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EXHIBIT 10.1  

CONFIDENTIAL TREATMENT REQUESTED  

        CONFIDENTIAL TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND IS NOTED WITH
"[CONFIDENTIAL TREATMENT REQUESTED]." AN UNREDACTED VERSION OF THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.  

  
 

    SUPPLEMENTAL AGREEMENT    
  

        This Supplemental Agreement (this "Supplemental Agreement"), dated as of March 15 2002, is made and entered into by and among Inhale Therapeutic
Systems, Inc. ("Inhale") and Alliance Pharmaceutical Corporation ("Alliance") (collectively referred to as the "Parties"). 

        WHEREAS,
Inhale and Alliance have previously entered into the following agreements (collectively, the "1999 Agreements"): (a) an Asset Purchase Agreement dated as of
October 4, 1999 (the "APA"); (b) a License Agreement (License to Inhale) dated as of November 4, 1999 (the "License to Inhale"); (c) a License Agreement (License to
Alliance) dated as of November 4, 1999 (the "License to Alliance"); (d) a Product Development Rights Agreement dated as of November 4, 1999 (the "PDRA"); and (e) an Escrow
Agreement dated as of November 4, 1999 (the "Escrow Agreement"); 

        [CONFIDENTIAL TREATMENT REQUESTED]

        WHEREAS,
Inhale and Alliance agree that the payments by Inhale under this Supplemental Agreement provide Alliance with fair value, fair consideration, and reasonably equivalent value for
the amendments and modifications of the 1999 Agreements with respect to Inhale's purchase and license of
the PulmoSphere® Technology and the MediSpheresTM Technology as contemplated by this Supplemental Agreement and for the additional proprietary assets, including proprietary
assets relating to the Bioavailability Technology, that Inhale is acquiring pursuant to this Supplemental Agreement; 

        WHEREAS,
Inhale represents that the Royalty and Milestone Payment obligations of Inhale under the APA have not yet come due and remain contingent and speculative, and thus Alliance
agrees with Inhale that the payments by Inhale under this Supplemental Agreement provide Alliance with fair value, fair consideration, and reasonably equivalent value for the modifications and
amendments of those Royalty and Milestone Payment obligations pursuant to this Supplemental Agreement; 

        WHEREAS,
Inhale and Alliance have agreed that, considered as a whole, the transactions that are the subject of this Supplemental Agreement involve an exchange of fair value, fair
consideration, and reasonably equivalent value; 

        [CONFIDENTIAL TREATMENT REQUESTED]

        NOW,
THEREFORE, for and in consideration of the premises, and the mutual promises, releases, and agreements herein contained, the Parties agree as follows: 

        1.    Impact Of This Supplemental Agreement On The 1999 Agreements.    

        1.1    1999 Agreements Remain Effective.    The Parties have concluded that it is not practical to restate in their
entirety the 1999 Agreements to reflect the compromises, agreements, and additional transactions embodied in this Supplemental Agreement. As modified and explained by this Supplemental Agreement, and
except as specifically set forth in this Supplemental Agreement, the 1999 Agreements remain in full force and effect. 

        1.2    This Supplemental Agreement Controls.    This Supplemental Agreement modifies and/or explains certain aspects
of the 1999 Agreements and addresses additional subjects not covered by the 1999 Agreements. In the event of any inconsistency between the provisions of this 

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Supplemental Agreement and the provisions of any or all of the 1999 Agreements, this Supplemental Agreement is controlling for all purposes. 

        2.    Payments By Inhale.    

        2.1    Payment At Closing.    Inhale will pay Alliance $5.25 million in cash on the Closing Date of this
transaction. 

        2.2    Royalty And Milestone Payments.    

        (a)  The
Milestone Payments provisions of Section 1.6 of the APA are amended as follows: 

          (i)  The
provisions apply to Products (A) then covered by a Valid Claim of the Assigned Patent Rights or the MediSpheresTM Assigned Patent Rights, or
(B) which embody or incorporate PulmoSphere® Technology or MediSpheresTM Technology and use, incorporate, or are based on the Purchased Assets or the
MediSpheresTM Purchased Assets. 

        (ii)  The
provisions apply to the [CONFIDENTIAL TREATMENT REQUESTED] and  [CONFIDENTIAL TREATMENT REQUESTED] covered Products and not to the [CONFIDENTIAL TREATMENT
REQUESTED] and [CONFIDENTIAL TREATMENT REQUESTED] such products. In no event shall the
aggregate payments from Inhale to Alliance under Section 1.6 of the APA exceed [CONFIDENTIAL TREATMENT REQUESTED]. 

        (b)  The
Royalty Payments provisions of Section 1.7 of the APA are amended as follows: 

          (i)  The
provisions apply to Products (A) then covered by a Valid Claim of the Assigned Patent Rights or the MediSpheresTM Assigned Patent Rights, or
(B) which embody or incorporate PulmoSphere® Technology or MediSpheresTM Technology and use, incorporate, or are based on the Purchased Assets or the
MediSpheresTM Purchased Assets. 

        (ii)  The
provisions apply to the [CONFIDENTIAL TREATMENT REQUESTED] and  [CONFIDENTIAL TREATMENT REQUESTED] covered Products and not to the [CONFIDENTIAL TREATMENT
REQUESTED] and [CONFIDENTIAL TREATMENT REQUESTED] such products. In no event shall Inhale be
obligated to make payments to Alliance under Section 1.7 with respect to more than [CONFIDENTIAL TREATMENT REQUESTED]
products, and the [CONFIDENTIAL TREATMENT REQUESTED] cap set forth in Section 1.7 of the APA is reduced to  [CONFIDENTIAL TREATMENT REQUESTED].

        2.3    Royalty Payments On Bioavailability Technology.    For purposes of this Section 2.3, the term "Specified
Products" shall mean Products outside the Inhale Field that do not constitute Bioavailability Products. 

        (a)  Inhale
shall pay Alliance a royalty equal to [CONFIDENTIAL TREATMENT REQUESTED] of Net Sales of
Specified Products sold directly or indirectly by Inhale or its Affiliates (other than sales by a Partner). Inhale shall make royalty payments to Alliance (by wire transfer) within thirty days after
the end of each calendar quarter in which Net Sales occur. 

        (b)  In
respect of sales of Specified Products by any Partner, Inhale shall pay Alliance, as and when received by Inhale or its Affiliates from such Partner, a royalty equal
to [CONFIDENTIAL TREATMENT REQUESTED] of Net Royalties. Inhale shall make royalty 

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payments to Alliance (by wire transfer) within thirty days after the end of each calendar quarter in which Inhale or its Affiliates receive such Net Royalties. 

        (c)  Inhale's
royalty obligations to Alliance with respect to Products that incorporate PulmoSphere® Technology, MediSpheresTM Technology, and/or
Bioavailability Technology in the Inhale Field are governed exclusively by Section 1.7 of the APA, as amended by this Supplemental Agreement. Except as provided in Section 1.7 of the
APA, as amended by this Supplemental Agreement, Inhale shall only pay Alliance a royalty with respect to the Bioavailability Assigned Patent Rights or the Bioavailability Technology for Specified
Products. 

        (d)  Upon
the request of Alliance, Inhale shall permit Alliance and its representatives, for purposes of auditing the performance of Inhale under this Section 2.3, to
have access (i) during normal business hours to such of the records of Inhale as may be reasonably necessary to verify such performance of Inhale and (ii) to any Partners. If any such
audit reveals that any payment required by this Section 2.3 shall have been deficient, Inhale shall immediately pay to Alliance the amount of any such deficiency plus interest from the date
otherwise due at the lesser of 18% per annum or the maximum rate permitted under applicable law. If any such deficiency shall be greater than five percent of the amount actually owed, Inhale shall
immediately reimburse Alliance for the costs of such audit (including, without limitation, the fees of any accounting firm employed by Alliance for such purpose). 

        3.    Certain Definitions.    

        3.1    Previously Defined Terms.    Unless they are redefined in this Supplemental Agreement, all terms defined in the
1999 Agreements shall have the same meaning for purposes of this Supplemental Agreement as was ascribed to them in the 1999 Agreements. The definitions set forth in this Supplemental Agreement shall
control for purposes of this Supplemental Agreement and the 1999 Agreements, and are intended by the Parties to replace the definitions set forth in the 1999 Agreements for all purposes. 

        3.2    Alliance Product.    For purposes of this Supplemental Agreement and the 1999 Agreements, Alliance Product
shall mean any product for use outside the Inhale Field involving the use of microstructures in connection with the direct intratracheal or direct pulmonary administration (e.g., via bronchoscope or
endotracheal tube) of fluorocarbons or other liquids ("Liquid Dose Instillation") which if made, used, sold, or imported absent the license granted to Alliance by Inhale would infringe one or more
Valid Claims of the Assigned Patent Rights, the MediSpheresTM Assigned Patent Rights, or the Bioavailability Assigned Patent Rights, or which in material part uses, incorporates, or is
based on the Assigned Know-How. 

        3.3    Assigned Know-How.    For purposes of this Supplemental Agreement and the 1999 Agreements, Assigned
Know-How shall mean all information and data within the Purchased Assets, the MediSpheresTM Purchased Assets, or the Bioavailability Purchased Assets other than the Assigned
Patent Rights, the MediSpheresTM Assigned Patent Rights, and the Bioavailability Assigned Patent Rights which is necessary or useful for Alliance to develop, manufacture, commercialize, or
use Products outside the Inhale Field. 

