Governmental Authority.  Payment under this subsection (d) shall be
made within 30 days after the date Lender or Agent makes a demand therefor.

 

(e)           For any period with
respect to which a Lender has failed to provide Borrower or Agent with the
appropriate form as required by Section 10.19 (whether or not such Lender is
lawfully able to do so, unless such failure is due to a change in treaty, law
or regulation occurring subsequent to the date on which such form originally
was required to be provided), such Lender shall not be entitled to
indemnification under this Section 3.1 with respect to Taxes imposed on such Lender;
provided that if a Lender, which is otherwise exempt from withholding tax,
becomes subject to Taxes because of its failure to deliver a form required
hereunder, Borrower shall take such steps as such Lender shall reasonably
request, at the Lender’s expense, to assist such Lender to recover such Taxes.

 

3.2          Illegality.  If any Lender determines that any Law has
made it unlawful, or that any Governmental Authority has asserted that it is
unlawful, for any Lender or its applicable Lending Office to make, maintain or
fund Eurodollar Rate Loans or IBOR Rate Loans, or to determine or charge
interest rates based upon the Eurodollar Rate or IBOR Rate, then, on notice
thereof by such Lender to Borrower through Agent, any obligation of such Lender
to make or continue Eurodollar Rate Loans or IBOR Rate Loans or to convert Base
Rate Loans to Eurodollar Rate Loans or IBOR Rate Loans shall be suspended until
such Lender notifies Agent and Borrower that the circumstances giving rise to
such determination no longer exist.  Upon
receipt of such notice, Borrower shall, upon demand from such Lender (with a
copy to Agent), prepay or, if applicable, convert all Eurodollar Rate Loans or
IBOR Rate Loans of such Lender to Base Rate Loans, either on the last day of
the Interest Period therefor, if such Lender may lawfully continue to maintain
such Eurodollar Rate Loans or IBOR Rate Loans to such day, or immediately, if
such Lender may not lawfully continue to maintain such Eurodollar Rate Loans or
IBOR Rate Loans.  Upon any such prepayment
or conversion, Borrower shall also pay accrued interest on the amount so
prepaid or converted and all amounts due under Section 3.5 in accordance
with the terms thereof due to such prepayment or conversion.  Each Lender agrees to designate a different
Lending Office if such designation will avoid the need for such notice and will
not, in the good faith judgment of such Lender, otherwise be materially
disadvantageous to such Lender.

 

3.3          Inability to Determine
Rates.  If Agent determines in
connection with any request for a Eurodollar Rate Loan or IBOR Rate Loan or a
conversion to or continuation thereof for any reason that (a) Dollar
deposits are not being offered to banks in the London interbank Eurodollar
market for the applicable amount and Interest Period of such Eurodollar Rate
Loan or IBOR Rate Loan, (b) adequate and reasonable means do not exist for
determining the Eurodollar Base Rate or IBOR Base Rate for any requested
Interest Period with respect to a proposed Eurodollar Rate Loan or IBOR Rate
Loan, as applicable, or (c) that the Eurodollar Base Rate or IBOR Base
Rate for any requested Interest Period with respect to a proposed Eurodollar
Rate Loan or IBOR Rate Loan, as applicable, does not adequately and fairly
reflect the cost to such Lenders of funding such Loan, Agent will promptly so
notify Borrower and each Lender. 
Thereafter, the obligation of Lenders to make or maintain Eurodollar
Rate Loans or IBOR Rate Loans shall be suspended until Agent (upon the
instruction of the Required Lenders) revokes such notice.  Upon receipt of such notice, Borrower may
revoke any pending request for a Borrowing of, conversion to or continuation of
Eurodollar Rate Loans or IBOR Rate Loans or,

 

47

 

failing that, will be deemed to have
converted such request into a request for a Borrowing of Base Rate Loans in the
amount specified therein.

 

3.4          Increased Cost and
Reduced Return; Capital Adequacy.

 

(a)           If any Lender
determines that as a result of the introduction of or any change in or in the
interpretation of any Law, or such Lender’s compliance therewith, there shall
be any increase in the cost to such Lender of agreeing to make or making,
funding or maintaining Eurodollar Rate Loans or IBOR Rate Loans (as the case
may be) or issuing or participating in Letters of Credit, or a reduction in the
amount received or receivable by such Lender in connection with any of the
foregoing (excluding for purposes of this subsection (a) any such
increased costs or reduction in amount resulting from (i) Taxes or Other
Taxes (as to which Section 3.1 shall govern), (ii) changes in the
basis of taxation of overall net income or overall gross income by the United
States or any foreign jurisdiction or any political subdivision of either
thereof under the Laws of which such Lender is organized or has its Lending
Office, and (iii) reserve requirements utilized in the determination of
the Eurodollar Rate or IBOR Rate), then from time to time within 5 days after
demand of such Lender (with a copy of such demand to Agent), Borrower shall pay
to such Lender such additional amounts as will compensate such Lender for such
increased cost or reduction.  If as a
result of the foregoing, Borrower is required to pay to any Lender any
additional amounts, such Lender agrees to use commercially reasonable efforts
to designate a different Lending Office if such designation will avoid such
increased cost or reduced return and will not, in the good faith judgment of
such Lender, otherwise be materially disadvantageous to such Lender.

 

(b)           If any Lender
determines that the introduction of any Law regarding capital adequacy or any
change therein or in the interpretation thereof, or compliance by such Lender
(or its Lending Office) therewith, has the effect of reducing the rate of
return on the capital of such Lender or any corporation controlling such Lender
as a consequence of such Lender’s obligations hereunder (taking into
consideration its policies with respect to capital adequacy and such Lender’s
desired return on capital), then from time to time within 5 days after demand
of such Lender (with a copy of such demand to Agent), Borrower shall pay to
such Lender such additional amounts as will compensate such Lender for such
reduction.

 

3.5          Compensation for Losses.  Upon demand of any Lender (with a copy to
Agent) from time to time, Borrower shall promptly compensate such Lender for
and hold such Lender harmless from any loss, cost or expense incurred by it as
a result of:

 

(a)           any continuation,
conversion, payment or prepayment of any Loan other than a Base Rate Loan on a
day other than the last day of the Interest Period for such Loan (whether
voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or

 

(b)           any failure by Borrower
(for a reason other than the failure of such Lender to make a Loan) to prepay,
borrow, continue or convert any Loan other than a Base Rate Loan on the date or
in the amount notified by Borrower; including any loss or expense arising from
the liquidation or reemployment of funds obtained by it to maintain such Loan
or from fees payable to terminate the deposits from which such funds were
obtained.  Borrower shall also pay any
customary administrative fees charged by such Lender in connection with

 

48

 

the foregoing.  For purposes of calculating amounts payable
by Borrower to Lenders under this Section 3.5, each Lender shall be
deemed to have funded each Eurodollar Rate Loan or IBOR Rate Loan made by it at
the Eurodollar Base Rate or IBOR Base Rate used in determining the Eurodollar
Rate or IBOR Rate, as applicable, for such Loan by a matching deposit or other
borrowing in the London interbank Eurodollar market for a comparable amount and
for a comparable period, whether or not such Eurodollar Rate Loan or IBOR Rate
Loan was in fact so funded.

 

3.6          Matters Applicable to all Requests
for Compensation.  A certificate
of Agent or any Lender claiming compensation under this Article III and
setting forth the additional amount or amounts to be paid to it hereunder and
setting forth an explanation therefor shall be conclusive in the absence of
manifest error.  In determining such
amount, Agent or such Lender may use any reasonable averaging and attribution
methods.

 

3.7          Survival. 
All of Borrower’s obligations under this Article III shall
survive termination of the Aggregate Commitments and repayment of all other
Obligations hereunder.

 

ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

4.1          Conditions
of Initial Credit Extension.  The obligation of each Lender to make its
initial Credit Extension hereunder is subject to satisfaction of the following
conditions precedent:

 

(a)           Closing Documents.  Agent’s receipt of the following, each of
which shall be originals or facsimiles (followed promptly by originals) unless
otherwise specified, each properly executed by a Responsible Officer of the
signing Loan Party, each dated the Closing Date (or, in the case of
certificates of governmental officials, a recent date before the Closing Date)
and each in form and substance satisfactory to Agent and each of the Lenders:

 

(i)            executed
counterparts of this Agreement and the other Loan Documents,
sufficient in number for distribution to Agent, each Lender and Borrower;

 

(ii)           a
Note executed by Borrower in favor of each Lender requesting a Note;

 

(iii)          such certificates of
resolutions or other action, incumbency certificates and/or other certificates
of Responsible Officers of each Loan Party as Agent may require evidencing the
identity, authority and capacity of each Responsible Officer thereof authorized
to act as a Responsible Officer in connection with this Agreement and the other
Loan Documents to which such Loan Party is a party;

 

(iv)          such documents and
certifications as Agent may reasonably require to evidence that each Loan Party
is duly organized or formed (including copies of Organization Documents of each
Loan Party certified by the Secretary of State of its jurisdiction of
incorporation), and that each Loan Party is validly existing, in good standing
and qualified to engage in business in each jurisdiction where its

 

49

 

ownership,
lease or operation of properties or the conduct of its business requires such
qualification, except to the extent that failure to do so could not reasonably
be expected to have a Material Adverse Effect;

 

(v)           a favorable opinion of
counsel to the Loan Parties substantially in the form of Exhibits K-1
and K-2 annexed hereto acceptable to Agent addressed to Agent and each
Lender, as to the matters set forth concerning the Loan Parties and the Loan
Documents in form and substance satisfactory to Agent;

 

(vi)          a certificate of a
Responsible Officer of each Loan Party either (A) attaching copies of all
consents, licenses and approvals required in connection with the execution,
delivery and performance by such Loan Party and the validity against such Loan
Party of the Loan Documents to which it is a party, and such consents, licenses
and approvals shall be in full force and effect, or (B) stating that no
such consents, licenses or approvals are so required;

 

(vii)         a certificate signed by a
Responsible Officer of Borrower certifying (A) that the conditions
specified in Sections 4.2(a) and (b) have been satisfied, and
(B) other than the filing of the lawsuit described in item number 1 in Schedule
5.6, that there has been no event or circumstance since December 31,
2003 that has had or could be reasonably expected to have, either individually
or in the aggregate, a Material Adverse Effect;

 

(viii)        evidence
that all insurance required to be maintained pursuant to the Loan Documents has
been obtained and is in effect;

 

(ix)           a duly completed
Compliance Certificate as of the last day of the fiscal quarter of Borrower
most recently ended prior to the Closing Date, signed by a Responsible Officer
of Borrower, which Compliance Certificate shall show that Borrower is in
compliance with all of the covenants as of such last day;

 

(x)            evidence that all
commitments under the Business Loan Agreement dated August 29, 2002 among
Borrower, Comerica Bank, as agent and a syndicate of lenders (the “Existing Credit Agreement”) have
been or concurrently with the Closing Date are being terminated, and all
outstanding amounts thereunder paid in full and all Liens securing obligations
under the Existing Credit Agreement have been or concurrently with the Closing
Date are being released;

 

(xi)           an officers’
certificate of each Loan Party dated the Closing Date, substantially in the
form of Exhibit J annexed hereto and with appropriate attachments, in each case
demonstrating that, after giving effect to the consummation of the transactions
contemplated by the Loan Documents, such Loan Party on a consolidated basis
will be Solvent; and

 

(xii)          such
other assurances, certificates, documents, consents or opinions as Agent, the
L/C Issuer or the Required Lenders reasonably may require.

 

50

 

(b)           Fees.  Any fees required to be paid on or before the
Closing Date shall have been paid.

 

(c)           Attorneys’ Fees.  Unless waived by Agent, Borrower shall have
paid all Attorney Costs of Agent to the extent invoiced prior to or on the
Closing Date, plus such additional amounts of Attorney Costs as shall
constitute its reasonable estimate of Attorney Costs incurred or to be incurred
by it through the closing proceedings (provided that such estimate shall not
thereafter preclude a final settling of accounts between Borrower and Agent).

 

(d)           Closing Date.  The Closing Date shall have occurred on or
before January 18, 2005.

 

(e)           No Litigation.  Except as specifically disclosed in Schedule
5.6, no action, suit, investigation or proceeding shall be pending or
threatened in any court or before any arbitrator or Governmental Authority that
purports to (i) have a Material Adverse Effect on Borrower, or
(ii) affect any transaction contemplated hereunder or the ability of
Borrower or any other Loan Party to perform their respective obligations under
the Loan Documents to which they are a party.

 

(f)            Security Interests
in Personal and Mixed Property. 
Agent shall have received evidence satisfactory to it that each Loan
Party shall have taken or caused to be taken all such actions, executed and
delivered or caused to be executed and delivered all such agreements, documents
and instruments, and made or caused to be made all such filings and recordings
(other than the filing or recording of items described in clauses (ii), (iii)
and (iv) below) that may be necessary or, in the opinion of Agent, desirable in
order to create in favor of Agent, for the benefit of Lenders, a valid and
(upon such filing and recording) perfected First Priority Lien (except for
Liens permitted under clauses (b) through (i) of Section 7.1) on the
entire personal and mixed property Collateral. 
Such actions shall include the following:

 

(i)            Stock Certificates;
Instruments.  Delivery to Agent of
(a) certificates (which certificates shall be accompanied by irrevocable
undated stock power, duly endorsed in blank and otherwise satisfactory in form
and substance to Agent) representing all Capital Stock pledged pursuant to the
Security Agreement, and (b) all promissory notes or other instruments
(duly endorsed, where appropriate, in a manner satisfactory to Agent)
evidencing any Collateral;

 

(ii)           Lien Searches and UCC
Termination Statements.  Delivery to
Agent of (a) the results of a recent search, by a Person satisfactory to
Agent, of all effective UCC financing statements and fixture filings and all
judgment and tax lien filings (or similar filings in the applicable foreign
jurisdictions) which may have been made with respect to any personal or mixed
property of Borrower or any Subsidiary that is a Loan Party, together with
copies of all such filings disclosed by such search, and (b) UCC
termination statements (or similar terminations in the applicable foreign
jurisdictions) duly executed by all applicable Persons for filing in all
applicable jurisdictions as may be necessary to terminate any effective UCC
financing statements or fixture filings (or similar

 

51

 

filings in the
applicable foreign jurisdictions) disclosed in such search (other than any such
financing statements or fixture filings in respect of Liens permitted to remain
outstanding pursuant to the terms of this Agreement).

 

(iii)          UCC Financing
Statements.  Delivery to Agent of UCC
financing statements, with respect to all personal and mixed property
Collateral of such Loan Party, for filing in all jurisdictions as may be
necessary or, in the opinion of Agent, desirable to perfect the security
interests created in such Collateral pursuant to the Collateral Documents;
and

 

(iv)          Cover
Sheets, Etc.  Delivery to Agent of
all cover sheets or other documents or instruments required to be filed with
any IP Filing Office in order to create or perfect Liens in respect of any IP
Collateral, together with releases duly executed (if necessary) of security
interests by all applicable Persons for filing in all applicable jurisdictions
as may be necessary to terminate any effective filings in any IP Filing Office
in respect of any IP Collateral (other than any such filings in respect of
Liens permitted to remain outstanding pursuant to the terms of this Agreement).