        3.4    Bioavailability Product.    For purposes of this Supplemental Agreement and the 1999 Agreements,
Bioavailability Product shall mean a non-respiratory human pharmaceutical (that is, a human pharmaceutical that is not within the Inhale Field), the making, using, selling, or importation
of which (i) is then covered by a Valid Claim of both (A) the Assigned Patent Rights or the MediSpheresTM Assigned Patent Rights and (B) the Bioavailability Assigned
Patent Rights, or (ii) embodies or incorporates both (C) PulmoSphere® Technology and/or MediSpheresTM Technology and (D) Bioavailability Technology and in
material part uses, incorporates, or is based 

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on both (E) the Purchased Assets and/or the MediSpheresTM Purchased Assets and (F) the Bioavailability Purchased Assets. 

        3.5    Bioavailability Technology.    For purposes of this Supplemental Agreement and the 1999 Agreements,
Bioavailability Technology shall mean (i) the method of manufacturing a microparticle composition for controlling an immune response by downregulating a pathogenic arm of the immune system, or
upregulating the suppressor arm of the immune system, or simultaneously downregulating the pathogenic arm and upregulating the suppressor arm of the immune system, and (ii) the microparticle
compositions manufactured by such method, both as further described in [CONFIDENTIAL TREATMENT REQUESTED] and  [CONFIDENTIAL TREATMENT REQUESTED] and
[CONFIDENTIAL TREATMENT
REQUESTED], and (iii) all foreign counterpart patent applications and patents claiming priority of such patent applications and patents, and (iv) all
patents that have issued or in the future issue from any of the foregoing patent applications, including utility, model, and design patents and certificates of invention, and (v) all
divisionals, continuations, continuations-in-part, reissues, reexaminations, renewals, extensions or additions of any of the foregoing patent applications and patents (the
"Bioavailability Assigned Patent Rights"). 

        3.6    Closing.    The consummation of the transactions contemplated by this Supplemental Agreement (the "Closing")
shall take place at the offices of Pillsbury Winthrop LLP, 11682 El Camino Real, Suite 200,
San Diego, California 92130 (or at such other place as the Parties shall designate), on March 15, 2002, at 9:00 a.m. (Pacific time). For purposes of this Supplemental Agreement, "Closing
Date" shall mean the time and date as of which the Closing actually takes place. The Parties shall each receive such other documents as either Party may reasonably request for the purpose of
evidencing or effecting the transactions contemplated by this Supplemental Agreement, all of which shall be in full force and effect. 

        3.7    Improvements.    For purposes of this Supplemental Agreement and the 1999 Agreements, Improvements shall mean
(a) all discoveries and inventions regarding PulmoSphere® Technology, MediSpheresTM Technology, or Bioavailability Technology, which are conceived and reduced to practice
by or on behalf of Alliance, whether or not such Improvements are claimed in a pending patent application or an issued patent ("Assignable Improvements") and (b) all other discoveries or
inventions which are conceived and reduced to practice by or on behalf of Alliance, whether or not such Improvements are claimed in a pending patent application or an issued patent ("Licensable
Improvements"). 

        3.8    Inhale Field.    For purposes of this Supplemental Agreement and the 1999 Agreements, Inhale Field shall mean
uses of microstructures of the types described in all of the Assigned Patent Rights and Purchased Proprietary Assets (regardless of their particular microstructure, physical characteristics, or
morphology) within the respiratory tract, including without limitation the nasal passage; provided, however, the Inhale Field shall not include the use of microstructures in connection with the direct
intratracheal or direct pulmonary administration (e.g., via bronchoscope or endotracheal tube) of fluorocarbons or other liquids. For clarity, the Inhale Field includes the administration of
microstructures containing compounds by means of metered dose inhaler, dry powder inhaler, nasal spray, or by nebulization of microstructures formulated with fluorochemicals as suspending agents,
provided that the quantities of fluorochemicals so included in such formulation for nebulization do not exceed that which is commercially reasonably necessary to provide effective delivery of the
active agent. 

        3.9    Licensed Know-How.    For purposes of this Supplemental Agreement and the 1999 Agreements, Licensed
Know-How shall mean (a) all information, inventions, technology, and data regarding the PulmoSphere® Technology, the MediSpheresTM Technology, or the
Bioavailability Technology which is not generally known and which is necessary or useful for Inhale to develop, 

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manufacture, commercialize, or use Products, in which Alliance now has an ownership or licensable interest, and (b) all information and data regarding Licensable Improvements which is not
generally known and which is necessary or useful for Inhale to develop, manufacture, commercialize or use Products, in which Alliance acquires an ownership or licensable interest. 

        3.10    Licensed Patent Rights.    For purposes of this Supplemental Agreement and the 1999 Agreements, Licensed
Patent Rights shall mean (a) those certain patents listed on Schedule A of the License to Inhale and all foreign counterpart patent applications and patents claiming priority of such
patent applications and patents; (b) all patents and patent applications in any country that claim Licensable Improvements; (c) all patents that have issued or in the future issue from
any of the foregoing patent applications, including utility, model, and design patents and certificates of invention; and (d) all
divisionals, continuations, continuations-in-part, reissues, renewals, extensions, or additions of any of the foregoing patent applications and patents; in each case which
Alliance now has or in which Alliance hereafter acquires an ownership or licensable interest. 

        3.11    MediSpheresTM Technology.    For purposes of this Supplemental Agreement and the 1999 Agreements,
MediSpheresTM Technology shall mean (i) the method of manufacturing stable, dry metal ion-lipid microparticle compositions for drug delivery based on the formation of a
lipid-metal ion complex matrix that incorporates the drug or active agent to be delivered, and (ii) the microparticle compositions manufactured by such method, both as further described in  [CONFIDENTIAL TREATMENT
REQUESTED] and [CONFIDENTIAL TREATMENT
REQUESTED] as well as its related continuation-in-part [CONFIDENTIAL TREATMENT
REQUESTED], and (iii) all foreign counterpart patent applications and patents claiming priority of such patent applications and patents, and (iv) all
patents that have issued or in the future issue from any of the foregoing patent applications, including utility, model, and design patents and certificates of invention, and (v) all
divisionals, continuations, continuations-in-part, reissues, reexaminations, renewals, extensions or additions of any of the foregoing patent applications and patents (the
"MediSpheresTM Assigned Patent Rights"). The Parties have specifically agreed that all particles described in the MediSpheresTM Assigned Patent Rights—regardless of
their particular microstructure, physical characteristics, or morphology—are covered by the phrase MediSpheresTM Technology. 

        3.12    Product.    For purposes of this Supplemental Agreement and the 1999 Agreements, Product shall mean a human
pharmaceutical, the making, using, selling, or importation of which (i) is then covered by a Valid Claim of the Assigned Patent Rights, the MediSpheresTM Assigned Patent Rights, or
the Bioavailability Assigned Patent Rights, or (ii) which embodies or incorporates PulmoSphere® Technology, MediSpheresTM Technology, or Bioavailability Technology and in
material part uses, incorporates, or is based on the Purchased Assets, the MediSpheresTM Purchased Assets, the Bioavailability Technology, or Licensed Know-How. 

        3.13    PulmoSphere® Technology.    For purposes of this Supplemental Agreement and the 1999 Agreements,
PulmoSphere® Technology shall mean (i) the method of manufacturing spray dried particles using a perfluorocarbon emulsion or other blowing agents described in the Assigned Patent
Rights and Purchased Proprietary Assets, and (ii) the particles manufactured by such method, both as further described in all of the Assigned Patent Rights and Purchased Proprietary Assets. The
Parties have agreed to delete the phrase "hollow and porous" from the definition of PulmoSphere® Technology. The Parties have specifically agreed that all particles described in the
Assigned Patent Rights and Purchased Proprietary Assets—regardless of their particular microstructure, physical characteristics, or morphology—are covered by the phrase
PulmoSphere® Technology, and have further agreed that "raisin-like," or "wrinkled," or other non-perfectly spherical particles are covered by the phrase
PulmoSphere® Technology. 

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        4.    Purchase And Sale Of Assets.    

        4.1    Agreement With Respect To The APA.    The Parties agree that the Assigned Patent Rights and Purchased Assets
conveyed pursuant to Section 1.1 of the APA, as modified by this Supplemental Agreement, have been conveyed by Alliance to Inhale in their entirety, with no reservation of any ownership
interest or other rights by Alliance, except as specifically set forth in the APA or this Supplemental Agreement. The Parties have further specifically agreed that the use of the phrase
PulmoSphere® Technology in Section 1.1 of the APA, or in any other provision of the APA, is not intended to imply or give rise to any limitation on the scope of the Assigned Patent
Rights conveyed by Alliance to Inhale in the APA, and that the Assigned Patent Rights purchased by Inhale are co-extensive with the disclosures and claims set forth in the Assigned Patent
Rights. 