 

4.2          Conditions to all Credit
Extensions.  The obligation of each
Lender to honor any Request for Credit Extension (other than a conversion or
continuation of Loans) is subject to the following conditions precedent:

 

(a)           The representations and
warranties of Borrower and each other Loan Party contained in Article V
or any other Loan Document, or which are contained in any document furnished at
any time under or in connection herewith or therewith, shall be true and
correct on and as of the date of such Credit Extension, except to the extent
that such representations and warranties specifically refer to an earlier date,
in which case they shall be true and correct as of such earlier date, and
except that for purposes of this Section 4.2, the representations and
warranties contained in subsections (a) and (b) of Section 5.5 shall be
deemed to refer to the most recent statements furnished pursuant to clauses (a)
and (b), respectively, of Section 6.1.

 

(b)           No Default shall exist,
or would result from such proposed Credit Extension.

 

(c)           Agent and, if
applicable, the L/C Issuer shall have received a Request for Credit Extension
in accordance with the requirements hereof.

 

(d)           Agent shall have
received, in form and substance satisfactory to it, such other assurances,
certificates, documents or consents related to the foregoing as Agent or the
Required Lenders reasonably may require.

 

Each Request for Credit Extension submitted by Borrower shall be deemed
to be a representation and warranty that the conditions specified in Sections
4.2(a) and (b) have been satisfied on and as of the date of the
applicable Credit Extension.

 

52

 

ARTICLE V REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants to Agent and the Lenders that:

 

5.1          Existence, Qualification
and Power; Compliance with Laws. 
Each Loan Party (a) is duly organized or formed, validly existing
and in good standing under the Laws of the jurisdiction of its incorporation or
organization, (b) has all requisite power and authority and all requisite
governmental licenses, authorizations, consents and approvals to (i) own
its assets and carry on its business and (ii) execute, deliver and perform
its obligations under the Loan Documents to which it is a party, (c) is
duly qualified and is licensed and in good standing under the Laws of each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification or license, and (d) is
in compliance with all Laws; except in each case referred to in clause (b)(i),
(c) or (d), to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect.

 

5.2          Authorization; No
Contravention.  The execution,
delivery and performance by each Loan Party of each Loan Document to which such
Person is party, have been duly authorized by all necessary corporate or other
organizational action, and do not and will not (a) contravene the terms of
any of such Person’s Organization Documents; (b) conflict with or result
in any breach or contravention of, or the creation of any Lien under,
(i) any Contractual Obligation to which such Person is a party or
(ii) any order, injunction, writ or decree of any Governmental Authority
or any arbitral award to which such Person or its property is subject; or (c) violate
any Law applicable to any Loan Party.

 

5.3          Governmental
Authorization; Other Consents. 
Except for filings necessary to perfect Liens granted under the Loan
Documents, no approval, consent, exemption, authorization, or other action by,
or notice to, or filing with, any Governmental Authority or any other Person is
necessary or required in connection with the execution, delivery or performance
by any Loan Party of this Agreement or any other Loan Document.

 

5.4          Binding Effect.  This Agreement has been, and each other Loan
Document, when delivered hereunder, will have been, duly executed and delivered
by each Loan Party that is party thereto. 
This Agreement constitutes, and each other Loan Document when so
delivered will constitute, a legal, valid and binding obligation of such Loan
Party, enforceable against each Loan Party that is party thereto in accordance
with its terms.

 

5.5          Financial Statements; No
Material Adverse Effect.

 

(a)           The Audited Financial
Statements (i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein; (ii) fairly present the financial condition of Borrower and its
Subsidiaries as of the date thereof and their results of operations for the
period covered thereby in accordance with GAAP consistently applied throughout
the period covered thereby, except as otherwise expressly noted therein; and
(iii) show all material indebtedness and other liabilities, direct or
contingent, of Borrower and its Subsidiaries as of the date thereof required to
be disclosed under GAAP, including liabilities for taxes, material commitments
and Indebtedness.

 

53

 

(b)           The unaudited
consolidated balance sheet of Borrower and its Subsidiaries dated
September 30, 2004, and the related consolidated statements of income or
operations, shareholders’ equity and cash flows for the fiscal quarter ended on
that date (i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein, and (ii) fairly present the financial condition of Borrower and
its Subsidiaries as of the date thereof and their results of operations for the
period covered thereby, subject, in the case of clauses (i) and (ii), to the
absence of footnotes and to normal year-end audit adjustments.

 

(c)           Other than the filing
of the lawsuit described in item number 1 in Schedule 5.6, since
December 31, 2003, there has been no event or circumstance, either individually
or in the aggregate, that has had or could reasonably be expected to have a
Material Adverse Effect.

 

(d)           As of December 31,
2004, the Net Worth of Borrower and its Subsidiaries
on a consolidated basis is at least $80,000,000.

 

5.6          Litigation.  Except as specifically disclosed in Schedule
5.6, there are no actions, suits, proceedings, claims or disputes pending
or, to the knowledge of Borrower, threatened or contemplated, at law, in
equity, in arbitration or before any Governmental Authority, by or against
Borrower or any of its Subsidiaries or against any of their properties or
revenues that (a) purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby, or
(b) either individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect.

 

5.7          No Default.  Neither Borrower nor any Subsidiary is in
default under or with respect to any Contractual Obligation that could, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  No Default has occurred
and is continuing or would result from the consummation of the transactions
contemplated by this Agreement or any other Loan Document.

 

5.8          Ownership of Property;
Liens.  Each of Borrower and each
Subsidiary has good record and marketable title in fee simple to, or valid
leasehold interests in, all real property necessary or used in the ordinary
conduct of its business, except for such defects in title as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  The property of Borrower
and its Subsidiaries is subject to no Liens, other than Liens permitted by Section
7.1.

 

5.9          Environmental
Compliance.  Borrower and its
Subsidiaries conduct in the ordinary course of business a review of the effect
of existing Environmental Laws and claims alleging potential liability or
responsibility for violation of any Environmental Law on their respective
businesses, operations and properties, and as a result thereof Borrower has
reasonably concluded that, except as specifically disclosed in Schedule 5.9,
such Environmental Laws and claims could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

54

 

5.10        Insurance.  The properties of Borrower and its
Subsidiaries are insured with financially sound and reputable insurance
companies not Affiliates of Borrower, in such amounts (after giving effect to
any self-insurance compatible with the following standards), with such
deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities where
Borrower or the applicable Subsidiary operates.

 

5.11        Taxes.  Borrower and its Subsidiaries have filed all
Federal, state and other material tax returns and reports required to be filed,
and have paid all Federal, state and other material taxes, assessments, fees
and other governmental charges levied or imposed upon them or their properties,
income or assets otherwise due and payable, except those which are being
contested in good faith by appropriate proceedings diligently conducted and for
which adequate reserves have been provided in accordance with GAAP.  There is no proposed tax assessment against
Borrower or any Subsidiary that would, if made, have a Material Adverse Effect.

 

5.12        ERISA Compliance.

 

(a)           Each Plan is in
compliance in all material respects with the applicable provisions of ERISA,
the Code and other Federal or state Laws. 
Each Plan that is intended to qualify under Section 401(a) of the Code
has received a favorable determination letter from the IRS or an application
for such a letter is currently being processed by the IRS with respect thereto
or the remedial amendment period to file such application has not expired and,
to the best knowledge of Borrower, nothing has occurred which would prevent, or
cause the loss of, such qualification.  Borrower
and each ERISA Affiliate have made all required contributions to each Plan
subject to Section 412 of the Code, and no application for a funding waiver or
an extension of any amortization period pursuant to Section 412 of the Code has
been made with respect to any Plan.

 

(b)           There are no pending
or, to the best knowledge of Borrower, threatened claims, actions or lawsuits,
or action by any Governmental Authority, with respect to any Plan that could be
reasonably be expected to have a Material Adverse Effect.  There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan that
has resulted or could reasonably be expected to result in a Material Adverse
Effect.

 

(c)           (i)  No ERISA Event has occurred or is reasonably
expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability;
(iii) neither Borrower nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability under Title IV of ERISA with respect to any
Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither Borrower nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such liability)
under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and
(v) neither Borrower nor any ERISA Affiliate has engaged in a transaction that
could be subject to Sections 4069 or 4212(c) of ERISA.

 

5.13        Subsidiaries.  As of the Closing Date,  Borrower has no Subsidiaries other
than those specifically disclosed in Part (a) of Schedule 5.13 and has
no equity investments in any other corporation or entity other than those
specifically disclosed in Part(b) of Schedule 5.13.

 

55

 

Neither the book value nor the fair market value of the total assets of
OSC (without netting against its liabilities and without taking into account
any intercompany loan (if any) receivable by OSC as of the Closing Date and
described in Schedule 7 of the Security Agreement) exceeds $10,000 and OSC does
not and will not engage in any operations or business other than owning its IP
Rights. Neither the book value nor the fair market value of the total assets of
any Dormant Foreign Subsidiary (without netting against its liabilities and
without taking into account any intercompany loan (if any) receivable by such
Dormant Foreign Subsidiary as of the Closing Date and described in Schedule 7
of the Security Agreement) exceeds $100,000 and none of the Dormant Foreign
Subsidiaries engages in or will engage in any operations or business.

 

5.14        Margin Regulations;
Investment Company Act; Public Utility Holding Company Act.

 

(a)           Borrower is not engaged
and will not engage, principally or as one of its important activities, in the
business of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the FRB), or extending credit for the purpose of
purchasing or carrying margin stock.  No part of the proceeds of any Credit
Extensions hereunder will be used for “purchasing” or “carrying” “margin stock”
as so defined or for any purpose which violates, or which would be inconsistent
with, the provisions of Regulations U or X of the FRB.

 

(b)           None of Borrower, any Person
Controlling Borrower, or any Subsidiary (i) is a “holding company,” or a “subsidiary
company” of a “holding company,” or an “affiliate” of a “holding company” or of
a “subsidiary company” of a “holding company,” within the meaning of the Public
Utility Holding Company Act of 1935, or (ii) is or is required to be
registered as an “investment company” under the Investment Company Act of 1940.

 

5.15        Disclosure.  Borrower has disclosed to Agent and Lenders
all agreements, instruments and corporate or other restrictions to which it or
any of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.  No report,
financial statement, certificate or other information furnished (whether in
writing or orally) by or on behalf of any Loan Party to Agent or any Lender in
connection with the transactions contemplated hereby and the negotiation of
this Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits
to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided
that, with respect to projected financial information, Borrower represents only
that such information was prepared in good faith based upon assumptions
believed to be reasonable at the time.

 

5.16        Compliance with Laws.  Each of Borrower and each Subsidiary is in
compliance in all material respects with the requirements of all Laws and all
orders, writs, injunctions and decrees applicable to it or to its properties,
except in such instances in which (a) such requirement of Law or order,
writ, injunction or decree is being contested in good faith by appropriate
proceedings diligently conducted or (b) the failure to comply therewith,
either individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.

 

56

 

5.17        Intellectual Property;
Licenses, Etc. 

Except for
the matters described Schedule 5.6:

 

(a)           Borrower and its
Subsidiaries own, or possess the right to use, all of the trademarks, service
marks, trade names, copyrights, patents, patent rights, franchises, licenses
and other intellectual property rights (collectively, “IP Rights”) that
are reasonably necessary for the operation of their respective businesses,
without conflict with the rights of any other Person;

 

(b)           To the best knowledge
of Borrower, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by Borrower or any Subsidiary infringes in any material respect upon
any rights held by any other Person; and

 

(c)           No claim or litigation
regarding any of the foregoing is pending or, to the best knowledge of
Borrower, threatened, which, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.

 

5.18        Rights in Collateral;
Priority of Liens.

 

(a)           Borrower and each other
Loan Party own the property granted by it as Collateral under the Collateral
Documents, free and clear of any and all Liens in favor of third parties,
except for Liens permitted under Section 7.1.  The
execution and delivery of the Collateral Documents by Loan Parties and the
delivery to Agent of the Pledged Collateral (all of which Pledged Collateral
has been so delivered) are effective to create in favor of Agent for the benefit
of Lenders, as security for the respective Obligations (as defined in the
applicable Collateral Document in respect of any Collateral), a valid and
perfected First Priority Lien on all of the Collateral, subject to Liens
permitted under clauses (b) through (i) of Section 7.1, and all filings
and other actions necessary or desirable to perfect and maintain the perfection
and first priority status of such Liens have been duly made or taken and remain
in full force and effect, subject to Liens permitted under clauses (b) through
(i) of Section 7.1, other than the filing of any UCC financing
statements delivered to Agent for filing (but not yet filed) and the periodic
filing of UCC continuation statements in respect of UCC financing statements
filed by or on behalf of Agent.  Upon the
proper filing of UCC financing statements, and the taking of the other actions
required by the Required Lenders, the Liens granted pursuant to the Collateral
Documents will constitute, subject to Liens permitted under clauses (b) through
(i) of Section 7.1, valid and enforceable first, prior and perfected
Liens on the Collateral in favor of Agent, for the ratable benefit of Agent and
Lenders.

 

(b)           No Governmental
Authorization is required for either (i) the pledge or grant by any Loan
Party of the Liens purported to be created in favor of Agent pursuant to any of
the Collateral Documents, or (ii) the exercise by Agent of any rights or
remedies in respect of any Collateral (whether specifically granted or created
pursuant to any of the Collateral Documents or created or provided for by
applicable law), except for filings or recordings contemplated by Section 5.18(a)
and except as may be required, in connection with the disposition of any
Pledged Collateral, by laws generally affecting the offering and sale of

 

57

 

securities. 
As of the Closing Date, Borrower and its Subsidiaries have received no
written notice of any pending or threatened condemnation proceeding, exercise
of the power of eminent domain by any Governmental Authority, or any similar
proceeding affecting any Facility or any interest therein.  As of the Closing Date, to the best of
Borrower’s knowledge, after due investigation and inquiry, no such proceeding
is pending, contemplated or threatened.

 

(c)           Except such as may have
been filed in favor of Agent as contemplated by Section 5.18(a) and
as set forth on Schedule 5.18 annexed hereto, (i) no effective
UCC financing statement, fixture filing or other instrument similar in effect
covering all or any part of the Collateral is on file in any filing or
recording office, and (ii) no effective filing covering all or any part of
the IP Collateral is on file in any IP Filing Office.

 

(d)           The pledge of the
Pledged Collateral pursuant to the Collateral Documents does not violate
Regulation T, U or X of the Board of Governors of the Federal Reserve System.

 

(e)           All information
supplied to Agent by or on behalf of any Loan Party with respect to any of the
Collateral (in each case taken as a whole with respect to any particular
Collateral) is accurate and complete in all material respects.  All representations and warranties of the
Loan Parties set forth in the Collateral Documents are true and correct.

 

ARTICLE VI AFFIRMATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or
other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of
Credit shall remain outstanding, Borrower shall, and shall (except in the case
of the covenants set forth in Sections 6.1, 6.2, 6.3 and 6.11)
cause each Subsidiary to:

 

6.1          Financial Statements.  Deliver to Agent a sufficient number of copies
for delivery by Agent to each Lender, in form and detail satisfactory to Agent
and the Required Lenders:

 

(a)           as soon as available,
but in any event within 90 days after the end of each fiscal year of Borrower,
a consolidated balance sheet of Borrower and its Subsidiaries as at the end of
such fiscal year, and the related consolidated statements of income or
operations, shareholders’ equity and cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal
year, all in reasonable detail and prepared in accordance with GAAP, audited
and accompanied by a report and opinion of an independent certified public
accountant of nationally recognized standing reasonably acceptable to the
Required Lenders, which report and opinion shall be prepared in accordance with
generally accepted auditing standards and shall not be subject to any “going
concern” or like qualification or exception or any qualification or exception
as to the scope of such audit; and

 

(b)           as soon as available,
but in any event within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of Borrower, a consolidated balance sheet of
Borrower and its Subsidiaries as at the end of such fiscal quarter, and the
related consolidated statements of income or operations, shareholders’ equity
and cash flows for such fiscal quarter and for the portion of Borrower’s fiscal
year then ended, setting forth in each

 

58

 

case in
comparative form the figures for the corresponding fiscal quarter of the
previous fiscal year and the corresponding portion of the previous fiscal year,
all in reasonable detail and certified by a Responsible Officer of Borrower as
fairly presenting the financial condition, results of operations, shareholders’
equity and cash flows of Borrower and its Subsidiaries in accordance with GAAP,
subject only to normal year-end audit adjustments and the absence of footnotes.

 

6.2          Certificates; Other
Information.  Deliver to Agent a
sufficient number of copies for delivery by Agent to each Lender, in form and
detail satisfactory to Agent and the Required Lenders:

 

(a)           concurrently with the
delivery of the financial statements referred to in Section 6.1(a),
a certificate of its independent certified public accountants certifying such
financial statements and stating that in making the examination necessary
therefor no knowledge was obtained of any Default under the financial covenants
set forth herein or, if any such Default shall exist, stating the nature and
status of such event;

 

(b)           concurrently with the
delivery of the financial statements referred to in Sections 6.1(a)
and (b), a duly completed Compliance Certificate signed by a Responsible
Officer of Borrower; provided, that if at the time of delivery of such
financial statements, any amounts are payable under any judgment, order or
settlement agreement related to any Specified Event, then Borrower shall
include in such Compliance Certificate the additional calculations for the
additional five four-fiscal quarter periods described in the third sentence of
the definition of the term Material Adverse Effect;

 

(c)           promptly after any
request by Agent or any Lender, copies of any detailed audit reports,
management letters or recommendations submitted to the board of directors (or
the audit committee of the board of directors) of Borrower by independent
accountants in connection with the accounts or books of Borrower or any
Subsidiary, or any audit of any of them;

 

(d)           promptly after the same
are available, copies of each annual report, proxy or financial statement or
other report or communication sent to the stockholders of Borrower, and copies
of all annual, regular, periodic and special reports and registration
statements which Borrower may file or be required to file with the Securities
and Exchange Commission under Section 13 or 15(d) of the Securities Exchange
Act of 1934, and not otherwise required to be delivered to Agent pursuant
hereto; and

 

(e)           promptly,
such additional information regarding the business, financial or corporate
affairs of Borrower or any Subsidiary, or compliance with the terms of the Loan
Documents, as Agent or any Lender may from time to time reasonably request.

 

6.3          Notices.  Promptly after any Responsible Officer or any
other officer (including without limitation any senior vice president,
executive vice president or any other vice president) of any Loan Party obtains
knowledge or receives notice thereof, notify Agent and each Lender:

 

(a)           of
the occurrence of any Default;

 

59

 

(b)           of any matter that has
resulted or could reasonably be expected to result in a Material Adverse
Effect, including (i) any breach or non-performance of, or any default
under, a Contractual Obligation of Borrower or any Subsidiary; (ii) any
dispute, litigation, investigation, proceeding or suspension between Borrower
or any Subsidiary and any Governmental Authority; or (iii) the commencement of,
or any development in, any litigation or proceeding affecting Borrower or any
Subsidiary, including pursuant to any applicable Environmental Laws, that has resulted
or could reasonably be expected to result in a Material Adverse Effect;

 

(c)           of the occurrence of a
Specified Event, together with copies of documents relating thereto and other
information requested by Agent or any Lender relating thereto and, within 10
Business Days of the occurrence of a Specified Event, the pro forma Compliance
Certificate described in the second sentence of the definition of the term
Material Adverse Effect, duly completed and each signed by a Responsible
Officer of Borrower;

 

(d)           of
the occurrence of any ERISA Event; and

 

(e)           of
any material change in accounting policies or financial reporting practices by
Borrower or any Subsidiary.

 

Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer of Borrower setting forth details of the
occurrence referred to therein and stating what action Borrower has taken and
proposes to take with respect thereto. 
Each notice pursuant to Section 6.3(a) shall describe with
particularity any provisions of this Agreement and any other Loan Document that
have been breached.

 

6.4          Payment of Obligations.  Pay and discharge as the same shall become
due and payable, all its obligations and liabilities, including (a) all
tax liabilities, assessments and governmental charges or levies upon it or its
properties or assets, unless the same are being contested in good faith by
appropriate proceedings diligently conducted and adequate reserves in
accordance with GAAP are being maintained by Borrower or such Subsidiary; (b) all
lawful claims which, if unpaid, would by law become a Lien upon its property ,
except for Liens permitted under Section 7.1; and (c) all
Indebtedness, as and when due and payable, but subject to any subordination
provisions contained in any instrument or agreement evidencing such
Indebtedness, except to the extent that (i) such unpaid claims,
obligations and liabilities under clauses (a), (b) and (c) do not exceed
$500,000 individually or in the aggregate and (ii) in the case of such
claims under clause (b), such claims, if unpaid, would not become a Lien that
is not permitted under Section 7.1.

 

6.5          Preservation of
Existence, Etc.  (a) Preserve,
renew and maintain in full force and effect its legal existence and good
standing under the Laws of the jurisdiction of its organization except in a
transaction permitted by Section 7.4 or 7.5; (b) take all
reasonable action to maintain all rights, privileges, permits, licenses and
franchises necessary or desirable in the normal conduct of its business, except
to the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect; and (c) except for the matters described on Schedule
5.6, preserve or renew all of its registered patents, trademarks, trade
names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.

 

60

 

6.6          Maintenance of
Properties; Application of Net Insurance/Condemnation Proceeds.

 

(a)           Maintenance of
Properties.  (i) Maintain,
preserve and protect all of its material properties and equipment necessary in
the operation of its business in good working order and condition, ordinary
wear and tear excepted; (ii) make all necessary repairs thereto and
renewals and replacements thereof except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect; and (iii) use
the standard of care typical in the industry in the operation and maintenance
of its facilities.

 

(b)           Application of Net
Insurance/Condemnation Proceeds.

 

(i)            Business
Interruption Insurance.  Upon receipt
by Borrower or any of its Subsidiaries of any business interruption insurance
proceeds constituting Net Insurance/Condemnation Proceeds, (a) so long as
no Event of Default or Default shall have occurred and be continuing,  Borrower or such Subsidiary may retain and
apply such Net Insurance/Condemnation Proceeds for working capital purposes,
and (b) if an Event of Default or Default shall have occurred and be
continuing, Borrower shall apply an amount equal to such Net Insurance/
Condemnation Proceeds to prepay the Loans (and/or the Aggregate Commitments
shall be reduced) as provided in Section 2.5(d)(ii); provided
that if Borrower makes a written request to Lenders through Agent requesting
that it not be required to apply such an amount to prepay the Loans (and/or to
reduce the Aggregate Commitments), then Borrower shall not be required to apply
such an amount to prepay the Loans (and/or to reduce the Aggregate Commitments)
so long as Required Lenders do not decline such a request in writing within 30
days of such request.

 

(ii)           Net
Insurance/Condemnation Proceeds Received by Borrower.  Upon receipt by Borrower or any of its
Subsidiaries of any Net Insurance/Condemnation Proceeds other than from
business interruption insurance, (a) so long as no Event of Default or
Default shall have occurred and be continuing, Borrower shall, or shall cause
one or more of its Subsidiaries to, promptly and diligently apply such Net Insurance/Condemnation
Proceeds to pay or reimburse the costs of repairing, restoring or replacing the
assets in respect of which such Net Insurance/Condemnation Proceeds were
received or, to the extent not so applied, to either (1) prepay the Loans
(and/or the Aggregate Commitments shall be reduced) as provided in Section
2.5(d)(ii), or (2) so long as no Default or Event of Default shall
have occurred and be continuing and to the extent that aggregate Net
Insurance/Condemnation Proceeds so reinvested or proposed to be reinvested
under this Section 6.6(b)(ii) or Section 2.5(d)(ii)
(together with Net Asset Sale Proceeds similarly applied from the Closing Date
through the date of determination under Section 2.5(d)(i)) from the
Closing Date through the date of determination do not exceed $1,500,000 (plus
the Net Asset Sale Proceeds from the Permitted Sale not exceeding $500,000 to
the extent such Net Asset Sale Proceeds are so reinvested), deliver to Agent an
officer’s certificate setting forth (x) that portion of such Net
Insurance/Condemnation Proceeds that Borrower or

 

61

 

such
Subsidiary intends to reinvest in equipment or other productive assets of the
general type used in the business of Borrower and its Subsidiaries within 180
days of such date of receipt and (y) the proposed use of such portion of
the Net Insurance/Condemnation Proceeds and such other information with respect
to such reinvestment as Agent may reasonably request, and Borrower shall, or
shall cause one or more of its Subsidiaries to, promptly and diligently apply
such portion to such reinvestment purposes; provided, however, that, pending
such reinvestment, such portion of the Net Insurance/Condemnation Proceeds
shall be applied to prepay outstanding Loans (without a reduction in the
Aggregate Commitments) to the full extent thereof, and (b) if an Event of
Default or Default shall have occurred and be continuing, Borrower shall apply
an amount equal to such Net Insurance/Condemnation Proceeds to prepay the Loans
(and/or the Aggregate Commitments shall be reduced) as provided in Section 2.5(d)(ii);
provided that if Borrower makes a written request to Lenders through
Agent requesting that it not be required to apply such an amount to prepay the
Loans (and/or to reduce the Aggregate Commitments), then Borrower shall not be
required to apply such an amount to prepay the Loans (and/or to reduce the
Aggregate Commitments) so long as Required Lenders do not decline such a
request in writing within 30 days of such request.

 

(iii)          Net
Insurance/Condemnation Proceeds Received by Agent.  Upon receipt by Agent of any Net
Insurance/Condemnation Proceeds as loss payee, (a) if and to the extent
Borrower would have been required to apply such Net Insurance/Condemnation
Proceeds (if it had received them directly) to prepay the Loans and/or reduce
the Aggregate Commitments, Agent shall, and Borrower hereby authorizes Agent
to, apply such Net Insurance/Condemnation Proceeds to prepay the Loans (and/or
the Aggregate Commitments shall be reduced) as provided in Section
6.6(b)(ii), and (b) to the extent the foregoing clause (a) does not
apply and (1) the aggregate amount of such Net Insurance/Condemnation
Proceeds received (and reasonably expected to be received) by Agent in respect of
any covered loss does not exceed $250,000, Agent shall deliver such Net
Insurance/Condemnation Proceeds to Borrower, and Borrower shall, or shall cause
one or more of its Subsidiaries to, promptly apply such Net Insurance/
Condemnation Proceeds to the costs of repairing, restoring, or replacing the
assets in respect of which such Net Insurance/Condemnation Proceeds were
received or to reinvest such proceeds in productive assets of the general type
used in the business of Borrower and its Subsidiaries within 180 days of such
date of receipt in accordance with the requirements of clause (ii) above, and
(2) if the aggregate amount of Net Insurance/Condemnation Proceeds
received (and reasonably expected to be received) by Agent in respect of any
covered loss exceeds $250,000, Agent shall hold such Net Insurance/Condemnation
Proceeds pursuant to the terms of the Security Agreement and, so long as
Borrower or any of its Subsidiaries proceeds diligently to repair, restore or
replace the assets of Borrower or such Subsidiary in respect of which such Net
Insurance/Condemnation Proceeds were received or to reinvest such proceeds in
productive assets, Agent shall from time to time disburse to Borrower or such
Subsidiary from the Collateral Account, to the extent of any such Net

 

62

 

Insurance/Condemnation
Proceeds remaining therein in respect of the applicable covered loss, amounts
necessary to pay the cost of such repair, restoration, replacement or
reinvestment after, where applicable the receipt by Agent of invoices or other
documentation reasonably satisfactory to Agent relating to the amount of costs
so incurred and the work performed (including, if required by Agent, lien
releases and architects’ certificates); provided, however that if at any time
Agent reasonably determines (A) that Borrower or such Subsidiary is not
proceeding diligently with such repair, restoration or replacement or
(B) that such repair, restoration, replacement or reinvestment cannot be
completed with the Net Insurance/Condemnation Proceeds then held by Agent for
such purpose, together with funds otherwise available to Borrower for such
purpose, or that such repair, restoration, replacement or reinvestment cannot
be completed within 180 days after the receipt by Agent of such Net
Insurance/Condemnation Proceeds, Agent shall, and Borrower hereby authorizes
Agent to, apply such Net Insurance/Condemnation Proceeds to prepay the Loans
(and/or the Aggregate Commitments shall be reduced) as provided in Section
2.5(d)(ii).

 

6.7          Maintenance of
Insurance.  Maintain with financially
sound and reputable insurance companies not Affiliates of Borrower, insurance
with respect to its properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar business,
of such types and in such amounts (after giving effect to any self-insurance
compatible with the following standards) as are customarily carried under
similar circumstances by such other Persons and providing for not less than 30
days’ prior notice to Agent of termination, lapse or cancellation of such
insurance.  Each such insurance policy
shall (a) in the case of each such insurance policy other than each
business interruption and casualty insurance policy, name Agent for the benefit
of Lenders as an additional insured thereunder as its interests may appear and
(b) in the case of each business interruption and casualty insurance
policy, contain a loss payable clause or endorsement, satisfactory in form and
substance to Agent, that names Agent for the benefit of Lenders as the loss
payee thereunder for any covered loss and provides for at least 30 days prior
written notice to Agent of any modification or cancellation of such policy.

 

6.8          Compliance with Laws and
Contractual Obligations.

 

(a)           Comply in all material
respects with the requirements of all Laws and all orders, writs, injunctions
and decrees applicable to it or to its business or property, except in such
instances in which (i) such requirement of Law or order, write, injunction
or decree is being contested in good faith by appropriate proceedings
diligently conducted; or (ii) the failure to comply therewith could not
reasonably be expected to have a Material Adverse Effect.