        4.2    Purchase And Sale Of MediSpheresTM Assets.    

        (a)  Upon
the terms and subject to the conditions of this Supplemental Agreement, on the Closing Date, Alliance shall sell, transfer, convey, assign, grant, and deliver to
Inhale, and Inhale shall purchase, acquire, and receive (a) the MediSpheresTM Assigned Patent Rights; (b) the trademark MediSpheresTM; and (c) all
Know-How of Alliance related to the development or use of the MediSpheresTM Technology (collectively, the "MediSpheresTM Purchased Assets"). Within 30 days
after the Closing Date, Alliance shall place in escrow pursuant to the Escrow Agreement the originals of all laboratory files, batch records, and other records listed in Exhibit A, and copies
of portions of laboratory notebooks listed in Exhibit B, in each case relating to the MediSpheresTM Technology. 

        (b)  Alliance
shall not itself retain copies (unless otherwise required by applicable governmental laws, rules, and regulations) of such files and records other than for
portions of the laboratory notebooks, but if Alliance requires access thereto to comply with regulatory requirements for its products, it shall so notify Inhale and Inhale shall provide Alliance
access on a reasonable basis during normal business hours as the Parties shall mutually agree. 

        4.3    Purchase And Sale Of Bioavailability Assets.    

        (a)  Upon
the terms and subject to the conditions of this Supplemental Agreement, on the Closing Date, Alliance shall sell, transfer, convey, assign, grant, and deliver to
Inhale, and Inhale shall purchase, acquire, and receive (a) the Bioavailability Assigned Patent Rights; and (b) all Know-How of Alliance related to the development or use of
the Bioavailability Technology (collectively, the "Bioavailability Purchased Assets"). Within 30 days after the Closing Date, Alliance shall place in escrow pursuant to the Escrow Agreement the
originals of all laboratory files, batch records, and other records listed in Exhibit C, and copies of portions of laboratory notebooks listed in Exhibit D, in each case relating to the
Bioavailability Technology. 

        (b)  Alliance
shall not itself retain copies (unless otherwise required by applicable governmental laws, rules, and regulations) of such files and records other than for
portions of the laboratory notebooks, but if Alliance requires access thereto to comply with regulatory requirements for its products, it shall so notify Inhale and Inhale shall provide Alliance
access on a reasonable basis during normal business hours as the Parties shall mutually agree. 

        4.4    Intent Of The Parties.    The Parties intend that the MediSpheresTM Purchased Assets and the
Bioavailability Purchased Assets constitute all of Alliance's Proprietary Assets with respect to the MediSpheresTM Technology and Bioavailability Technology. 

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        4.5    Representations And Warranties Of Alliance.    Except as set forth in this Supplemental Agreement, the 1999
Agreements, or that certain letter to Inhale's counsel dated as of the date hereof: 

        (a)  To
Alliance's Knowledge, Alliance has the right to grant to Inhale rights to all MediSpheresTM Purchased Assets and all Bioavailability Purchased Assets that
Alliance purports to grant under this Supplemental Agreement, free and clear of any Encumbrances. To the Knowledge of Alliance, there are no defects in the filing or prosecution of the
MediSpheresTM Assigned Patent Rights or the Bioavailability Assigned Patent Rights that could reasonably be expected to cause either the invalidity of any patent that may issue from the
MediSpheresTM Assigned Patent Rights or the Bioavailability Assigned Patent Rights or cause a patent not to issue from the MediSpheresTM Assigned Patent Rights or the
Bioavailability Assigned Patent Rights. Alliance is not obligated to make any payment to any Person for the use or other exploitation of any of the MediSpheresTM Purchased Assets or any of
the Bioavailability Purchased Assets. 

        (b)  Alliance
has taken commercially reasonable measures and precautions, consistent with its customary practices, appropriate to protect and maintain the confidentiality and
secrecy of all of the MediSpheresTM Purchased Assets and all of the Bioavailability Purchased Assets (except to the extent that public disclosure was necessary as part of the process of
filing patent applications for the MediSpheresTM Assigned Patent Rights or the Bioavailability Assigned Patent Rights whose value would be unimpaired by public disclosure). 

        (c)  All
issued patents and trademarks that are registered with any Governmental Body and held by Alliance and included within the MediSpheresTM Purchased Assets
or the Bioavailability Purchased Assets are subsisting and to the Knowledge of Alliance are valid. To the Knowledge of Alliance (without performing any special inquiry and recognizing that Alliance's
primary area of expertise is outside Inhale's intended use of the MediSpheresTM Purchased Assets and the Bioavailability Purchased Assets), the use of the MediSpheresTM Purchased
Assets or the Bioavailability Purchased Assets does not infringe or constitute a misappropriation of any Proprietary Asset owned or used by any other Person. Alliance has not received any written
notice or other communication from any Person of any actual, alleged, possible, or potential infringement, misappropriation, or unlawful use of, any Proprietary Asset owned
or used by such Person. To the Knowledge of Alliance, no other Person is infringing, misappropriating, or making any unlawful use of any MediSpheresTM Purchased Asset or any Bioavailability
Purchased Asset. 

        (d)  The
MediSpheresTM Purchased Assets and the Bioavailability Purchased Assets constitute all the Proprietary Assets of Alliance that are necessary to enable
Alliance to utilize the MediSpheresTM Technology and the Bioavailability Technology in the manner in which the MediSpheresTM Technology and the Bioavailability Technology are
being utilized by Alliance outside of Liquid Dose Instillation. Alliance has not licensed any of the MediSpheresTM Purchased Assets or any of the Bioavailability Purchased Assets to any
Person and has not granted any right to any Third Party in or to the MediSpheresTM Purchased Assets or the Bioavailability Purchased Assets which would conflict with the rights transferred
to Inhale pursuant to this Supplemental Agreement. Alliance has not entered into any covenant not to compete or Contract restricting its right to use or practice any of the MediSpheresTM
Purchased Assets or any of the Bioavailability Purchased Assets or to transact business regarding the MediSpheresTM Purchased Assets or the Bioavailability Purchased Assets in any market or
geographic area or with any Person. To the Knowledge of Alliance, Alliance has, and Inhale will acquire on the Closing Date, the exclusive right to use the trademark MediSpheresTM, subject
to the nonexclusive license granted to Alliance in the License to Alliance to use such mark for Designated Products. As a specific remedy for breach of this 

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warranty, in addition to all other remedies available at law, Alliance agrees that any Proprietary Asset of Alliance in existence as of the Closing Date that is necessary to enable Alliance to
utilize the MediSpheresTM Technology and the Bioavailability Technology in the manner in which the MediSpheresTM Technology and the Bioavailability Technology are being utilized
by Alliance outside of Liquid Dose Instillation as of the Closing Date will be treated, with no further action by Inhale or Alliance, as a MediSpheresTM Purchased Asset or a Bioavailability
Purchased Asset for all purposes under this Supplemental Agreement. 

        (e)  Alliance
has provided Inhale with full and complete access to all of Alliance's material records, documents, and data with respect to the MediSpheresTM
Purchased Assets and the Bioavailability Purchased Assets. 

        (f)    To
Alliance's Knowledge, there is no fact or condition relating to the MediSpheresTM Purchased Assets or the Bioavailability Purchased Assets (including
without limitation the practice of the MediSpheresTM Purchased Assets or the Bioavailability Purchased Assets) that may interfere materially with Inhale's ability to exploit the
MediSpheresTM Purchased Assets or the Bioavailability Purchased Assets outside of Liquid Dose Instillation in a commercially reasonable manner, and no condition or circumstance exists that
would be expected to give rise to any such fact or condition. 

        (g)  Alliance
is not now insolvent, and will not be rendered insolvent by any of the transactions contemplated by this Supplemental Agreement. In addition, immediately after
giving effect to the consummation of the transactions contemplated by this Supplemental Agreement, (a) Alliance will be able to pay its debts as they become due; (b) Alliance will not
have unreasonably small assets with which to conduct its present or proposed business; and (c) taking into account all contingent pending
and threatened litigation, final judgments against Alliance in actions for money damages are not reasonably anticipated to be rendered at a time when, or in amounts such that, Alliance will be unable
to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum probable amount of such judgments in any such actions might be rendered) as well as all other
obligations of Alliance. The cash available to Alliance, taking into account all other anticipated uses of the cash, will be sufficient to pay all such judgments promptly in accordance with their
terms. As used in this Section, (i) "insolvent" means that the sum of the present fair saleable value of Alliance's assets does not and will not exceed its debts and other probable liabilities;
and (ii) "debts" includes any legal liability, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent, disputed or undisputed, or secured or unsecured. 

        (h)  To
the Knowledge of Alliance, no representation or warranty of Alliance in this Supplemental Agreement and no information provided by Alliance to Inhale with respect to
the Purchased Assets, the MediSpheresTM Purchased Assets, or the Bioavailability Purchased Assets fails to state any material fact necessary in order to make the representations,
warranties, and information of or with respect to Alliance, the Purchased Assets, the MediSpheresTM Purchased Assets, or the Bioavailability Purchased Assets contained herein and therein
(in the light of circumstances under which such representations, warranties, and information were or will be made or provided) not false or misleading. 

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        (i)    EXCEPT
AS OTHERWISE EXPRESSLY SET FORTH IN THIS SECTION 4.5, NOTHING IN THIS SUPPLEMENTAL AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE, OR WARRANTY GIVEN, BY
ALLIANCE THAT ANY PATENT WILL ISSUE BASED UPON ANY PENDING PATENT APPLICATION WITHIN THE MEDISPHERESTM ASSIGNED PATENT RIGHTS OR THE BIOAVAILABILITY ASSIGNED PATENT RIGHTS, THAT ANY PATENT
WITHIN THE MEDISPHERESTM ASSIGNED PATENT RIGHTS OR THE BIOAVAILABILITY ASSIGNED PATENT RIGHTS WHICH ISSUES WILL BE VALID, OR THAT THE USE OF ANY LICENSE GRANTED HEREUNDER OR THE USE OF ANY
RIGHTS WITH RESPECT THERETO WILL NOT INFRINGE THE PATENT OR OTHER PROPRIETARY RIGHTS OF ANY OTHER PERSON. FURTHERMORE, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS SECTION 4.5, ALLIANCE MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE MEDISPHERESTM PURCHASED ASSETS, THE BIOAVAILABILITY PURCHASED ASSETS OR ANY OTHER RIGHTS GRANTED OR LICENSED
HEREUNDER, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 

        4.6    Technology Transfer.    Following the Closing Date, Alliance and Inhale shall take all steps reasonable to
effect the transfer of all MediSpheresTM Purchased Assets and all Bioavailability Purchased Assets to Inhale in such a manner as to enable Inhale to practice the MediSpheresTM
Technology and the Bioavailability Technology with the same proficiency as such technology is practiced by Alliance as of the Closing Date. Such transfer shall occur no later than June 30,
2002. 

        5.    License To Inhale.    

        5.1    Effect Of This Supplemental Agreement.    Following the Closing Date, the definitions set forth in this
Supplemental Agreement will apply with full force and effect to the License to Inhale for all purposes. The effect of this Supplemental Agreement is to clarify and broaden the scope of the license
granted by Alliance to Inhale under the License to Inhale. As amended by this Supplemental Agreement, the License to Inhale remains in full force and effect. 

        5.2    Amendments To The License To Inhale.    

        (a)  The
first "Whereas" clause of the License to Inhale is hereby deleted in its entirety and replaced with the following: "WHEREAS, Alliance and Inhale have entered into an
Asset Purchase Agreement
dated as of October 4, 1999 (as amended or restated from time to time) (the "Asset Purchase Agreement") and a Supplemental Agreement dated as of March 15, 2002 (the "Supplemental
Agreement"), pursuant to which Alliance assigned and sold to Inhale certain patent rights and know-how relating to the PulmoSphere® Technology, the MediSpheresTM
Technology, and the Bioavailability Technology." 

        (b)  Section 3.1
of the License to Inhale is hereby deleted in its entirety and replaced with the following: "Alliance hereby grants to Inhale an irrevocable,
nonexclusive, worldwide, royalty-free (except as provided in the Asset Purchase Agreement, as amended by the Supplemental Agreement) license (including the nonexclusive right to grant
sublicenses) under the Licensed Patent Rights (as defined in the Supplemental Agreement) solely to make, use, offer for sale, sell, and import Products (as defined in the Supplemental Agreement) other
than Products involving Liquid Dose Instillation (as defined in the Supplemental Agreement)." 

        (c)  Section 3.2
of the License to Inhale is hereby deleted in its entirety and replaced with the following: "Alliance hereby grants to Inhale an irrevocable,
nonexclusive, worldwide, royalty-free (except as provided in the Asset Purchase Agreement, as amended by the 

9

 

Supplemental Agreement) license (including the nonexclusive right to grant sublicenses) under the Licensed Know-How (as defined in the Supplemental Agreement) solely to make, use, offer
for sale, sell, and import Products (as defined in the Supplemental Agreement) other than Products involving Liquid Dose Instillation (as defined in the Supplemental Agreement)." 

        (d)  Section 3.3
of the License to Inhale is hereby deleted in its entirety and replaced with the following: "Alliance shall, and hereby does, grant to Inhale all
right, title, and interest in and to all Assignable Improvements (as defined in the Supplemental Agreement), together with all intellectual property rights relating thereto (including without
limitation all patent applications or patents claiming such Assignable Improvements). Alliance agrees promptly to disclose to Inhale any such Assignable Improvements and to execute such documents and
perform such other acts as Inhale may reasonably request to obtain, perfect, and enforce such rights to the Assignable Improvements and the assignment thereof." 

        (e)  Section 3.4
of the License to Inhale is hereby deleted in its entirety and replaced with the following: "Inhale shall not knowingly use or sell products or
compounds involving Liquid Dose Instillation (as defined in the Supplemental Agreement) where such products or compounds are claimed in the Licensed Patent Rights or incorporate or are made using the
Licensed Know-How." 

        (f)    Section 5.3
of the License to Inhale is hereby deleted in its entirety and replaced with the following: "Alliance hereby represents and warrants to Inhale that,
except as set forth on Schedule A to this Agreement, as of the Closing of the Supplemental Agreement, Alliance does not own or control any patents or patent applications that would be infringed
by the use of the PulmoSphere® Technology, the MediSpheresTM Technology, or the Bioavailability Technology, as described in the Assigned Patent Rights,
the MediSpheresTM Assigned Patent Rights, or the Bioavailability Assigned Patent Rights, respectively, as of the Closing of the Supplemental Agreement. As a specific remedy for breach of
this warranty, in addition to all other remedies available at law, Alliance agrees that any Proprietary Asset of Alliance in existence as of the Closing Date that is necessary to enable Alliance to
utilize the MediSpheresTM Technology and the Bioavailability Technology in the manner in which the MediSpheresTM Technology and the Bioavailability Technology are being utilized
by Alliance outside of Liquid Dose Instillation as of the Closing Date will be treated, with no further action by Inhale or Alliance, as a MediSpheresTM Purchased Asset or a Bioavailability
Purchased Asset for all purposes under this Agreement." 

        6.    License To Alliance.    

        6.1    Effect Of This Supplemental Agreement.    Following the Closing Date, the definitions set forth in this
Supplemental Agreement will apply with full force and effect to the License to Alliance for all purposes. The effect of this Supplemental Agreement is to amend and clarify the scope of the license
granted by Inhale to Alliance under the License to Alliance. As amended by this Supplemental Agreement, the License to Alliance remains in full force and effect. 

        6.2    Amendments To The License To Alliance.    

        (a)  The
second "Whereas" clause of the License to Alliance is hereby deleted in its entirety and replaced with the following: "WHEREAS, pursuant to the Supplemental
Agreement dated as of March 15, 2002 (the "Supplemental Agreement"), Inhale has agreed to grant Alliance a license under the assigned patent rights and know-how, together with other
intellectual property rights, relating to the PulmoSphere® Technology, the MediSpheresTM Technology, and the Bioavailability Technology for all applications involving Liquid
Dose Instillation, and for certain products within the Inhale Field as to which Alliance exercises its 

10

 

rights under the Product Development Rights Agreement, as amended by the Supplemental Agreement (the "Product Development Rights Agreement"). The definitions for certain terms used in this Agreement
with initial letters capitalized (as this Agreement is amended pursuant to the Supplemental Agreement) are set forth in the Supplemental Agreement." 

        (b)  Section 3.1
of the License to Alliance is hereby deleted in its entirety and replaced with the following: 

        "(a) Inhale
hereby grants to Alliance an irrevocable, exclusive, worldwide, royalty-free license (including the right to grant sublicenses) under the Assigned
Patent Rights, the MediSpheresTM Assigned Patent Rights, the Bioavailability Assigned Patent Rights, the Assignable Improvements, and the Assigned Know-How for use in
applications involving Liquid Dose Instillation, including without limitation the
right to make, use, offer for sale, sell, and import Alliance Products for use in applications involving Liquid Dose Instillation. 

        (b)  Inhale
hereby grants to Alliance an irrevocable, exclusive, worldwide, royalty-free license (including the right to grant sublicenses) under the
Bioavailability Purchased Assets and any Assignable Improvements regarding Bioavailability Technology for uses outside the Inhale Field to make, use, offer for sale, sell, and import Products that do
not constitute Bioavailability Products." 

        (c)  Section 3.2
of the License to Alliance is hereby deleted in its entirety and replaced with the following: "Inhale hereby grants to Alliance a
non-exclusive, worldwide, royalty-free license (without the right to grant sublicenses, other than to its Affiliates and parties to whom the rights of Alliance under the
Product Development Rights Agreement may be assigned as permitted thereby) under the Assigned Patent Rights, the MediSpheresTM Assigned Patent Rights, the Bioavailability Assigned Patent
Rights, the Assignable Improvements, and the Assigned Know-How to perform research and development activities to identify products with respect to which Alliance may desire to exercise a
Product Development Right (as defined in the Product Development Rights Agreement) therefor under the Product Development Rights Agreement. Such license shall be effective for so long as Alliance has
any unused Product Development Right(s) available to it under the Product Development Rights Agreement." 