 

(b)           Comply in all material
respects with all Contractual Obligations, except in such instances in which
the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect.

 

6.9          Books and Records.  (a)  Maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all

 

63

 

financial transactions and matters involving the assets and business of
Borrower or such Subsidiary, as the case may be; and (b) maintain such
books of record and account in material conformity with all applicable
requirements of any Governmental Authority having regulatory jurisdiction over
Borrower or such Subsidiary, as the case may be.  Borrower shall maintain at all times books
and records pertaining to the Collateral in such detail, form and scope as
Agent or any Lender shall reasonably require.

 

6.10        Inspection Rights.  Permit representatives and independent
contractors of Agent and each Lender to visit and inspect any of its
properties, to examine its corporate, financial and operating records, and make
copies thereof or abstracts therefrom, to discuss its affairs, finances and
accounts with its directors, officers, and independent public accountants and
to conduct up to two collateral audits during any twelve month period, all at
the expense of Borrower and at such reasonable times during normal business
hours and as often as may be reasonably desired, upon reasonable advance notice
to Borrower; provided, however, that when an Event of Default
exists Agent or any Lender (or any of their respective representatives or
independent contractors) may do any of the foregoing at the expense of Borrower
at any time during normal business hours and without advance notice.

 

6.11        Use of Proceeds.  Use the proceeds of the Credit Extensions for
general corporate purposes (including, without limitation, capital expenditures
and Permitted Acquisitions) not in contravention of any Law or of any Loan
Document.

 

6.12        Financial Covenants.

 

(a)           Net Worth.  Maintain on a consolidated basis Net Worth
equal to at least the sum of the following:

 

(i)            Eighty Million Dollars
($80,000,000); plus

 

(ii)           the sum of 75% of net
income after income taxes (without subtracting losses) earned in each fiscal
year ending on or after December 31, 2004; plus

 

(iii)          the
sum of 75% of the net proceeds from any equity securities issued after the date
of this Agreement and on or before the last day of the most recently ended
fiscal quarter.

 

(b)           Funded Debt to
EBITDA Ratio.  Maintain on a
consolidated basis a Funded Debt to EBITDA Ratio not exceeding the ratios indicated for each period
specified below:

 

	
  Fiscal quarter ending on

  	
   

  	
  Ratios

  
	
  December 31, 2004

  	
   

  	
  3.50:1.00

  
	
  December 31, 2005

  	
   

  	
  2.25:1.00

  
	
  March 31, 2006 and each fiscal quarter thereafter

  	
   

  	
  2.00:1.00

  

 

64

 

This ratio will be calculated at the end of each reporting period for
which this Agreement requires Borrower to deliver financial statements, using
the results of the four-fiscal quarter period ending with that reporting
period.  Notwithstanding the foregoing,
if the Borrower issues Subordinated Indebtedness on terms and conditions
acceptable to Agent and the Required Lenders in their sole discretion in
accordance with Section 7.3(e), (i) Borrower shall maintain on a
consolidated basis a Senior Debt to EBITDA Ratio not exceeding 2.00:1.00 for
all periods thereafter and (ii) Borrower shall maintain on a consolidated
basis a Funded Debt to EBITDA Ratio not exceeding the ratios indicated for each
period specified below occurring after such issuance (in lieu of the ratios
specified above):

 

	
  Fiscal quarter ending on

  	
   

  	
  Ratios

  
	
  December 31, 2004

  	
   

  	
  3.50:1.00

  
	
  March 31, 2005

  	
   

  	
  3.25:1.00

  
	
  June 30, 2005

  	
   

  	
  3.25:1.00

  
	
  September 30, 2005

  	
   

  	
  3.25:1.00

  
	
  December 31, 2005

  	
   

  	
  3.00:1.00

  
	
  March 31, 2006 and each fiscal quarter
  thereafter

  	
   

  	
  3.00:1.00

  

 

(c)           Fixed Charge
Coverage Ratio.  Commencing with the
fiscal quarter ending on December 31, 2005 and for each fiscal quarter
thereafter, maintain on a consolidated basis a Fixed Charge Coverage Ratio of
at least level 1.50:1.00. This ratio will be calculated at the end of each
reporting period for which this Agreement requires Borrower to deliver
financial statements, using the results of the four-fiscal quarter period
ending with that reporting period.  The
current portion of long-term liabilities will be measured as of the last day of the calculation period.

 

(d)           Minimum EBITDA.

 

(i)            As of the last date of
each period set forth below, maintain EBITDA for such period in an amount in
excess of the amount set forth below for the period set forth below:

 

	
  Period

  	
   

  	
  Minimum EBITDA

  	
   

  
	
  10/1/04-12/31/04

  	
   

  	
  $

  	
  2,800,000

  	
   

  
	
  1/1/05-3/31/05

  	
   

  	
  $

  	
  2,000,000

  	
   

  
	
  1/1/05-6/30/05

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  1/1/05-9/30/05

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
  1/1/05-12/31/05

  	
   

  	
  $

  	
  15,000,000

  	
   

  

 

(ii)           Commencing with
March 31, 2006, maintain EBITDA for the trailing four-fiscal quarter
period ending on each of the dates set forth below in an amount in excess of
the amount set forth below:

 

65

 

	
  Period

  	
   

  	
  Minimum EBITDA

  	
   

  
	
  March 31, 2006

  	
   

  	
  $

  	
  16,000,000

  	
   

  
	
  June 30, 2006

  	
   

  	
  $

  	
  17,000,000

  	
   

  
	
  September 30, 2006

  	
   

  	
  $

  	
  18,000,000

  	
   

  
	
  December 31, 2006

  	
   

  	
  $

  	
  23,000,000

  	
   

  

 

(iii)          Commencing with
December 31, 2007 and as of December 31 for each fiscal year
thereafter, maintain EBITDA for the fiscal year ending on such date (the “Applicable
Fiscal Year”) to be not less than the sum (without duplication) of (x) 80%
of EBITDA for the immediately preceding fiscal year (without giving effect to
any Permitted Acquisition consummated during the Applicable Fiscal Year) plus
(ii) 75% of EBITDA for the Applicable Fiscal Year of Persons acquired
pursuant to a Permitted Acquisition during the Applicable Fiscal Year as set
forth on the audited financial statements of such Persons for such period.

 

(e)           Operating Lease.  Not permit the aggregate payments due in any
fiscal year under all operating leases (including leases for real or personal
property) to exceed Two Million Dollars ($2,000,000).

 

6.13        Additional Guarantors.  Notify Agent at the time that any Person
becomes a Subsidiary, and promptly thereafter (and in any event within 30
days), cause such Person to (a) become a Guarantor by executing and
delivering to Agent a counterpart of the Guaranty or such other document as
Agent shall deem appropriate for such purpose, and (b) execute and deliver
to Agent a counterpart of the Security Agreement and take such further actions
and execute all such further documents and instruments as may be necessary or,
in the opinion of the Agent, for the benefit of the Lenders, except for Liens
permitted under clause (b) through (i) of Section 7.1, a valid perfected
First Priority Lien on all of the personal and mixed property assets of such
Subsidiary described in the applicable forms of Collateral Documents.  In addition, Borrower shall, or shall cause
the Subsidiary that owns the Capital Stock of such Person to, execute and
deliver to Agent a supplement to the Security Agreement and to deliver to Agent
all certificates representing such Capital Stock of such Person (accompanied by
irrevocable undated stock powers, duly endorsed in blank) and deliver to Agent
documents of the types referred to in clauses (iii) and (iv) of Section
4.1(a) and favorable opinions of counsel to the Loan Parties and such
Person addressed to Agent and Lenders (which shall cover, among other things,
the legality, validity, binding effect and enforceability of the documentation
referred to in this Section 6.13), all in form, content and scope
reasonably satisfactory to Agent. 
Notwithstanding the foregoing, Borrower and its Subsidiaries shall not
be required to cause Quidel Deutschland to become a Guarantor or to cause any
of the Capital Stock or any of the assets of Quidel Deutschland to be pledged
pursuant to the Loan Documents unless the Permitted Sale does not occur by
December 31, 2005 (it being understood that if the Permitted Sale does not
occur by such date, Borrower shall by such date execute and deliver to Agent a foreign
pledge agreement in form and substance satisfactory to Agent and other
documentation and opinions in form, content and scope reasonably satisfactory
to Agent, including documentation and opinions described in the immediately
foregoing sentence with respect to 65% of the Capital Stock of Quidel
Deutschland).

 

66

 

6.14        Collateral Records.  To execute and deliver promptly, and to cause
each other Loan Party to execute and deliver promptly, to Agent, from time to
time, solely for Agent’s convenience in maintaining a record of the Collateral,
such written statements and schedules as Agent may reasonably require
designating, identifying or describing the Collateral.  The failure by Borrower or any other Loan Party,
however, to promptly give Agent such statements or schedules shall not affect,
diminish, modify or otherwise limit the Liens on the Collateral granted
pursuant to the Collateral Documents.

 

6.15        Cash Management System.  Borrower shall, and shall cause each of its
Subsidiaries to, at all times after the 180th day after the Closing
Date use commercially reasonable efforts to maintain all of their respective
Deposit Accounts, Securities Accounts and their respective treasury management
arrangements, depository and other cash management arrangements with Bank of
America, N.A. or other institutions providing a Control Agreement in form
attached hereto or otherwise acceptable to Agent.  Borrower shall not establish or maintain, and
shall not permit any of its Subsidiaries to establish or maintain, any Deposit
Account or Securities Account (other than Deposit Accounts maintained at Bank
of America, N.A.) unless Borrower or such Subsidiary, as the case may be, has
(i) executed and delivered to Agent a Control Agreement with respect to
such Deposit Account or Securities Account and (ii) taken all other steps
necessary or, in the opinion of Agent, desirable to ensure that Agent has a
perfected security interest in such account. 
Notwithstanding the foregoing, Borrower and its Subsidiaries may
maintain Deposit Accounts and Securities Accounts for 180 days after the
Closing Date without complying with the second sentence of this Section 6.15.

 

6.16        Security Interests.

 

(a)           General Covenant.  To, and to cause each other Loan Party to,
(i) in the exercise of Borrower’s commercial reasonable judgment, defend
the Collateral against all claims and demands of all Persons at any time
claiming the same or any interest therein, (ii) comply with the
requirements of all state and federal laws in order to grant to Agent and
Lenders valid and perfected first priority security interests in the Collateral
(except for Liens permitted under clauses (b) through (i) of Section 7.1),
with perfection, in the case of any investment property, deposit account or
letter of credit, being effected by giving Agent control of such investment
property or deposit account or letter of credit, rather than by the filing of a
UCC financing statement with respect to such investment property, and (iii) do
whatever Agent may reasonably request, from time to time, to effect the
purposes of this Agreement and the other Loan Documents, including filing
notices of liens, UCC financing statements, fixture filings and amendments,
renewals and continuations thereof; cooperating with Agent’s representatives;
keeping stock records; obtaining waivers from landlords and mortgagees and from
warehousemen and their landlords and mortgages; and, paying claims which might,
if unpaid, become a Lien on the Collateral. 
Agent is hereby authorized by Borrower to file any UCC financing
statements covering the Collateral whether or not Borrower’s signatures appear
thereon.

 

(b)           Landlord Waivers.  (i) On or before the date that is 90
days after the Closing Date, deliver to Agent a fully executed Landlord Waiver
with respect to each Leasehold Property of any Loan Party and (ii) on or
before the date that any Loan Party enters

 

67

 

into any lease with respect to any
Leasehold Property after the Closing Date, deliver to Agent a fully executed
Landlord Waiver with respect to such Leasehold Property of such Loan Party.

 

(c)           Cash Management
Documentation.  On or before the date
that is 180 days after the Closing Date, deliver to Agent fully executed
Control Agreements with respect to each Loan Party’s Deposit Accounts and
Securities Accounts (other than such Deposit Accounts maintained with Bank of
America, N.A.), each of which Deposit Accounts and Securities Accounts as of
the Closing Date are set forth on Schedule 6.16(c); provided
that if the form of the Control Agreement materially differs from Exhibit H or
I, as the case may be, then at the reasonable request of Agent, Borrower shall
concurrently deliver with such Control Agreement an opinion of counsel in form
and substance reasonably satisfactory to Agent.

 

ARTICLE VII NEGATIVE COVENANTS

 

So long as any Lender shall have any
Commitment hereunder, any Loan or other Obligation hereunder shall remain
unpaid or unsatisfied, or any Letter of Credit shall remain outstanding,
Borrower shall not, nor shall it permit any Subsidiary to, directly or
indirectly:

 

7.1          Liens.  Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, other than the following:

 

(a)           Liens pursuant to any
Loan Document;

 

(b)           Liens existing on the
date hereof and listed on Schedule 7.1 and any renewals or extensions
thereof, provided that the property covered thereby is not increased and
any renewal or extension of the obligations secured or benefited thereby is
permitted by Section 7.3(b);

 

(c)           Liens for taxes not yet
due or which are being contested in good faith and by appropriate proceedings
diligently conducted, if adequate reserves with respect thereto are maintained
on the books of the applicable Person in accordance with GAAP;

 

(d)           carriers’, warehousemen’s,
mechanics’, materialmen’s, repairmen’s or other like Liens arising in the
ordinary course of business which are not overdue for a period of more than 30
days or which are being contested in good faith and by appropriate proceedings
diligently conducted, if adequate reserves with respect thereto are maintained
on the books of the applicable Person in accordance with GAAP;

 

(e)           pledges or deposits in
the ordinary course of business in connection with workers’ compensation,
unemployment insurance and other social security legislation, other than any
Lien imposed by any Plan or the PBGC under ERISA;

 

(f)            deposits to secure the
performance of bids, trade contracts and leases (other than Indebtedness),
statutory obligations, surety bonds (other than bonds related to judgments or
litigation), performance bonds and other obligations of a like nature incurred
in the ordinary course of business;

 

68

 

(g)           easements,
rights-of-way, restrictions and other similar encumbrances affecting real
property which, in the aggregate, are not substantial in amount, and which do
not in any case materially detract from the value of the property subject
thereto or materially interfere with the ordinary conduct of the business of
the applicable Person;

 

(h)           Liens securing
judgments for the payment of money not constituting an Event of Default under Section 8.1(h)
or securing appeal or other surety bonds related to such judgments; and

 

(i)            Liens securing
Indebtedness permitted under Section 7.3(f); provided that
(i) such Liens do not at any time encumber any property other than the
property financed by such Indebtedness and (ii) the Indebtedness secured
thereby does not exceed the cost or fair market value, whichever is lower, of
the property being acquired, constructed or improved on the date of
acquisition.