        (d)  Section 3.3
of the License to Alliance is hereby deleted in its entirety and replaced with the following: "Inhale hereby grants to Alliance an irrevocable,
exclusive, worldwide (subject to Section 3.9 of the Product Development Rights Agreement), royalty-free (except as provided in Section 3.8 of the Product Development Rights
Agreement) license (including the exclusive right to grant sublicenses to Third Parties that are not Competitors of Inhale, subject to Section 3.7 of the Product Development Rights Agreement)
under the Designated Product Patent Rights and Designated Product Know-How to use, offer for sale, sell, import, manufacture and have manufactured Designated Products for all purposes;
provided, however, that the right to manufacture or have manufactured a Powder Formulation of the Active Substance of such Designated Product shall be suspended to the extent that Inhale or its
Partner (as the foregoing terms are defined for purposes of the Product Development Rights Agreement) is manufacturing such Powder Formulation pursuant to a manufacturing agreement entered into as
contemplated by Section 3.5 of the Product Development Rights Agreement." 

        (e)  The
trademark MediSpheresTM is added to Section 3.4 of the License to Alliance for all purposes. 

        (f)    Section 3.5
of the License to Alliance is hereby deleted in its entirety and replaced with the following: "Except in the case of Designated Products or products
or compounds 

11

 

involving Liquid Dose Instillation (as defined in the Supplemental Agreement), or, as to the Bioavailability Purchased Assets and any Assignable Improvements regarding Bioavailability Technology, for
applications outside the Inhale Field, Alliance shall not knowingly use or sell products or compounds that are made using or that incorporate PulmoSphere® Technology,
MediSpheresTM Technology, or Bioavailability Technology." 

        (g)  Sections
5.1 and 5.2 of the License to Alliance are hereby deleted in their entirety and replaced with the following: 

        "5.1    Prosecution and Maintenance.    

        5.1.1    Subject
to the provisions of this Section 5.1, Inhale shall [CONFIDENTIAL TREATMENT
REQUESTED]. Inhale (a) shall [CONFIDENTIAL TREATMENT REQUESTED]; (b) shall  [CONFIDENTIAL TREATMENT REQUESTED]; and
(c) shall [CONFIDENTIAL TREATMENT
REQUESTED]. 

        5.1.2    Inhale
shall [CONFIDENTIAL TREATMENT REQUESTED]. Inhale (a) shall  [CONFIDENTIAL TREATMENT REQUESTED] relating to the Applications; (b) shall 
[CONFIDENTIAL TREATMENT REQUESTED]; (c) shall [CONFIDENTIAL TREATMENT
REQUESTED]; and (d) shall [CONFIDENTIAL TREATMENT REQUESTED]. 

        5.1.3    If
requested by Alliance [CONFIDENTIAL TREATMENT REQUESTED] the Inhale Field. With respect to
each such patent application and patent issuing therefrom [CONFIDENTIAL TREATMENT REQUESTED]. For any patent application or
patent [CONFIDENTIAL TREATMENT REQUESTED], Alliance (a) shall [CONFIDENTIAL TREATMENT
REQUESTED] and (b) [CONFIDENTIAL TREATMENT REQUESTED] of any proposed action.
Notwithstanding the foregoing, if [CONFIDENTIAL TREATMENT REQUESTED]. 

        5.1.4    If
Inhale elects to [CONFIDENTIAL TREATMENT REQUESTED]. Alliance shall  [CONFIDENTIAL TREATMENT REQUESTED]. 

        5.1.5    Each
party shall cooperate with the other, execute all lawful papers and instruments and make all rightful oaths and declarations as may be necessary in the
preparation, filing, prosecution and maintenance of the Assigned Patent Rights, Designated Product Patent Rights, MediSpheresTM Assigned Patent Rights and Bioavailability Assigned Patent
Rights. 

        5.2    Enforcement of Patent Rights.    Each party shall notify the other party of any infringement known to such
party of any Assigned Patent Rights, Designated Product Patent Rights, MediSpheresTM Assigned Patent Rights or Bioavailability Assigned Patent Rights and shall provide the other party with
the available evidence, if any, of such infringement. 

        5.2.1    Subject
to the provisions of Sections 5.2.2 and 5.2.3 below, Inhale shall [CONFIDENTIAL TREATMENT
REQUESTED. 

        5.2.2    Except
as provided in the last sentence of this Section 5.2.2 [CONFIDENTIAL TREATMENT
REQUESTED]. All monies recovered upon final judgment or settlement of any such suit to enforce the Assigned Patent Rights, Designated Product Patent Rights,
MediSpheresTM Assigned Patent Rights or Bioavailability Assigned Patent Rights as permitted under this Section 5.2.2 shall first be allocated to reimburse each party's expenses
incurred in conducting such action and then allocated between the parties in proportion to their respective damages 

12

 

incurred by reason of such infringement, as determined in such suit, or as agreed upon in such settlement. 

        5.2.3    If
Alliance learns that a Third Party is infringing the Designated Product Patent Rights by making and selling a product competitive with a Designated Product,  [CONFIDENTIAL TREATMENT REQUESTED]. All
monies recovered upon final judgment or settlement of any such suit to enforce the
Designated Product Patent Rights as permitted under this Section 5.2.3 shall first be allocated to reimburse each party's expenses incurred in conducting such action and then allocated between
the parties in proportion to their respective damages incurred by reason of such infringement, as determined in such suit, or as agreed upon in such settlement. 

        5.2.4    Notwithstanding
the foregoing, the non-controlling party shall reasonably cooperate with the controlling party, at the expense of the controlling party, in the
planning and prosecution of any action to enforce the Assigned Patent Rights, Designated Product Patent Rights, MediSpheresTM Assigned Patent Rights or Bioavailability Assigned Patent
Rights as set forth above. Each party shall keep the other party and its counsel reasonably informed as to the status of any such action." 

        7.    Alliance's Product Development Rights.    

        7.1    Effect Of This Supplemental Agreement.    Following the Closing Date, the definitions set forth in this
Supplemental Agreement will apply with full force and effect to the PDRA for all purposes. The effect of this Supplemental Agreement is to amend, clarify, and limit the scope of the product
development rights granted by Inhale to Alliance under the PDRA. As amended by this Supplemental Agreement, the PDRA remains in full force and effect. 

        7.2    Amendments To The PDRA.    

        (a)  The
"Whereas" clauses of the PDRA are hereby deleted in their entirety and replaced with the following: "WHEREAS, Alliance and Inhale have entered into a Supplemental
Agreement dated as of March 15, 2002 (the "Supplemental Agreement"), pursuant to which the product development rights granted to Alliance in connection with the Asset Purchase Agreement and
this Agreement have been substantially altered and amended." 

        (b)  Section 3.1
of the PDRA is hereby deleted in its entirety and replaced with the following: 

        "3.1    Product Development Rights.    

        (a)  Subject
to the last sentence of this Section 3.1(a), in the [CONFIDENTIAL TREATMENT
REQUESTED] following the Closing of the Supplemental Agreement, Alliance shall have the right (a "Product Development Right") to (i) select, on a  [CONFIDENTIAL TREATMENT REQUESTED], up to [CONFIDENTIAL TREATMENT
REQUESTED] for development and commercialization of products in the Inhale Field which are manufactured by means of or incorporate PulmoSphere®
Technology, MediSpheresTM Technology, and/or Bioavailability Technology, or (ii) initiate Phase II trials on up to four products in the Inhale Field which are manufactured by means
of or incorporate PulmoSphere® Technology, MediSpheresTM Technology, and/or Bioavailability Technology, whichever comes first. Alliance may not exercise Product Development
Rights under this Section without first obtaining from Inhale a Product Development Rights License under the procedures set forth in Section 3.2 of this Agreement. Alliance shall not have the
right to exercise any additional Product Development Rights granted to Alliance under this Agreement 

13

 

following the earliest of (i) the date on which Alliance has initiated development on [CONFIDENTIAL TREATMENT
REQUESTED]; (ii) the date on which Alliance has initiated Phase II trials on four products; or (iii) [CONFIDENTIAL
TREATMENT REQUESTED] from the Closing Date of the Supplemental Agreement (although none of these events shall disrupt the continuing exercise of Product Development
Rights that have been initially exercised prior thereto). Alliance's Product Development Rights granted under this Agreement are subject to termination as provided in Section 9.7 of the Asset
Purchase Agreement. 

        (b)  The
Product Development Rights granted to Alliance under Section 3.1(a) apply only to [CONFIDENTIAL TREATMENT
REQUESTED]. In the event Alliance exercises a Product Development Right for a [CONFIDENTIAL TREATMENT
REQUESTED]; provided, however, that nothing in this sentence shall be deemed to grant Inhale any implied license under Alliance's proprietary technologies.
Furthermore, Alliance may exercise a Product Development Right for a product only if [CONFIDENTIAL TREATMENT REQUESTED]. 

        (c)  As
of March 15, 2002, Alliance has [CONFIDENTIAL TREATMENT REQUESTED]. Alliance can  [CONFIDENTIAL TREATMENT REQUESTED]. 

        (c)  Section 3.2
of the PDRA is hereby deleted in its entirety and replaced with the following: 

        "3.2    Notice Mechanism; Excluded Products.    

        (a)  In
order to exercise a Product Development Right with respect to a product, Alliance must receive a product-specific Product Development Rights License from Inhale.
Alliance shall give written notice to Inhale of such exercise with a description of such product and other information in Alliance's possession and control that is reasonably sufficient for Inhale to
decide whether to grant Product Development Rights to Alliance under this Section 3.2(a). Alliance must give such notice before the initiation of Phase I in order to receive a Product
Development Rights License. Within forty-five days after Inhale's receipt of such notice and information, Inhale shall either confirm its grant of a Product Development Rights License or
notify Alliance that it is not granting a Product Development Rights License with respect to the proposed product. Inhale may reject the proposed product if Inhale reasonably and in good faith makes
one of the following determinations: (i) Inhale has already begun development of the product prior to the date of receipt of the Alliance notice, either through an internal development program
or with a partner; (ii) granting a Product Development Rights License with respect to the proposed product would constitute a breach by Inhale of a then existing agreement to which Inhale is
bound; or (iii) Inhale began negotiating prior to the date of receipt of the Alliance notice an agreement with a prospective customer and believes that the principal terms of such an agreement
will be agreed upon within ninety days of the Alliance notice and granting a Product Development Rights License to Alliance would constitute a breach of such agreement if consummated. If Inhale
rejects a Product Development Rights License for a specific Alliance product based on a determination covered by clause (iii), Inhale shall diligently pursue the conclusion of such negotiations
with the prospective customer and Inhale shall notify Alliance promptly if Inhale concludes that it is not going to execute a definitive agreement for such product with such prospective customer. 

        (b)  Inhale
will grant Product Development Rights Licenses to Alliance under this Agreement [CONFIDENTIAL TREATMENT
REQUESTED]. Products as to 

14

 

which a Product Development Rights License has been granted by Inhale shall constitute Designated Products. Except in the case of Designated Products for which Inhale has granted a specific Product
Development Rights License under this Agreement or products or compounds involving Liquid Dose Instillation (as defined in the Supplemental Agreement) or, as to the Bioavailability Purchased Assets
(as defined in the Supplemental Agreement) and any Assignable Improvements regarding Bioavailability Technology (as defined in the Supplemental Agreement), for applications outside the Inhale Field,
Alliance shall not use or sell knowingly products or compounds that are made using or that incorporate PulmoSphere® Technology, MediSpheresTM Technology, or Bioavailability
Technology. 

        (c)  Alliance
may obtain up to [CONFIDENTIAL TREATMENT REQUESTED] Product Development Rights Licenses,
but may obtain no additional Product Development Rights Licenses after Phase II trials have been initiated with respect to four Designated Products or after  [CONFIDENTIAL TREATMENT REQUESTED] have
elapsed from the Closing Date, whichever is earlier. 

        (d)  If
Alliance terminates development on a Designated Product, rights with respect to the [CONFIDENTIAL TREATMENT
REQUESTED] under development revert to Inhale. Alliance is not entitled to seek additional Product Development Rights to replace rights that have reverted to Inhale
as a result of Alliance's termination of development on a Designated Product." 

        (d)  Sections
3.3 and 3.4 of the PDRA are hereby deleted in their entirety. Alliance may seek to develop Designated Products on its own and is not required to contract with
Inhale to do so. Except in the case of Liquid Dose Instillation, Alliance is not permitted to partner or contract with Competitors of Inhale for the development or commercialization of Designated
Products in the Inhale Field. Alliance may seek to contract with Inhale for the development of Designated Products pursuant to a Collaboration Agreement negotiated in good faith by the Parties, but
Inhale is not required to enter into any Collaboration Agreement. 

        (e)  Section 3.5
of the PDRA is hereby deleted in its entirety and replaced with the following: 

        "(a) Inhale
shall have a right of first offer, either by itself or through a Partner, for the manufacture and supply of a Powder Formulation of any Designated Product that
is [CONFIDENTIAL TREATMENT REQUESTED]. With respect to Designated Products that are not  [CONFIDENTIAL TREATMENT REQUESTED] and 
[CONFIDENTIAL TREATMENT
REQUESTED] for which Alliance and Inhale do not enter into a commercial supply agreement as provided in this Section 3.5, Alliance may manufacture a Powder
Formulation of the Active Substance of the Designated Product itself or enter into a manufacturing agreement therefor with a Third Party that is not a Competitor of Inhale. 

        (b)  Before
entering into a manufacturing agreement with any Third Party with respect to a Powder Formulation of any Designated Product that is  [CONFIDENTIAL TREATMENT REQUESTED], Alliance will give Inhale notice
containing the terms of its offer to Inhale to enter into a
manufacturing agreement. Such notice will include the financial and other material terms which Alliance is prepared to accept and, if requested by Inhale, (i) sufficient information to define
the manufacturing process and (ii) reasonable data regarding anticipated volume requirements for the Designated Product. For the [CONFIDENTIAL TREATMENT
REQUESTED] following delivery of such notice, the parties will negotiate in good faith in an effort to achieve (and, if applicable, execute) a definitive
manufacturing 

15

 

agreement. If such an agreement is not executed prior to the end of such [CONFIDENTIAL TREATMENT REQUESTED], Alliance may
(x) do its own manufacturing or (y) negotiate and execute a definitive manufacturing agreement with one or more Third Parties that are not Competitors of Inhale on terms no more
favorable, in the aggregate, than the last terms offered by Inhale to Alliance. In such an event, Alliance may request that Inhale provide reasonable advice regarding whether Alliance's proposed
formulation for the relevant Designated Product is compatible with Inhale's proprietary technology for manufacturing a Powder Formulation of such Designated Product, and other reasonable technical
assistance as may be relevant to the manufacture of such product. Any technology transfer to Alliance or Alliance's Third Party manufacturer(s) in connection with such advice or assistance shall be
governed by a written agreement between Inhale, Alliance, and any such Third Party manufacturer(s)
in customary form imposing upon Alliance and such Third Party manufacturer(s) obligations of confidentiality and limitations on use of Inhale's proprietary technology for the relevant Designated
Product, which agreement shall be negotiated and entered into prior to the transfer of such technology pursuant to this Section 3.5." 

16

  

        (f)    Section 3.7
of the PDRA is hereby deleted in its entirety and replaced with the following: "The Product Development Rights and other rights described herein shall
not be transferable by Alliance to any other person, except (i) as provided in Section 7.7 and (ii) that Alliance, as to each Designated Product, shall have the right at any time
after commencement of Phase IIa clinical trials for such Designated Product to grant sublicenses under the license granted to Alliance for such Designated Product to Third Parties other than
Competitors of Inhale. Any such right to sublicense includes the right to grant a sublicense to use, sell, offer for sale, import, manufacture, or have manufactured the relevant Designated Product;
provided, however, that the right to manufacture or have manufactured a Powder Formulation of the Active Substance of such Designated Product shall be suspended to the extent that Inhale or any
Partner of Inhale is manufacturing such Powder Formulation pursuant to a manufacturing agreement entered into as contemplated by Section 3.5. Any sublicensee of Alliance that manufactures such
a Powder Formulation of the Active Substance shall be subject to confidentiality obligations and use limitations with respect to the Inhale Technology substantially similar to those provided in the
last sentence of Section 3.5(b)." 

        (g)  Section 3.8
of the PDRA is hereby deleted in its entirety and replaced with the following: "Further Payments. Other than the payments agreed to by the Parties (if
any) in any manufacturing agreement contemplated by Section 3.5 or any other agreement contemplated by Section 3.6, Alliance shall have no obligation to pay Inhale any amounts, by way of
royalties or otherwise, in connection with the development, manufacture, sale, or use of the [CONFIDENTIAL TREATMENT REQUESTED]
Designated Products commercialized pursuant to the exercise of Product Development Rights. However, if the Parties enter into an agreement pursuant to this Article 3 under which Inhale agrees
to perform final container filling or packaging of a Powder Formulation of a Designated Product, or to supply devices to Alliance as provided in Section 3.6, then such agreement shall provide
for additional payments to Inhale as the parties may mutually agree that will provide Inhale reasonable and customary compensation for a license under Inhale's proprietary technology covering or
including such Other Inhale Technology. In addition to the payments referred to above, Alliance shall pay Inhale a royalty equal to [CONFIDENTIAL TREATMENT
REQUESTED] of Net Sales of any Designated Products after the [CONFIDENTIAL TREATMENT
REQUESTED] Designated Products sold by Alliance or its Affiliates or Partners. Alliance shall make royalty payments to Inhale (by wire transfer) within thirty days
after the end of each calendar quarter in which Net Sales occur. 

        Upon
the request of Inhale, Alliance shall permit Inhale and its representatives, for purposes of auditing the performance of Alliance under this Section 3.8, to have access
(i) during normal business hours to such of the records of Alliance as may be reasonably necessary to verify such performance of Alliance and (ii) to any Partners. If any such audit
reveals that any payment required by this Section 3.8 shall have been deficient, Alliance shall immediately pay to Inhale the amount of any such deficiency plus interest from the date otherwise
due at the lesser of 18% per annum or the maximum rate permitted under applicable law. If any such deficiency shall be greater than five percent of the amount
actually owed, Alliance shall immediately reimburse Inhale for the costs of such audit (including, without limitation, the fees of any accounting firm employed by Inhale for such purpose)." 