 

7.2          Investments.  Make or own any Investments, except:

 

(a)           Investments held by
Borrower or such Subsidiary in the form of cash equivalents or short-term
marketable debt securities;

 

(b)           advances
to officers, directors and employees of Borrower and Subsidiary Guarantors in
an aggregate amount not to exceed $250,000
at any time outstanding, for travel, entertainment, relocation and analogous
ordinary business purposes;

 

(c)           Investments owned by
Borrower as of the Closing Date in the Capital Stock of any wholly-owned
Subsidiary as described on Schedule 5.13;

 

(d)           Investments consisting
of extensions of credit in the nature of accounts receivable or notes
receivable arising from the grant of trade credit in the ordinary course of
business, and Investments received in satisfaction or partial satisfaction
thereof from financially troubled account debtors to the extent reasonably
necessary in order to prevent or limit loss; and

 

(e)           Guarantees permitted by
Section 7.3;

 

(f)            Permitted Acquisitions
by Borrower or any wholly-owned Subsidiary Guarantor;

 

(g)           Investments consisting
of extensions of credit or capital contributions by Borrower to wholly-owned
Subsidiary Guarantors so long as such Investments consisting of extensions of
credit are evidenced by promissory notes pledged to Agent under the Collateral
Documents; and

 

(h)           additional
Investments not exceeding at any time an aggregate outstanding amount
of $2,000,000.

 

69

 

7.3          Indebtedness.  Create, incur, assume or suffer to exist any Indebtedness, except:

 

(a)           Indebtedness under the
Loan Documents;

 

(b)           Indebtedness
outstanding on the date hereof and listed on Schedule 7.3 and any
refinancings, refundings, renewals or extensions thereof; provided that
the amount of such Indebtedness is not increased at the time of such
refinancing, refunding, renewal or extension except by an amount equal to a
reasonable premium or other reasonable amount paid, and fees and expenses
reasonably incurred, in connection with such refinancing and by an amount equal
to any existing commitments unutilized thereunder;

 

(c)           Guarantees of Borrower
or any Subsidiary in respect of Indebtedness otherwise permitted hereunder of
Borrower or any wholly-owned Subsidiary Guarantor;

 

(d)           obligations (contingent
or otherwise) of Borrower or any Subsidiary existing or arising under any Swap
Contract, provided that (i) such obligations are (or were) entered
into by such Person in the ordinary course of business for the purpose of
directly mitigating risks associated with liabilities, commitments,
investments, assets, or property held or reasonably anticipated by such Person,
or changes in the value of securities issued by such Person, and not for
purposes of speculation or taking a “market view;” and (ii) such Swap
Contract does not contain any provision exonerating the non-defaulting party
from its obligation to make payments on outstanding transactions to the
defaulting party;

 

(e)           unsecured Subordinated
Indebtedness of Borrower or any wholly-owned Subsidiary Guarantor in an
aggregate amount not exceeding $5,000,000 so long as (i) after giving
effect thereto, Borrower shall be in pro forma compliance with all of the terms
of this Agreement and (ii) prior to the incurrence of such Subordinated
Indebtedness, Borrower shall have delivered to Agent and Lenders a Compliance
Certificate evidencing such pro forma compliance and Agent and Required Lenders
shall have approved all of the terms and conditions and documents relating to
such Subordinated Indebtedness (which shall include an intercreditor and
subordination agreement with Agent) in their sole discretion;

 

(f)            Indebtedness in
respect of capital leases, Synthetic Lease Obligations and purchase money
obligations for fixed or capital assets (including equipment) within the
limitations set forth in Section 7.1(i); provided, however,
that the aggregate amount of all such Indebtedness at any one time outstanding
shall not exceed $2,000,000; and

 

(g)           other
unsecured Indebtedness not exceeding $2,500,000 in the aggregate at any time
outstanding.

 

7.4          Fundamental Changes.  Merge, dissolve, liquidate, consolidate with
or into another Person, or Dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except for the
Permitted Sale and except that, so long as no Default exists or would result
therefrom:

 

(a)           any Subsidiary may
merge with (i) Borrower, provided that Borrower shall be the
continuing or surviving Person, or (ii) any one or more other
Subsidiaries, provided

 

70

 

that when any
wholly-owned Subsidiary is merging with another Subsidiary, the wholly-owned
Subsidiary shall be the continuing or surviving Person, and, provided further that if a Guarantor is merging with
another Subsidiary, the Guarantor shall be the surviving Person; and

 

(b)           any Subsidiary may
Dispose of all or substantially all of its assets (upon voluntary liquidation
or otherwise) to Borrower or to another Subsidiary; provided that if the
transferor in such a transaction is a wholly-owned Subsidiary, then the
transferee must either be Borrower or a wholly-owned Subsidiary and, provided further that if the transferor
of such assets is a Guarantor, the transferee thereof must either be Borrower
or a Guarantor.

 

7.5          Dispositions.  Make any Disposition or enter into any
agreement to make any Disposition, except:

 

(a)           Dispositions of
obsolete or worn out property, or immaterial property no longer useful or
necessary to the business of Borrower and its Subsidiaries, whether now owned
or hereafter acquired, in the ordinary course of business;

 

(b)           Dispositions of
inventory and cash equivalents in the ordinary course of business and sales,
assignments, transfers or dispositions of accounts in the ordinary course of
business for purposes of collection;

 

(c)           Dispositions of
equipment or real property to the extent that (i) such property is
exchanged for credit against the purchase price of similar replacement property
or (ii) the proceeds of such Disposition are reasonably promptly applied
to the purchase price of such replacement property;

 

(d)           Dispositions of
property by Borrower to any of its wholly-owned Subsidiary Guarantors or by any
Subsidiary to Borrower or to a wholly-owned Subsidiary Guarantor; provided
that if the transferor of such property is Borrower or a Guarantor, the
transferee thereof must either be Borrower or a wholly-owned Guarantor;

 

(e)           Dispositions permitted
by Section 7.4;

 

(f)            non-exclusive
licenses of immaterial IP Rights in the ordinary course of business and
non-exclusive licenses of IP Rights in the ordinary course of business solely
in connection with cooperative agreements with third parties for further
development of such IP Rights;

 

(g)           subleases
of leased properties no longer needed by Borrower and its Subsidiaries and not
material to the operation of Borrower and its Subsidiaries;

 

(h)           Dispositions not
otherwise permitted hereunder if (i) at the time of any Disposition, no
Event of Default or Default shall exist or shall result from such Disposition,
(ii) the aggregate sales price of such Disposition shall be paid in cash,
and (iii) the proceeds from Dispositions under this clause (h) since the
Closing Date shall not exceed $500,000 in the aggregate; and

 

(i)            the
Permitted Sale.

 

71

 

provided, however,
that any Disposition pursuant to clauses (a) through (h) (other than clause
(d)) shall be for fair market value.

 

7.6          Restricted Payments.  Declare or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
except that:

 

(a)           each Subsidiary may
make Restricted Payments to Borrower and to wholly-owned Subsidiary
Guarantors  (and, in the case of a
Restricted Payment by a non-wholly-owned Subsidiary, to Borrower and any
Subsidiary and to each other owner of capital stock or other equity interests
of such Subsidiary on a pro rata basis based on their relative ownership
interests);

 

(b)           Borrower and each
Subsidiary Guarantor may declare and make dividend payments or other
distributions payable solely in the common stock or other common equity
interests of such Person; and

 

(c)           Borrower and each
Subsidiary Guarantor may purchase, redeem or otherwise acquire shares of its
common stock or other common equity interests or warrants or options to acquire
any such shares with the proceeds received from the substantially concurrent
issue of new shares of its common stock or other common equity interests.

 

7.7          Change
in Nature of Business.  Engage in any
material line of business substantially different from those lines of business
conducted by Borrower and its Subsidiaries on the date hereof or any business
substantially related or incidental thereto. 
Notwithstanding anything in this Agreement to the contrary, OSC shall
not at any time engage in any business other than owning its IP Rights and none
of the Dormant Foreign Subsidiaries shall engage in any business.

 

7.8          Transactions with
Affiliates.  Enter into any
transaction of any kind with any Affiliate of Borrower, whether or not in the
ordinary course of business, other than on fair and reasonable terms
substantially as favorable to Borrower or such Subsidiary as would be
obtainable by Borrower or such Subsidiary at the time in a comparable arm’s
length transaction with a Person other than an Affiliate, provided that the
foregoing restriction shall not apply to (i) transactions between or among
Borrower and any of its wholly-owned Subsidiary Guarantors or between and among
any wholly-owned Subsidiary Guarantors, (ii) customary indemnification of
directors, officers and employees of Borrower and its Subsidiaries,
(iii) loans and advances permitted by Section 7.2(b), (iv)
Restricted Payments permitted by Section 7.6, or (v) transfer to
Quidel Deutschland the IP Rights and other assets described in Schedule 1.1
prior to the Permitted Sale permitted by Section 7.11.

 

7.9          Burdensome Agreements.  Enter into any Contractual Obligation (other
than this Agreement or any other Loan Document) that (a) limits the
ability (i) of any Subsidiary to make Restricted Payments to Borrower or
any Guarantor or to otherwise transfer property to Borrower or any Guarantor,
(ii) of any Subsidiary to Guarantee the Indebtedness of Borrower or
(iii) of Borrower or any Subsidiary to create, incur, assume or suffer to
exist Liens on property of such Person; provided, however, that
clause (i) and clause (iii) shall not prohibit any restriction on transfer or
negative pledge incurred or provided in favor of any holder of Indebtedness
permitted

 

72

 

under Section 7.3(f) solely to the extent any such restriction
on transfer or negative pledge relates to the property financed by or the
subject of such Indebtedness; or (b) requires the grant of a Lien to
secure an obligation of such Person if a Lien is granted to secure another
obligation of such Person.

 

7.10        Use of Proceeds.  Use the proceeds of any Credit Extension,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, to purchase or carry margin stock (within the meaning of Regulation
U of the FRB) or to extend credit to others for the purpose of purchasing or
carrying margin stock or to refund indebtedness originally incurred for such
purpose or for any Hostile Acquisition.

 

7.11        Foreign Subsidiaries; OSC.  Make any Investments in
Quidel Deutschland, OSC, any Dormant Foreign Subsidiary or any other foreign
Subsidiary after the Closing Date, Guarantee any obligations of Quidel
Deutschland, OSC, any Dormant Foreign Subsidiary or any other foreign
Subsidiary after the Closing Date, or otherwise transfer any assets (including
the repayment of any intercompany payables) to Quidel Deutschland, OSC, any
Dormant Foreign Subsidiary or any other foreign Subsidiary after the Closing
Date; provided that Borrower and its Subsidiary Guarantors may transfer to
Quidel Deutschland the IP Rights and other assets described in Schedule 1.1
prior to the Permitted Sale.

 

ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES

 

8.1          Events of Default.  Any of the following shall constitute an
Event of Default:

 

(a)           Non-Payment.  Borrower or any other Loan Party fails to pay
(i) when and as required to be paid herein, any amount of principal of any
Loan or any L/C Obligation, or (ii) within three days after the same
becomes due, any interest on any Loan or on any L/C Obligation, or any fee due
hereunder, or (iii) within five days after the same becomes due, any other
amount payable hereunder or under any other Loan Document; or

 

(b)           Specific Covenants.  Borrower fails to perform or observe any
term, covenant or agreement contained in any of Section 6.1, 6.2,
6.3, 6.5 (as to existence), 6.10, 6.11, 6.12,
6.13, 6.15 or 6.16 or Article VII; or

 

(c)           Other Defaults.  Any Loan Party fails to perform or observe
any other covenant or agreement (not specified in any other subsection of this
Section 8) contained in any Loan Document on its part to be performed or
observed and such failure continues for 30 days after the earlier of
(i) any Responsible Officer or any other officer (including without
limitation any senior vice president, executive vice president or any other
vice president) of any Loan Party becoming aware of such failure or
(ii) receipt by Borrower or any other Loan Party of notice from Agent or
any Lender of such failure; or

 

(d)           Representations and
Warranties.  Any representation,
warranty or certification made or deemed made by or on behalf of Borrower or
any other Loan Party herein, in any other Loan Document, or in any document
delivered in connection herewith or therewith shall be incorrect or misleading
when made or deemed made; or

 

73

 

(e)           Cross-Default.  (i) Borrower or any Subsidiary
(A) fails to make any payment when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) in respect of any
Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness
under Swap Contracts) having an aggregate principal amount (including undrawn
committed or available amounts and including amounts owing to all creditors
under any combined or syndicated credit arrangement) of more than the Threshold
Amount, or (B) fails to observe or perform any other agreement or
condition relating to any such Indebtedness or Guarantee or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event occurs, the effect of which default or other event is to cause, or to
permit the holder or holders of such Indebtedness or the beneficiary or
beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the giving of notice
if required, such Indebtedness to be demanded or to become due or to be
repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an
offer to repurchase, prepay, defease or redeem such Indebtedness to be made,
prior to its stated maturity, or such Guarantee to become payable or cash
collateral in respect thereof to be demanded (except for due on sale clauses in
Indebtedness relating to capital leases permitted under Section 7.3(b) or
7.3(f)); or (ii) there occurs under any Swap Contract an Early
Termination Date (as defined in such Swap Contract) resulting from (A) any
event of default under such Swap Contract as to which Borrower or any
Subsidiary is the Defaulting Party (as defined in such Swap Contract) or
(B) any Termination Event (as so defined) under such Swap Contract as to
which Borrower or any Subsidiary is an Affected Party (as so defined) and, in
either event, the Swap Termination Value owed by Borrower or such Subsidiary as
a result thereof is greater than the Threshold Amount and, in the case of
clause (B) above, such amount is not paid within 10 days; or

 

(f)            Insolvency
Proceedings, Etc.  Any Loan Party or
any of its Subsidiaries institutes or consents to the institution of any
proceeding under any Debtor Relief Law, or makes an assignment for the benefit
of creditors; or applies for or consents to the appointment of any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar officer
for it or for all or any material part of its property; or any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar officer
is appointed without the application or consent of such Person and the
appointment continues undischarged or unstayed for 60 calendar days; or any
proceeding under any Debtor Relief Law relating to any such Person or to all or
any material part of its property is instituted without the consent of such
Person and continues undismissed or unstayed for 60 calendar days, or an order
for relief is entered in any such proceeding; or

 

(g)           Inability to Pay
Debts; Attachment.  (i) Borrower
or any Subsidiary becomes unable or admits in writing its inability or fails
generally to pay its debts as they become due, or (ii) any writ or warrant
of attachment or execution or similar process is issued or levied against all
or any material part of the property of any such Person and is not released,
vacated or fully bonded within 30 days after its issue or levy; or

 

(h)           Judgments.  There is entered against Borrower or any
Subsidiary (i) a judgment or order for the payment of money in an
aggregate amount exceeding the Threshold Amount (to the extent not covered by
independent third-party insurance as to which the insurer does not dispute
coverage) (other than a judgment or order for the payment of money entered

 