        (h)  Section 3.9
of the PDRA is hereby deleted in its entirety and replaced with the following: "Each Product Development Rights License shall become effective with
respect to the related Designated Product on a worldwide basis. Notwithstanding the foregoing, if, as of the second anniversary of the grant date for any Product Development Rights License, Alliance
(or a sublicensee) does not own or acquire rights to any patent applications or patents covering the related Designated Product and the use thereof outside of Liquid Dose Instillation in the  [CONFIDENTIAL TREATMENT
REQUESTED] (other than pursuant to 

18

 

the License to Alliance), then effective as of such date, such license granted to Alliance for such Designated Product shall revert to Inhale with respect to those Major Countries in which Inhale has
Designated Product Patent Rights covering such Designated Products and the use thereof outside of Liquid Dose Instillation and in which Alliance does not own or possess rights under patent
applications or patents covering such Designated Product in such countries (other than pursuant to the License to Alliance), without otherwise affecting such license granted to Alliance (or a
sublicensee) for such Designated Product with respect to all other countries." 

        (i)    The
trademark MediSpheresTM is added to Section 3.11 of the PDRA for all purposes. 

        (j)    Section 7.7
of the PDRA is hereby deleted in its entirety and replaced with the following: "Except as otherwise expressly provided under this Agreement, neither
this Agreement nor any right or obligation hereunder may be assigned or otherwise transferred (whether voluntarily, by operation of law, or otherwise), without the prior express written consent of the
other party; provided, however, that either party may, without such consent, assign this Agreement and its rights and obligations hereunder in connection with the transfer or sale of all or
substantially all of its business to which this Agreement relates, or in the event of a merger, consolidation, change in control, or similar transaction; and further provided, that in the event of a
transfer or sale of all or substantially all of Alliance's business to which this Agreement relates, or in the event of a merger or consolidation in which Alliance is not the acquiring or surviving
entity and in which the stockholders of Alliance immediately prior to such event do not own at least a majority of the voting power of the acquiring or surviving entity, Alliance will forfeit any
unused Product Development Rights (i.e., its right to seek any further Product Development Rights Licenses with respect to additional [CONFIDENTIAL TREATMENT
REQUESTED]) regardless of whether Alliance's rights thereto have otherwise expired under the terms of this Agreement; and further provided, that in no event shall
Alliance assign this Agreement or its rights and obligations hereunder to a Competitor of Inhale or shall Inhale assign its rights under this Agreement to an entity that has fewer than two hundred
employees without Alliance's prior written consent, not to be unreasonably withheld. Notwithstanding the foregoing, Alliance may only assign its rights and obligations under this Agreement to a party
that provides adequate assurance of future performance in form and substance satisfactory in Inhale, and Inhale may only assign its obligations under this Agreement to a third party in conjunction
with an assignment of sufficient rights under the PulmoSphere® Technology, the MediSpheresTM Technology, and the Bioavailability Technology necessary for the performance of its
obligations hereunder. Any permitted assignee shall assume all obligations of its assignor under this Agreement. Any purported assignment or transfer in violation of this Section 7.7 shall be
void." 

        8.    Alliance's Escrow Obligations.    

        8.1    Effect Of This Supplemental Agreement.    Following the Closing Date, the definitions set forth in this
Supplemental Agreement will apply with full force and effect to the Escrow Agreement for all purposes. The effect of this Supplemental Agreement is to clarify and broaden the scope of Alliance's
obligations under the Escrow Agreement. As amended by this Supplemental Agreement, the Escrow Agreement remains in full force and effect. 

        8.2    Previously Requested Information.    On the Closing Date, Alliance will place into escrow with DSI Technology
Escrow Services, Inc. pursuant to the terms of the APA and the Escrow Agreement the following: [CONFIDENTIAL TREATMENT
REQUESTED]. 

        8.3    Information On MediSpheresTM and Bioavailability Technology.    Within  [CONFIDENTIAL TREATMENT REQUESTED] of the Closing
Date of this Supplemental Agreement, Inhale may request that Alliance place
into escrow [CONFIDENTIAL TREATMENT REQUESTED]. From 

19

 

time to time, Inhale may request that Alliance place into escrow copies of such additional data owned or controlled by Alliance directly related to [CONFIDENTIAL
TREATMENT REQUESTED]. Alliance will honor such requests within thirty days. 

        9.    Supply of Perflubron.    

        9.1    Initial Purchase.    On the Closing Date, Alliance will supply Inhale with  [CONFIDENTIAL TREATMENT REQUESTED] metric tons of
Perflubron. 

        9.2    Inhale's Option.    Inhale shall have an option, exercisable within one year of the Closing Date, to purchase
from Alliance up to an additional [CONFIDENTIAL TREATMENT REQUESTED] metric tons of Perflubron, in units of not less than  [CONFIDENTIAL TREATMENT REQUESTED] metric tons, at a price of [CONFIDENTIAL TREATMENT
REQUESTED] per metric ton. In the event Inhale exercises the option but does not purchase all [CONFIDENTIAL TREATMENT
REQUESTED] metric tons of Perflubron in a single purchase, Inhale may purchase any portion of the remaining balance of the  [CONFIDENTIAL TREATMENT REQUESTED] metric tons, in
units of approximately [CONFIDENTIAL
TREATMENT REQUESTED] metric tons, at any time prior to the expiration of the twelve-month period following the Closing Date. Inhale's option can be extended, at
Inhale's request at any time during the initial twelve-month period, for an additional six months, in which case the price per metric ton for Perflubron purchased during the extended option period
will be [CONFIDENTIAL TREATMENT REQUESTED]. 

        9.3    Application Of The APA.    All purchases of Perflubron under this Supplemental Agreement will be subject to the
provisions of Sections 1.3, 10.6(b), 10.6(e), and 11.2 of the APA and to the title, risk of loss, and warranty provisions of Section 10.6(c) of the APA. 

        10.    [CONFIDENTIAL TREATMENT REQUESTED].    

        11.    [CONFIDENTIAL TREATMENT REQUESTED].    

        11.1    [CONFIDENTIAL TREATMENT REQUESTED].    

        11.2    [CONFIDENTIAL TREATMENT REQUESTED].    

        12.    Enforcement.    The Parties agree that all disputes arising out of or relating to this Supplemental Agreement
will be subject to the dispute resolution provisions of the 1999 Agreements. 

        13.    Miscellaneous.    

        13.1    Notices.    All notices, requests, waivers, releases, consents, and other communications required or permitted
by this Supplemental Agreement (collectively, "Notices") must be given in writing. Notices will be deemed sufficiently given for all purposes when delivered in person or when dispatched by electronic
facsimile transmission or upon confirmation of receipt when dispatched by a nationally recognized overnight courier service to the appropriate party as follows: (a) If to Inhale, at 150
Industrial Road, San Carlos, CA 94070, to the attention of the General Counsel, with a copy to Richard I. Werder, Jr., Jones, Day, Reavis & Pogue, North Point, 901 Lakeside Avenue, Cleveland,
Ohio 44114, and (b) if to Alliance, at 3040 Science Park Road, San Diego, CA 92121, to the attention of the President and Chief Operating Officer, with a copy to Mike Hird, Pillsbury Winthrop
LLP, 11682 El Camino Real, Suite 200, San Diego, California 92130. 

        13.2    Amendment And Waiver.    This Supplemental Agreement may be amended, modified, waived, discharged, or
terminated only by an instrument in writing signed by all Parties. 

        13.3    Survival Of Representations And Warranties.    All representations and warranties contained herein will
survive the execution and delivery of this Supplemental Agreement and the Closing Date; provided, however, that the representations and warranties made by Alliance in this Supplemental Agreement
(including, without limitation, the representations and warranties set forth in Section 4.5) shall survive the Closing solely for, and shall expire, two years after the 

20

 

Closing Date and any liability of Alliance with respect to such representations and warranties shall thereupon cease; provided, further, that if, at any time prior to such second anniversary of the
Closing Date, Inhale (acting in good faith) shall deliver a written notice to Alliance alleging the breach by Alliance of any such representation or warranty, then the representations and warranties
of Alliance in this Supplemental Agreement, but solely as they relate to the claim asserted, shall survive until such time as such claim is resolved. 

        13.4    Successors And Assigns.    This Supplemental Agreement will be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns, but will not be assignable or delegable by any Party without the prior written consent of each other Party. In the absence of such prior
written consent, any purported assignment or delegation of any right or obligation hereunder will be null and void. 

        13.5    Rights Of The Parties.    Nothing expressed or implied in this Supplemental Agreement is intended or will be
construed to confer upon or give any person or entity other than the Parties any rights or remedies under or by reason of this Supplemental Agreement or any transaction contemplated hereby. 

        13.6    Expenses.    Each of the Parties to this Supplemental Agreement will bear its own expenses incurred in
connection with this Supplemental Agreement and the transactions contemplated hereby. 

        13.7    Titles And Headings.    Titles and headings to Sections herein are inserted for convenience of reference only,
and are not intended to be part of or to affect the meaning or interpretation of this Supplemental Agreement. 

        13.8    Entire Agreement.    This Supplemental Agreement, together with its Exhibits, constitutes the entire agreement
between the Parties hereto with respect to the subject matter hereof, and there are no agreements among the Parties hereto with respect thereto except as expressly set forth herein. 

        13.9    Severability.    In case any provision contained in this Supplemental Agreement is invalid or unenforceable,
the validity and enforceability of the remaining provisions will not in any way be affected or impaired thereby. 

        13.10    Governing Law.    This Supplemental Agreement will be governed by and construed in accordance with the laws
of the State of California. 

        13.11    Counterparts.    This Supplemental Agreement may be executed in any number of counterparts, each of which so
executed will be deemed to be an original; such counterparts will together constitute but one agreement. 