74

 

in connection with the litigation specified in item number 1 of Schedule
5.6 so long as such judgment or order is not deemed to have a Material
Adverse Effect (pursuant to the second and/or third sentences of the definition
of the term Material Adverse Effect)), or (ii) any one or more
non-monetary judgments that have, or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect (other than a
non-monetary judgment entered in connection with the litigation specified in
item number 1 of Schedule 5.6 so long as such judgment is not deemed to
have a Material Adverse Effect (pursuant to the second and/or third sentences
of the definition of the term Material Adverse Effect)) and, in either case,
(A) enforcement proceedings are commenced by any creditor upon such
judgment or order, or (B) there is a period of 30 days during which a stay
of enforcement of such judgment, by reason of a pending appeal or otherwise, is
not in effect; or

 

(i)            ERISA.  (i) An ERISA Event occurs with respect
to a Pension Plan or Multiemployer Plan which has resulted or could reasonably
be expected to result in liability of Borrower under Title IV of ERISA to
the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in
excess of the Threshold Amount, or (ii) Borrower or any ERISA Affiliate
fails to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of the
Threshold Amount; or

 

(j)            Invalidity of
Loan Documents; Failure of Security. 
(i) Any Loan Document, at any time after its execution and delivery
and for any reason other than as expressly permitted hereunder or satisfaction
in full of all the Obligations, ceases to be in full force and effect; or any
Loan Party or any other Person contests in any manner the validity or
enforceability of any Loan Document; or any Loan Party denies that it has any
or further liability or obligation under any Loan Document, or purports to
revoke, terminate or rescind any Loan Document or (ii) the Agent shall not
have or shall cease to have a valid and perfected First Priority Lien in any
Collateral (other than Liens permitted under clauses (b) through (i) of Section
7.1 and items of Collateral deemed immaterial by Agent in its sole
discretion) purported to be covered by the Collateral Documents, in each case
for any reason other than failure of Agent or any Lender to take any action
within its control; or

 

(k)           Change of Control.  There occurs any Change of Control with
respect to Borrower and/or any
Guarantor; or

 

(l)            Material Adverse
Effect.  There occurs any event or
circumstance that has a Material Adverse Effect (other than any event or circumstance
relating to the litigation described in item 1 of Schedule 5.6 unless
such event or circumstance relating to such litigation is a Specified Event
which is deemed to have a Material Adverse Effect pursuant to the second and/or
third sentences of the definition of the term Material Adverse Effect); or

 

(m)          Loss of ISO 9001
Certifications.  Borrower or any of
its Subsidiaries shall have ceased to have maintained in full force and effect
each of their respective International Organization for Standardization (“ISO”)
9001 certifications (other than due to the sale of any such ISO 9001
certification pursuant to a Disposition permitted under this Agreement and
other than due to any voluntary shutdown of plants by any Loan Party for
reasons other than the loss of the applicable ISO 9001 certification).

 

75

 

8.2          Remedies Upon Event of
Default.  If any Event of
Default occurs and is continuing, Agent shall, at the request of, or may, with
the consent of, the Required Lenders, take any or all of the following actions:

 

(a)           declare the
commitment of each Lender to make Loans and any obligation of the L/C Issuer to
make L/C Credit Extensions to be terminated, whereupon such commitments and
obligation shall be terminated;

 

(b)           declare the unpaid
principal amount of all outstanding Loans, all interest accrued and unpaid
thereon, and all other amounts owing or payable hereunder or under any other
Loan Document to be immediately due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived
by Borrower;

 

(c)           require that
Borrower Cash Collateralize the L/C Obligations (in an amount equal to the then
Outstanding Amount thereof); and

 

(d)           exercise on behalf
of itself and the Lenders all rights and remedies available to it and the
Lenders under the Loan Documents or applicable law;

 

provided, however, that upon the
occurrence of an actual or deemed entry of an order for relief with respect to
Borrower under the Bankruptcy Code of the United States, the obligation of each
Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit
Extensions shall automatically terminate, the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable, and the obligation of Borrower to Cash
Collateralize the L/C Obligations as aforesaid shall automatically become
effective, in each case without further act of Agent or any Lender.

 

8.3          Application of Funds.  After the exercise of remedies provided for
in Section 8.2 (or after the Loans have automatically become immediately
due and payable and the L/C Obligations have automatically been required to be
Cash Collateralized as set forth in the proviso to Section 8.2), any
amounts received on account of the Obligations shall be applied by Agent in the
following order:

 

First, to payment of that portion of the
Obligations constituting fees, indemnities, expenses and other amounts
(including Attorney Costs and amounts payable under Article III) payable
to Agent in its capacity as such;

 

Second, to payment of that portion of the
Obligations constituting fees, indemnities and other amounts (other than
principal and interest) payable to the Lenders and their Affiliates (including
Attorney Costs and amounts payable under Article III), ratably among
them in proportion to the amounts described in this clause Second
payable to them;

 

Third, to payment of that portion of the
Obligations constituting accrued and unpaid interest on the Loans, L/C
Borrowings and other Obligations, ratably among the Lenders in proportion to
the respective amounts described in this clause Third payable to them;

 

Fourth, to payment
of that portion of the Obligations constituting unpaid principal of the Loans
and L/C Borrowings and the Swap Termination Value and other amounts owing to
Lenders and

 

76

 

their Affiliates under Lender Swap Contracts,
ratably among the Lenders and its Affiliates in proportion to the respective
amounts described in this clause Fourth held by them;

 

Fifth, to Agent for the account of the L/C
Issuer, to Cash Collateralize that portion of L/C Obligations comprised of the
aggregate undrawn amount of Letters of Credit; and

 

Last, the balance, if any, after all of the
Obligations have been indefeasibly paid in full, to Borrower or as otherwise
required by Law.

 

Subject to Section 2.3(c), amounts used to Cash Collateralize
the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth
above shall be applied to satisfy drawings under such Letters of Credit as they
occur.  If any amount remains on deposit
as Cash Collateral after all Letters of Credit have either been fully drawn or
expired, such remaining amount shall be applied to the other Obligations, if
any, in the order set forth above.

 

ARTICLE IX AGENT

 

9.1          Appointment and
Authorization Agent.

 

(a)           Each Lender hereby
irrevocably appoints, designates and authorizes Agent to take such action on
its behalf under the provisions of this Agreement and each other Loan Document
and to exercise such powers and perform such duties as are expressly delegated
to it by the terms of this Agreement or any other Loan Document, together with
such powers as are reasonably incidental thereto.  Notwithstanding any provision to the contrary
contained elsewhere herein or in any other Loan Document, Agent shall not have
any duties or responsibilities, except those expressly set forth herein, nor
shall Agent have or be deemed to have any fiduciary relationship with any
Lender or participant, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or any
other Loan Document or otherwise exist against Agent.  Without limiting the generality of the
foregoing sentence, the use of the term “agent” herein and in the other Loan
Documents with reference to Agent is not intended to connote any fiduciary or
other implied (or express) obligations arising under agency doctrine of any
applicable Law.  Instead, such term is
used merely as a matter of market custom, and is intended to create or reflect
only an administrative relationship between independent contracting parties.

 

(b)           The L/C Issuer shall
act on behalf of the Lenders with respect to any Letters of Credit issued by it
and the Issuer Documents associated therewith, and the L/C Issuer shall have
all of the benefits and immunities (i) provided to Agent in this Article
IX with respect to any acts taken or omissions suffered by the L/C Issuer
in connection with Letters of Credit issued by it or proposed to be issued by
it and the Issuer Documents pertaining to such Letters of Credit as fully as if
the term “Agent” as used in this Article IX and in the definition of “Agent-Related
Person” included the L/C Issuer with respect to such acts or omissions, and
(ii) as additionally provided herein with respect to the L/C Issuer.

 

9.2          Delegation of Duties.  Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel and other
consultants or experts concerning all matters pertaining to

 

77

 

such
duties.  Agent shall not be responsible
for the negligence or misconduct of any agent or attorney-in-fact that it
selects in the absence of gross negligence or willful misconduct.

 

9.3          Liability of Agent.  No Agent-Related Person shall (a) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct
in connection with its duties expressly set forth herein as determined by a
final non-appealable judgment by a court of competent jurisdiction), or
(b) be responsible in any manner to any Lender or Participant for any
recital, statement, representation or warranty made by any Loan Party or any
officer thereof, contained herein or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for
in, or received by Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of any Loan Party or any other party to any Loan Document to
perform its obligations hereunder or thereunder.  No Agent-Related Person shall be under any
obligation to any Lender or Participant to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Loan Party or any Affiliate thereof.

 

9.4          Reliance by Agent.

 

(a)           Agent shall be
entitled to rely, and shall be fully protected in relying, upon any writing,
communication, signature, resolution, representation, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, electronic mail message, statement or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons, and upon advice and statements of legal
counsel (including counsel to any Loan Party), independent accountants and
other experts selected by Agent.  Agent
shall be fully justified in failing or refusing to take any action under any
Loan Document unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate and, if it so requests, it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action.  Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Required Lenders (or such greater number of Lenders as may be expressly
required hereby in any instance) and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders.

 

(b)           For purposes of
determining compliance with the conditions specified in Section 4.1,
each Lender that has signed this Agreement shall be deemed to have consented
to, approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or satisfactory
to a Lender unless Agent shall have received notice from such Lender prior to
the proposed Closing Date specifying its objection thereto.

 

9.5          Notice of Default.  Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default, except with respect to defaults in
the payment of principal, interest

 

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and fees
required to be paid to Agent for the account of the Lenders, unless Agent shall
have received written notice from a Lender or Borrower referring to this
Agreement, describing such Default and stating that such notice is a “notice of
default.”  Agent will notify the Lenders
of its receipt of any such notice.  Agent
shall take such action with respect to such Default as may be directed by the
Required Lenders in accordance with Article VIII; provided, however,
that unless and until Agent has received any such direction, Agent may (but
shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default as it shall deem advisable or in the best
interest of the Lenders.

 

9.6          Credit Decision;
Disclosure of Information by Agent. 
Each Lender acknowledges that no Agent-Related Person has made any
representation or warranty to it, and that no act by Agent hereafter taken,
including any consent to and acceptance of any assignment or review of the
affairs of any Loan Party or any Affiliate thereof, shall be deemed to
constitute any representation or warranty by any Agent-Related Person to any
Lender as to any matter, including whether Agent-Related Persons have disclosed
material information in their possession. 
Each Lender represents to Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Loan Parties and their respective
Subsidiaries, and all applicable bank or other regulatory Laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to Borrower and the other Loan Parties
hereunder.  Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to
the business, prospects, operations, property, financial and other condition
and creditworthiness of Borrower and the other Loan Parties.  Except for notices, reports and other
documents expressly required to be furnished to the Lenders by Agent herein,
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of any of the Loan
Parties or any of their respective Affiliates which may come into the
possession of any Agent-Related Person.

 

9.7          Indemnification of
Agent.  Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand each Agent-Related Person (to the extent not reimbursed by or on
behalf of any Loan Party and without limiting the obligation of any Loan Party
to do so), pro rata, and hold harmless each Agent-Related Person from and
against any and all Indemnified Liabilities incurred by it; provided, however,
that no Lender shall be liable for the payment to any Agent-Related Person of
any portion of such Indemnified Liabilities to the extent determined in a
final, nonappealable judgment by a court of competent jurisdiction to have
resulted from such Agent-Related Person’s own gross negligence or willful
misconduct; provided, however, that no action taken in accordance
with the directions of the Required Lenders shall be deemed to constitute gross
negligence or willful misconduct for purposes of this Section.  Without limitation of the foregoing, each
Lender shall reimburse Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by Agent in
connection with the preparation, execution, delivery, administration,

 

79

 

modification, amendment or enforcement (whether through negotiations,
legal proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any
document contemplated by or referred to herein, to the extent that Agent is not
reimbursed for such expenses by or on behalf of Borrower.  The undertaking in this Section shall survive
termination of the Aggregate Commitments, the payment of all other Obligations
and the resignation of Agent.

 

9.8          Agent in its Individual
Capacity.  Bank of America and
its Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in and generally engage in any
kind of banking, trust, financial advisory, underwriting or other business with
each of the Loan Parties and their respective Affiliates as though Bank of
America were not Agent or the L/C Issuer hereunder and without notice to or
consent of the Lenders.  The Lenders
acknowledge that, pursuant to such activities, Bank of America or its
Affiliates may receive information regarding any Loan Party or its Affiliates
(including information that may be subject to confidentiality obligations in
favor of such Loan Party or such Affiliate) and acknowledge that Agent shall be
under no obligation to provide such information to them.  With respect to its Loans, Bank of America
shall have the same rights and powers under this Agreement as any other Lender
and may exercise such rights and powers as though it were not Agent or the L/C
Issuer, and the terms “Lender” and “Lenders” include Bank of America in its
individual capacity.

 

9.9          Successor Agent.  Agent may resign as Agent upon 30 days’
notice to the Lenders; provided that any such resignation by Bank of America
shall also constitute its resignation as L/C Issuer.  If Agent resigns under this Agreement, the
Required Lenders shall appoint from among the Lenders a successor
administrative agent for the Lenders, which successor administrative agent
shall be consented to by Borrower at all times other than during the existence
of an Event of Default (which consent of Borrower shall not be unreasonably
withheld or delayed).  If no successor
administrative agent is appointed prior to the effective date of the
resignation of Agent, Agent may appoint, after consulting with the Lenders and
Borrower, a successor administrative agent from among the Lenders.  Upon the acceptance of its appointment as
successor administrative agent hereunder, the Person acting as such successor
administrative agent shall succeed to all the rights, powers and duties of the
retiring Agent, L/C Issuer and the respective terms “Agent” and “L/C Issuer”
shall mean such successor administrative agent, Letter of Credit issuer, and
the retiring Agent’s appointment, powers and duties as Agent shall be terminated
and the retiring L/C Issuer’s rights, powers and duties as such shall be
terminated, without any other or further act or deed on the part of such
retiring L/C Issuer or any other Lender, other than the obligation of the
successor L/C Issuer to issue letters of credit in substitution for the Letters
of Credit, if any, outstanding at the time of such succession or to make other
arrangements satisfactory to the retiring L/C Issuer to effectively assume the
obligations of the retiring L/C Issuer with respect to such Letters of
Credit.  After any retiring Agent’s
resignation hereunder as Agent, the provisions of this Article IX and Sections 10.4
and 10.5 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.  If no successor administrative agent has
accepted appointment as Agent by the date which is 30 days following a retiring
Agent’s notice of resignation, the retiring Agent’s resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of
the duties of Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above.

 

80

 

9.10        Agent May File Proofs of
Claim.

 

(a)           In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to any Loan Party, Agent (irrespective of whether the
principal of any Loan or L/C Obligation shall then be due and payable as herein
expressed or by declaration or otherwise and irrespective of whether Agent
shall have made any demand on Borrower) shall be entitled and empowered, by
intervention in such proceeding or otherwise

 

(b)           to file and prove a
claim for the whole amount of the principal and interest owing and unpaid in
respect of the Loans, L/C Obligations and all other Obligations that are owing
and unpaid and to file such other documents as may be necessary or advisable in
order to have the claims of the Lenders and Agent (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Lenders
and Agent and their respective agents and counsel and all other amounts due the
Lenders and Agent under Sections 2.3(i) and (j), 2.9 and 10.4)
allowed in such judicial proceeding; and

 

(c)           to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is
hereby authorized by each Lender to make such payments to Agent and, in the
event that Agent shall consent to the making of such payments directly to the
Lenders, to pay to Agent any amount due for the reasonable compensation,
expenses, disbursements and advances of Agent and its agents and counsel, and
any other amounts due Agent under Sections 2.9 and 10.4.  Nothing contained herein shall be deemed to
authorize Agent to authorize or consent to or accept or adopt on behalf of any
Lender any plan of reorganization, arrangement, adjustment or composition
affecting the Obligations or the rights of any Lender or to authorize Agent to
vote in respect of the claim of any Lender in any such proceeding.

 

9.11        Guaranty Matters.  Each Lender hereby irrevocably authorizes
Agent, at its option and in its discretion, to release any Guarantor from its
obligations under the Guaranty if such Person ceases to be a Subsidiary as a
result of a transaction permitted hereunder. 
Upon request by Agent at any time, each Lender will confirm in writing
Agent’s authority to release any Guarantor from its obligations under the
Guaranty pursuant to this Section 9.11.

 

9.12        Collateral Matters.

 

(a)           Each Lender hereby
irrevocably authorizes and directs Agent to enter into the Collateral Documents
for the benefit of such Lender.  Each
Lender hereby agrees, and each holder of any Note by the acceptance thereof
will be deemed to agree, that, except as otherwise set forth in Section 10.1,
any action taken by the Required Lenders, in accordance with the provisions of
this Agreement or the Collateral Documents, and the exercise by the Required
Lenders of the powers set forth herein or therein, together with such other
powers as are reasonably incidental thereto, shall be authorized and binding
upon all of Lenders.  Agent is hereby
authorized on behalf of all of Lenders, without the necessity of any notice to
or further consent from any Lender from time to time prior to, an Event of
Default, to take any action

 

81

 

with respect to any Collateral or Collateral Documents which may be
necessary to perfect and maintain perfected the Liens upon the Collateral
granted pursuant to the Collateral Documents.

 

(b)           Each Lender hereby
irrevocably authorizes Agent, at its option and in its discretion,

 

(i)            to release any Lien
on any property granted to or held by Agent under any Loan Document
(A) upon termination of the Aggregate Commitments and payment in full of
all Obligations (other than contingent indemnification obligations) and the
expiration or termination of all Letters of Credit, (B) that is sold or to
be sold as part of or in connection with any sale permitted hereunder or under
any other Loan Document, (C) subject to Section 10.1, if
approved, authorized or ratified in writing by the Required Lenders, or (D) in
connection with any foreclosure sale or other disposition of Collateral after
the occurrence of an Event of Default; and

 

(ii)           to subordinate any
Lien on any property granted to or held by Agent under any Loan Document to the
holder of any Lien on such property that is permitted by this Agreement or any
other Loan Document.

 

Upon request by Agent at any time, each Lender will confirm in writing
Agent’s authority to release or subordinate its interest in particular types or
items of Collateral pursuant to this Section 9.12.

 

(c)           Subject to (b)
above, Agent shall (and is hereby irrevocably authorized by each Lender, to) execute
such documents as may be necessary to evidence the release or subordination of
the Liens granted to Agent for the benefit of Agent and Lenders herein or
pursuant hereto upon the applicable Collateral; provided that (i) Agent
shall not be required to execute any such document on terms which, in Agent’s
opinion, would expose Agent to or create any liability or entail any
consequence other than the release or subordination of such Liens without
recourse or warranty and (ii) such release or subordination shall not in
any manner discharge, affect or impair the Obligations or any Liens upon (or
obligations of Borrower or any other Loan Party in respect of) all interests
retained by Borrower or any other Loan Party, including the proceeds of the
sale, all of which shall continue to constitute part of the Collateral.  In the event of any sale or transfer of
Collateral, or any foreclosure with respect to any of the Collateral, Agent
shall be authorized to deduct all expenses reasonably incurred by Agent from the
proceeds of any such sale, transfer or foreclosure.

 

(d)           Agent shall have no
obligation whatsoever to any Lender or any other Person to assure that the
Collateral exists or is owned by Borrower or any other Loan Party or is cared
for, protected or insured or that the Liens granted to Agent herein or in any
of the Collateral Documents or pursuant hereto or thereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise or to continue exercising
at all or in any manner or under any duty of care, disclosure or fidelity any
of the rights, authorities and powers granted or available to Agent in this Section
9.12 or in any of the Collateral Documents, it being understood and
agreed that in respect of the Collateral, or any act, omission or event related
thereto, Agent may act in any manner it

 

82

 

may deem
appropriate, in its sole discretion, given Agent’s own interest in the
Collateral as one of Lenders and that Agent shall have no duty or liability
whatsoever to Lenders.

 

(e)           Each Lender hereby
appoints each other Lender as agent for the purpose of perfecting Lenders’
security interest in assets which, in accordance with Article 9 of the UCC can
be perfected only by possession or control. 
Should any Lender (other than Agent) obtain possession or control of any
such Collateral, such Lender shall notify Agent thereof, and, promptly upon
Agent’s request therefor shall deliver such Collateral to Agent or in
accordance with Agent’s instructions.

 

ARTICLE X MISCELLANEOUS

 

10.1        Amendments, Etc.  No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent to any departure by
Borrower or any other Loan Party therefrom, shall be effective unless in
writing signed by the Required Lenders and Borrower or the applicable Loan
Party, as the case may be, and acknowledged by Agent, and each such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such
amendment, waiver or consent shall:

 

(a)           waive any condition
set forth in Section 4.1(a) without the written consent of each Lender; provided,
however, in the sole discretion of Agent, only a waiver by Agent shall
be required with respect to immaterial matters or items specified in Section
4.1(a) (iii) or (iv) with respect to which Borrower has given
assurances satisfactory to Agent that such items shall be delivered promptly
following the Closing Date;

 

(b)           extend or increase
the Commitment of any Lender (or reinstate any Commitment terminated pursuant
to Section 8.2) without the written consent of such Lender;

 

(c)           postpone any date
fixed by this Agreement or any other Loan Document for any payment (excluding
mandatory prepayments) of principal, interest, fees or other amounts due to the
Lenders (or any of them) hereunder or under any other Loan Document without the
written consent of each Lender directly affected thereby;

 

(d)           reduce the principal
of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or
(subject to clause (iv) of the second proviso to this Section 10.1) any
fees or other amounts payable hereunder or under any other Loan Document, without
the written consent of each Lender directly affected thereby; provided, however,
that only the consent of the Required Lenders shall be necessary (i) to
amend the definition of “Default Rate” or to waive any obligation of Borrower
to pay interest or L/C Fees at the Default Rate or (ii) to amend any
financial covenant hereunder (or any defined term used therein) even if the
effect of such amendment would be to reduce the rate of interest on any Loan or
L/C Borrowing or to reduce any fee payable hereunder;

 

(e)           change Section
2.13 or Section 8.3 in a manner that would alter the pro rata
sharing of payments required thereby without the written consent of each
Lender;

 

(f)            change any
provision of this Section or the definition of “Required Lenders” or any other
provision hereof specifying the number or percentage of Lenders

 

83

 

required to
amend, waive or otherwise modify any rights hereunder or make any determination
or grant any consent hereunder, without the written consent of each Lender; or

 

(g)           release any
Guarantor from the Guaranty or release the Liens on all or substantially all of
the Collateral except in accordance with the terms of any Loan Document without
the written consent of each Lender; and,

 

provided  further,
that (i) no amendment, waiver or consent shall, unless in writing and
signed by the L/C Issuer in addition to the Lenders required above, affect the
rights or duties of the L/C Issuer under this Agreement or any L/C Application
relating to any Letter of Credit issued or to be issued by it; (ii) no
amendment, waiver or consent shall, unless in writing and signed by Agent in
addition to the Lenders required above, affect the rights or duties of Agent
under this Agreement or any other Loan Document; and (iii) the Agent Fee
Letter may be amended, or rights or privileges thereunder waived, in a writing
executed only by the parties thereto. 
Notwithstanding anything to the contrary herein, no Defaulting Lender
shall have any right to approve or disapprove any amendment, waiver or consent
hereunder, except that the Commitment of such Lender may not be increased or
extended without the consent of such Lender.

 

10.2        Notices and Other
Communications; Facsimile Copies.

 

(a)           General.  Unless otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including by facsimile transmission). 
All such written notices shall be mailed, certified or registered mail,
faxed or delivered to the applicable address, facsimile number or (subject to
subsection (c) below) electronic mail address, and all notices and other
communications expressly permitted hereunder to be given by telephone shall be
made to the applicable telephone number, as follows:

 

(i)            if to Borrower,
Agent and the L/C Issuer, to the address, facsimile number, electronic mail
address or telephone number specified for such Person on Schedule 10.2
or to such other address, facsimile number, electronic mail address or
telephone number as shall be designated by such party in a notice to the other
parties; and

 

(ii)           if to any other
Lender, to the address, facsimile number, electronic mail address or telephone
number specified in its Administrative Questionnaire or to such other address,
facsimile number, electronic mail address or telephone number as shall be
designated by such party in a notice to Borrower, Agent and the L/C Issuer.

 

Notices sent by hand or overnight courier service, or mailed by
certified or registered mail, shall be deemed to have been given when received;
notices sent by facsimile shall be deemed to have been given when sent (except
that, if not given during normal business hours for the recipient, shall be
deemed to have been given at the opening of business on the next business day
for the recipient).  Notices delivered
through electronic communications to the extent provided in subsection (b)
below, shall be effective as provided in such subsection (b).

 

84

 

(b)           Electronic
Communications.  Notices and other
communications to Lenders hereunder may be delivered or furnished by electronic
communication (including e-mail and Internet or intranet websites) pursuant to
procedures approved by Agent, provided that the foregoing shall not apply to
notices to any Lender pursuant to Article II if such Lender has notified the
Agent that it is incapable of receiving notices under such Article by
electronic communication.  Agent or
Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it, provided that approval of such procedures may be
limited to particular notices or communications.

 

(c)           Effectiveness of
Facsimile Documents and Signatures. 
Loan Documents may be transmitted and/or signed by facsimile.  The effectiveness of any such documents and
signatures shall, subject to applicable Law, have the same force and effect as
manually-signed originals and shall be binding on all Loan Parties, Agent and
the Lenders.  Agent may also require that
any such documents and signatures be confirmed by a manually-signed original
thereof; provided, however, that the failure to request or
deliver the same shall not limit the effectiveness of any facsimile document or
signature.

 

(d)           Reliance by Agent
and Lenders.  Agent and the Lenders shall be
entitled to rely and act upon any notices (including telephonic Loan Notices)
purportedly given by or on behalf of Borrower even if (i) such notices
were not made in a manner specified herein, were incomplete or were not
preceded or followed by any other form of notice specified herein, or
(ii) the terms thereof, as understood by the recipient, varied from any
confirmation thereof.  Borrower shall
indemnify each Agent-Related Person and each Lender from all losses, costs,
expenses and liabilities resulting from the reliance by such Person on each
notice purportedly given by or on behalf of Borrower.  All telephonic notices to and other
communications with Agent may be recorded by Agent, and each of the parties
hereto hereby consents to such recording.

 

10.3        No Waiver; Cumulative
Remedies.  No failure by any
Lender or Agent to exercise, and no delay by any such Person in exercising, any
right, remedy, power or privilege hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.

 

10.4        Attorney Costs, Expenses
and Taxes.  Borrower agrees
(a) to pay or reimburse Agent for all costs and expenses incurred in
connection with the development, preparation, negotiation and execution of this
Agreement and the other Loan Documents and any amendment, waiver, consent or
other modification of the provisions hereof and thereof (whether or not the transactions
contemplated hereby or thereby are consummated), and the consummation and
administration of the transactions contemplated hereby and thereby, including
all Attorney Costs, and (b) to pay or reimburse Agent and each Lender for
all costs and expenses incurred in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this Agreement or
the other Loan Documents (including all such costs and expenses incurred during
any “workout” or restructuring in respect of the Obligations and during

 

85

 

any legal proceeding, including any proceeding under any Debtor Relief
Law), including all Attorney Costs.  The
foregoing costs and expenses shall include all search, filing, recording, title
insurance and appraisal charges and fees and taxes related thereto, and other
out-of-pocket expenses incurred by Agent and the cost of independent public
accountants and other outside experts retained by Agent or any Lender.  All amounts due under this Section 10.4
shall be payable within ten Business Days after demand therefor.  The agreements in this Section shall survive
the termination of the Aggregate Commitments and repayment of all other
Obligations.

 

10.5        Indemnification by Borrower.  Whether or not the transactions contemplated
hereby are consummated, Borrower shall indemnify and hold harmless each
Agent-Related Person, each Lender and their respective Affiliates, directors,
officers, employees, counsel, agents and attorneys-in-fact (collectively the “Indemnitees”)
from and against any and all liabilities, obligations, losses, damages,
penalties, claims, demands, actions, judgments, suits, costs, expenses and
disbursements (including Attorney Costs) of any kind or nature whatsoever which
may at any time be imposed on, incurred by or asserted against any such
Indemnitee in any way relating to or arising out of or in connection with
(a) the execution, delivery, enforcement, performance or administration of
any Loan Document or any other agreement, letter or instrument delivered in
connection with the transactions contemplated thereby or the consummation of
the transactions contemplated thereby, (b) any Commitment, Loan or Letter
of Credit or the use or proposed use of the proceeds therefrom (including any
refusal by the L/C Issuer to honor a demand for payment under a Letter of
Credit if the documents presented in connection with such demand do not
strictly comply with the terms of such Letter of Credit), (c) any actual
or alleged presence or release of Hazardous Materials on or from any property
currently or formerly owned or operated by Borrower, any Subsidiary or any
other Loan Party, or any Environmental Liability related in any way to
Borrower, any Subsidiary or any other Loan Party, or (d) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory (including
any investigation of, preparation for, or defense of any pending or threatened
claim, investigation, litigation or proceeding) and regardless of whether any
Indemnitee is a party thereto (all the foregoing, collectively, the “Indemnified
Liabilities”), in all cases, whether or not caused by or arising, in whole
or in part, out of the negligence of the Indemnitee; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
liabilities, obligations, losses, damages, penalties, claims, demands, actions,
judgments, suits, costs, expenses or disbursements are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of such Indemnitee.  No Indemnitee shall be liable for any damages
arising from the use by others of any information or other materials obtained
through IntraLinks or other similar information transmission systems in
connection with this Agreement, nor shall any Indemnitee have any liability for
any indirect or consequential damages relating to this Agreement or any other
Loan Document or arising out of its activities in connection herewith or
therewith (whether before or after the Closing Date).  All amounts due under this Section 10.5
shall be payable within ten Business Days after demand therefor.  The agreements in this Section shall survive
the resignation of Agent, the replacement of any Lender, the termination of the
Aggregate Commitments and the repayment, satisfaction or discharge of all the
other Obligations.

 

10.6        Payments Set Aside.  To the extent that any payment by or on behalf
of Borrower is made to Agent or any Lender, or Agent or any Lender exercises
its right of set-off,

 

86

 

and such payment or the proceeds of such set-off or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required (including pursuant to any settlement entered into by Agent or such
Lender in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any proceeding under any Debtor Relief Law or
otherwise, then (a) to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such set-off had
not occurred, and (b) each Lender severally agrees to pay to Agent upon
demand its applicable share of any amount so recovered from or repaid by Agent,
plus interest thereon from the date of such demand to the date such payment is
made at a rate per annum equal to the Federal Funds Rate from time to time in
effect.

 

10.7        Successors and Assigns.  (a) The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that Borrower may not assign or
otherwise transfer any of its rights or obligations hereunder without the prior
written consent of each Lender and no Lender may assign or otherwise transfer
any of its rights or obligations hereunder except (i) to an Eligible
Assignee in accordance with the provisions of subsection (b) of this
Section, (ii) by way of participation in accordance with the provisions of
subsection (d) of this Section, or (iii) by way of pledge or assignment of
a security interest subject to the restrictions of subsection (f)  of this Section (and any other attempted
assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, Participants
to the extent provided in subsection (d) of this Section and, to the extent
expressly contemplated hereby, the Indemnitees) any legal or equitable right,
remedy or claim under or by reason of this Agreement.

 

(b)           Any Lender may at
any time assign to one or more Eligible Assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans (including for purposes of this subsection (b),
participations in L/C Obligations) at the time owing to it); provided
that (i) except in the case of an assignment of the entire remaining
amount of the assigning Lender’s Commitment and the Loans at the time owing to
it or in the case of an assignment to a Lender or an Affiliate of a Lender ,
the aggregate amount of the Commitment (which for this purpose includes Loans
outstanding thereunder) subject to each such assignment, determined as of the
date the Assignment and Assumption with respect to such assignment is delivered
to Agent or, if “Trade Date” is specified in the Assignment and Assumption, as
of the Trade Date, shall not be less than $5,000,000 unless each of Agent and, so long as no Event of Default has
occurred and is continuing, Borrower otherwise consents (each such consent not
to be unreasonably withheld or delayed); (ii) each partial assignment
shall be made as an assignment of a proportionate part of all the assigning
Lender’s rights and obligations under this Agreement with respect to the Loans
or the Commitment assigned; (iii) any assignment of a Commitment must be
approved by Agent and the L/C Issuer unless the Person that is the proposed
assignee is itself a Lender (whether or not the proposed assignee would
otherwise qualify as an Eligible Assignee); and (iv) the parties to each
assignment shall execute and deliver to Agent an Assignment and Assumption,
together with a processing and recordation fee of $3,500.  Subject to acceptance and recording thereof by
Agent pursuant to subsection (c) of this Section, from and after the effective
date specified in each Assignment and Assumption, the Eligible Assignee
thereunder

 

87

 

shall be a
party to this Agreement and, to the extent of the interest assigned by such
Assignment and Assumption, have the rights and obligations of a Lender under
this Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 3.1, 3.4, 3.5, 10.4
and 10.5 with respect to facts and circumstances occurring prior to the
effective date of such assignment).  Upon
request, Borrower (at its expense) shall execute and deliver a Note to the
assignee Lender.  Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does
not comply with this subsection shall be treated for purposes of this Agreement
as a sale by such Lender of a participation in such rights and obligations in
accordance with subsection (d) of this Section.

 

(c)           Agent, acting solely
for this purpose as an agent of Borrower, shall maintain at Agent’s Office a
copy of each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amounts of the Loans and L/C Obligations owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, and Borrower, Agent and the Lenders may treat each Person whose
name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary.  The Register shall be
available for inspection by Borrower, at any reasonable time and from time to
time upon reasonable prior notice.  In
addition, at any time that a request for a consent for a material or other
substantive change to the Loan Documents is pending, any Lender wishing to
consult with other Lenders in connection therewith may request and receive from
Agent a copy of the Register.

 

(d)           Any Lender may at
any time, without the consent of, or notice to, Borrower or Agent, sell participations
to any Person (other than a natural person or Borrower or any of Borrower’s
Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion
of such Lender’s rights and/or obligations under this Agreement (including all
or a portion of its Commitment and/or the Loans (including such Lender’s
participations in L/C Obligations) owing to it); provided that
(i) such Lender’s obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) Borrower, Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement.  Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such agreement or instrument may provide that such Lender will not,
without the consent of the Participant, agree to any amendment, waiver or other
modification described in the first proviso to Section 10.1 that
directly affects such Participant. 
Subject to subsection (e) of this Section, Borrower agrees that each
Participant shall be entitled to the benefits of Sections 3.1, 3.4
and 3.5 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to subsection (b) of this Section.  To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 10.9
as

 

88

 

though it were
a Lender, provided such Participant agrees to be subject to Section
2.13 as though it were a Lender.

 

(e)           A Participant shall
not be entitled to receive any greater payment under Section 3.1 or 3.4
than the applicable Lender would have been entitled to receive with respect to
the participation sold to such Participant, unless the sale of the
participation to such Participant is made with Borrower’s prior written
consent.

 

(f)            Any Lender may at
any time pledge or assign a security interest in all or any portion of its
rights under this Agreement (including under its Note, if any) to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

 

(g)           “Eligible
Assignee” as used herein, means (a) a Lender; (b) an Affiliate of
a Lender;  and (c) any other Person
(other than a natural person) approved by (i) Agent and the L/C Issuer,
and (ii) unless an Event of Default has occurred and is continuing,
Borrower (each such approval not to be unreasonably withheld or delayed); provided
that notwithstanding the foregoing, “Eligible Assignee” shall not include
Borrower or any of Borrower’s Affiliates or Subsidiaries.

 

(h)           If the consent of
Borrower to an assignment to an Eligible Assignee is required hereunder
(including a consent to an assignment which does not meet the minimum
assignment threshold specified in clause (i) of the proviso to the first sentence
of Section 10.7(b)), Borrower shall be deemed to have given its consent
five Business Days after the date notice thereof has been delivered to Borrower
by the assigning Lender (through Agent) unless such consent is expressly
refused by Borrower prior to such fifth Business Day.

 

(i)            Notwithstanding
anything to the contrary contained herein, if at any time Bank of America
assigns all of its Commitment and Loans pursuant to subsection (b) above, Bank
of America may, upon 30 days’ notice to Borrower and the Lenders, resign as L/C
Issuer.  In the event of any such
resignation as L/C Issuer, Borrower shall be entitled to appoint from among the
Lenders a successor L/C Issuer hereunder; provided, however, that
no failure by Borrower to appoint any such successor shall affect the
resignation of Bank of America as L/C Issuer. 
If Bank of America resigns as L/C Issuer, it shall retain all the rights
and obligations of the L/C Issuer hereunder with respect to all Letters of Credit
outstanding as of the effective date of its resignation as L/C Issuer and all
L/C Obligations with respect thereto (including the right to require the
Lenders to make Base Rate Loans or fund risk participations in Unreimbursed
Amounts pursuant to Section 2.3(c)).

 

10.8        Confidentiality.  Each of Agent and the Lenders agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its Affiliates and to its and its
Affiliates’ respective partners, directors, officers, employees, agents,
advisors and representatives(it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to
the extent requested by any regulatory

 

89

 

authority, purporting to have jurisdiction over it  (including any self-regulatory authority,
such as the National Association of Insurance Commissioners), (c) to the
extent required by applicable laws or regulations or by any subpoena or similar
legal process, (d) to any other party hereto, (e) in connection with
the exercise of any remedies hereunder or under any other Loan Document or any
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to an
agreement containing provisions substantially the same as those of this
Section, to (i) any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement or (ii) any actual or prospective counterparty (or its advisors)
to any swap or derivative transaction relating to Borrower and its obligations,
(g) with the consent of Borrower or (h) to the extent such
Information (x) becomes publicly available other than as a result of a
breach of this Section or (y) becomes available to Agent or any Lender on
a nonconfidential basis from a source other than Borrower.  For purposes of this Section, “Information”
means all information received from Borrower or any of its Subsidiaries
relating to Borrower or any Subsidiary or any of their respective businesses,
other than any such information that is available to Agent or any Lender on a
nonconfidential basis prior to disclosure by Borrower or any Subsidiary, provided
that, in the case of information received from a Borrower or any Subsidiary
after the date hereof, such information is clearly identified at the time of
delivery as confidential.  Any Person
required to maintain the confidentiality of Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

 

10.9        Set-off.  In addition to any rights and remedies of the
Lenders provided by law, upon the occurrence and during the continuance of any
Event of Default, each Lender is authorized at any time and from time to time,
without prior notice to Borrower or any other Loan Party, any such notice being
waived by Borrower (on its own behalf and on behalf of each Loan Party) to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, such Lender to or for the credit
or the account of the respective Loan Parties against any and all Obligations
owing to such Lender hereunder or under any other Loan Document, now or
hereafter existing, irrespective of whether or not Agent or such Lender shall
have made demand under this Agreement or any other Loan Document and although
such Obligations may be contingent or unmatured or denominated in a currency
different from that of the applicable deposit or indebtedness.  Each Lender agrees promptly to notify
Borrower and Agent after any such set-off and application made by such Lender; provided,
however, that the failure to give such notice shall not affect the
validity of such set-off and application.

 

10.10      Interest Rate Limitation.  Notwithstanding anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under
the Loan Documents shall not exceed the maximum rate of non-usurious interest
permitted by applicable Law (the “Maximum Rate”).  If Agent or any Lender shall receive interest
in an amount that exceeds the Maximum Rate, the excess interest shall be
applied to the principal of the Loans or, if it exceeds such unpaid principal,
refunded to Borrower.  In determining
whether the interest contracted for, charged, or received by Agent or a Lender
exceeds the Maximum Rate, such Person may, to the extent permitted by
applicable Law, (a) characterize any payment that is not principal as an
expense, fee, or premium rather than interest, (b) exclude voluntary
prepayments and the effects

 

90

 

thereof, and (c) amortize, prorate, allocate, and spread in equal
or unequal parts the total amount of interest throughout the contemplated term
of the Obligations hereunder.

 

10.11      Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.

 

10.12      Integration.  This Agreement, together with the other Loan
Documents, comprises the complete and integrated agreement of the parties on
the subject matter hereof and thereof and supersedes all prior agreements,
written or oral, on such subject matter. 
In the event of any conflict between the provisions of this Agreement
and those of any other Loan Document, the provisions of this Agreement shall
control; provided that the inclusion of supplemental rights or remedies
in favor of Agent or the Lenders in any other Loan Document shall not be deemed
a conflict with this Agreement.  Each
Loan Document was drafted with the joint participation of the respective parties
thereto and shall be construed neither against nor in favor of any party, but
rather in accordance with the fair meaning thereof.

 

10.13      Survival of Representations
and Warranties.  All
representations and warranties made hereunder and in any other Loan Document or
other document delivered pursuant hereto or thereto or in connection herewith
or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been
or will be relied upon by Agent and each Lender, regardless of any
investigation made by Agent or any Lender or on their behalf and
notwithstanding that Agent or any Lender may have had notice or knowledge of
any Default at the time of any Credit Extension, and shall continue in full
force and effect as long as any Loan or any other Obligation hereunder shall
remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

 

10.14      Severability.  If any provision of this Agreement or the
other Loan Documents is held to be illegal, invalid or unenforceable,
(a) the legality, validity and enforceability of the remaining provisions
of this Agreement and the other Loan Documents shall not be affected or
impaired thereby and (b) the parties shall endeavor in good faith
negotiations to replace the illegal, invalid or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

10.15      Governing Law; Submission to
Jurisdiction.

 

(a)           THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
SUCH STATE;  PROVIDED THAT
AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

 

(b)           ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR
THE

 

91

 

CENTRAL
DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
BORROWER, AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.  BORROWER, AGENT AND EACH LENDER IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY
LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO.  BORROWER, AGENT AND EACH LENDER WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.

 

10.16      Waiver of Right to Trial by
Jury.

 

EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN
DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS
OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE
TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

10.17      USA Patriot Act Notice.  Each Lender and Agent (for itself and not on
behalf of any Lender) hereby notifies Borrower that pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”), it is required to obtain, verify and
record information that identifies Borrower, which information includes the
name and address of Borrower and other information that will allow such Lender
or Agent, as applicable, to identify Borrower in accordance with the Act.

 

10.18      Time of the Essence.  Time is of the essence of the Loan Documents.

 

10.19      Foreign Lenders.  Each Lender that is a “foreign corporation,
partnership or trust” within the meaning of the Code shall deliver to Agent,
prior to receipt of any payment subject to withholding under the Code (or after
accepting an assignment of an interest herein), two duly signed completed
copies of either Form W-8BEN or any successor thereto (relating to such Person
and entitling it to a complete exemption from withholding on all payments to be
made to such Person by Borrower pursuant to this Agreement) or Form W-8ECI or
any successor thereto (relating to all payments to be made to such Person by
Borrower pursuant to this Agreement) of the IRS or such other evidence
satisfactory to Borrower and Administrative Agent that no withholding under the
federal income tax laws is required with respect to such

 

92

 

Person.  Thereafter and from time
to time, each such Person shall (a) promptly submit to Agent such
additional duly completed and signed copies of one of such forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may then be available under then current United
States laws and regulations to avoid, or such evidence as is satisfactory to
Borrower and Agent of any available exemption from, United States withholding
taxes in respect of all payments to be made to such Person by Borrower pursuant
to this Agreement, and (b) take such steps as shall not be materially
disadvantageous to it, in the reasonable judgment of such Lender, and as may be
reasonably necessary (including the re-designation of its Lending Office) to
avoid any requirement of applicable Laws that Borrower make any deduction or
withholding for taxes from amounts payable to such Person.  If such Persons fails to deliver the above
forms or other documentation, then Agent and Borrower may withhold from any
interest payment to such Person an amount equivalent to the applicable
withholding tax imposed by Sections 1441 and 1442 of the Code, without
reduction.  If any Governmental Authority
asserts that Agent did not properly withhold any tax or other amount from
payments made in respect of such Person, such Person shall indemnify Agent
therefor, including all penalties and interest and costs and expenses
(including Attorney Costs) of Agent.  The
obligation of Lenders under this Section shall survive the payment of all
Obligations and the resignation or replacement of Agent.

 

93

 

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

 

 

	
   

  	
  QUIDEL CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul
  Landers

  	
   

  
	
   

  	
  Name: Paul
  Landers

  
	
   

  	
   

  
	
   

  	
  Title: Chief
  Financial Officer

  

 

S-1

 

	
   

  	
  BANK OF AMERICA, N.A., as

  	
   

  
	
   

  	
  Agent

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert
  W. Troutman

  	
   

  
	
   

  	
  Name: Robert
  W. Troutman

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:
  Senior Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A., as a Lender, L/C

  Issuer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert
  W. Troutman

  	
   

  
	
   

  	
  Name:  Robert W. Troutman

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:  Senior Vice President

  	
   

  
					

 

S-2

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