        IN
WITNESS WHEREOF, the Parties hereto have duly executed this Supplemental Agreement as of this 15 day of March, 2002. 

ALLIANCE
PHARMACEUTICAL CORPORATION 

By:
/s/ Theodore D. Roth 

        Its:
President and Chief Operating Officer 

INHALE
THERAPEUTIC SYSTEMS, INC. 

By:
/s/ Douglas M. Altschuler 

        Its:
Vice President and General Counsel 

21

  

 
 

EXHIBIT A    
  

        
Report Title: 

[CONFIDENTIAL
TREATMENT REQUESTED] 

Invention
Disclosures: 

[CONFIDENTIAL
TREATMENT REQUESTED] 

22

 
 
 

EXHIBIT B    
  

        
Laboratory Notebooks: 

	Assignee	 	Notebook Number

        [CONFIDENTIAL TREATMENT REQUESTED]  

23

 
  
 

    EXHIBIT C    
  

        
Report Title: 

[CONFIDENTIAL
TREATMENT REQUESTED] 

Invention
Disclosures: 

[CONFIDENTIAL
TREATMENT REQUESTED] 

24

 
 
 

EXHIBIT D    
  

        
Laboratory Notebooks: 

	Assignee	 	Notebook Number

        [CONFIDENTIAL TREATMENT REQUESTED]  

25

QuickLinks

SUPPLEMENTAL AGREEMENT

EXHIBIT A

EXHIBIT B

EXHIBIT C

EXHIBIT DExhibit
4.5

 

WHENEVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH OMISSIONS ARE
DENOTED BY AN ASTERISK), SUCH CONFIDENTIAL INFORMATION HAS BEEN SUBMITTED
SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT.

 

AMENDED
AND RESTATED CREDIT AGREEMENT

 

by
and between

 

META
GROUP, INC

 

AND

 

THE
BANK OF NEW YORK

 

 

$20,000,000

 

 

Dated
as of November 5, 2001

 

 

TABLE
OF CONTENTS

 

	
  1.

  	
  DEFINITIONS
  AND PRINCIPLES OF CONSTRUCTION

  
	
   

  	
   

  
	
   

  	
  1.1.

  	
  Definitions

  
	
   

  	
  1.2.

  	
  Principles of Construction

  
	
   

  	
  1.3.

  	
  Matters
  Regarding the Prior Credit Agreement

  
	
   

  	
  1.4.

  	
  Continuation of Collateral

  
	
   

  	
   

  	
   

  
	
  2.

  	
  AMOUNT AND TERMS OF LOANS

  
	
   

  	
   

  
	
   

  	
  2.1.

  	
  Revolving
  Credit Loans

  
	
   

  	
  2.2.

  	
  Revolving
  Credit Note

  
	
   

  	
  2.3.

  	
  Term Loan

  
	
   

  	
  2.4.

  	
  Term Note

  
	
   

  	
  2.5.

  	
  Procedure
  for Borrowing

  
	
   

  	
  2.6.

  	
  Termination
  of Commitment; Reduction of Commitment Amount

  
	
   

  	
  2.7.

  	
  Prepayments
  of the Loans; Payment on Maturity

  
	
   

  	
  2.8.

  	
  Payments

  
	
   

  	
  2.9.

  	
  Use of Proceeds

  
	
   

  	
  2.10.

  	
  Letter of Credit Sub-facility

  
	
   

  	
  2.11.

  	
  Absolute
  Obligation with respect to Letter of Credit Payments

  
	
   

  	
   

  	
   

  
	
  3.

  	
  INTEREST, FEES,
  YIELD PROTECTIONS, ETC.

  
	
   

  	
   

  
	
   

  	
  3.1.

  	
  Interest Rate and
  Payment Dates

  
	
   

  	
  3.2.

  	
  Fees

  
	
   

  	
  3.3.

  	
  Conversions

  
	
   

  	
  3.4.

  	
  Indemnification
  for Loss

  
	
   

  	
  3.5.

  	
  Capital
  Adequacy

  
	
   

  	
  3.6.

  	
  Reimbursement for
  Increased Costs

  
	
   

  	
  3.7.

  	
  Illegality
  of Funding

  
	
   

  	
  3.8.

  	
  Substituted Interest Rate

  
	
   

  	
  3.9.

  	
  Taxes

  
	
   

  	
  3.10.

  	
  Option to Fund

  
	
   

  	
   

  	
   

  
	
  4.

  	
  REPRESENTATIONS AND
  WARRANTIES

  
	
   

  	
   

  
	
   

  	
  4.1.

  	
  Subsidiaries;
  Capitalization

  
	
   

  	
  4.2.

  	
  Existence
  and Power

  
	
   

  	
  4.3.

  	
  Authority
  and Execution

  
	
   

  	
  4.4.

  	
  Binding
  Agreement

  
	
   

  	
  4.5.

  	
  Litigation

  
	
   

  	
  4.6.

  	
  Required
  Consents

  
	
   

  	
  4.7.

  	
  Absence
  of Defaults; No Conflicting Agreements

  
	
   

  	
  4.8.

  	
  Compliance with
  Applicable Laws

  

 

 

	
   

  	
  4.9.

  	
  Taxes

  
	
   

  	
  4.10.

  	
  Governmental
  Regulations

  
	
   

  	
  4.11.

  	
  Federal
  Reserve Regulations; Use of Loan Proceeds

  
	
   

  	
  4.12.

  	
  Plans

  
	
   

  	
  4.13.

  	
  Financial
  Statements

  
	
   

  	
  4.14.

  	
  Property

  
	
   

  	
  4.15.

  	
  Intellectual Property;
  Licenses

  
	
   

  	
  4.16.

  	
  Environmental
  Matters

  
	
   

  	
  4.17.

  	
  Solvency

  
	
   

  	
  4.18.

  	
  Security
  Interests

  
	
   

  	
  4.19.

  	
  Absence of Certain
  Restrictions

  
	
   

  	
  4.20.

  	
  No
  Misrepresentation

  
	
   

  	
   

  	
   

  
	
  5.

  	
  CONDITIONS TO FIRST LOANS

  
	
   

  	
   

  
	
   

  	
  5.1.

  	
  Evidence of
  Action

  
	
   

  	
  5.2.

  	
  This Agreement

  
	
   

  	
  5.3.

  	
  Note

  
	
   

  	
  5.4.

  	
  Security
  Agreement

  
	
   

  	
  5.5.

  	
  Subsidiary
  Guaranty

  
	
   

  	
  5.6.

  	
  Officer’s
  Certificate

  
	
   

  	
  5.7.

  	
  Compliance
  Certificate

  
	
   

  	
  5.8.

  	
  Opinion of Counsel
  to the Borrower

  
	
   

  	
  5.9.

  	
  Search Reports and
  Related Documents

  
	
   

  	
  5.10.

  	
  Approval of Special Counsel

  
	
   

  	
  5.11.

  	
  Fees

  
	
   

  	
  5.12.

  	
  Fees and Expenses
  of Special Counsel

  
	
   

  	
  5.13.

  	
  Other Documents

  
	
   

  	
   

  	
   

  
	
  6.

  	
  CONDITIONS OF LENDING

  
	
   

  	
   

  
	
   

  	
  6.1.

  	
  Compliance

  
	
   

  	
  6.2.

  	
  Borrowing
  Request / Letter of Credit Agreement

  
	
   

  	
  6.3.

  	
  Loan Closings

  
	
   

  	
  6.4.

  	
  Other Documents

  
	
   

  	
   

  	
   

  
	
  7.

  	
  AFFIRMATIVE COVENANTS

  
	
   

  	
   

  
	
   

  	
  7.1.

  	
  Financial
  Statements and Information

  
	
   

  	
  7.2.

  	
  Certificates; Other
  Information

  
	
   

  	
  7.3.

  	
  Legal Existence

  
	
   

  	
  7.4.

  	
  Taxes

  
	
   

  	
  7.5.

  	
  Insurance

  
	
   

  	
  7.6.

  	
  Performance of Obligations

  
	
   

  	
  7.7.

  	
  Condition
  of Property

  
	
   

  	
  7.8.

  	
  Observance of Legal
  Requirements

  
	
   

  	
  7.9.

  	
  Inspection
  of Property; Books and Records; Discussions

  
	
   

  	
  7.10.

  	
  Authorizations

  
	
   

  	
  7.11.

  	
  Financial
  Covenants

  

 

ii

 

	
  8.

  	
  NEGATIVE COVENANTS

  
	
   

  	
   

  
	
   

  	
  8.1.

  	
  Indebtedness

  
	
   

  	
  8.2.

  	
  Liens

  
	
   

  	
  8.3.

  	
  Merger; Consolidations

  
	
   

  	
  8.4.

  	
  Dispositions

  
	
   

  	
  8.5.

  	
  Acquisitions,
  Investments, Loans, Etc.

  
	
   

  	
  8.6.

  	
  Restricted
  Payments

  
	
   

  	
  8.7.

  	
  Business
  and Name Changes

  
	
   

  	
  8.8.

  	
  Subsidiaries

  
	
   

  	
  8.9.

  	
  Sale and Leaseback
  Transactions

  
	
   

  	
  8.10.

  	
  Amendments, Etc.
  of Certain Agreements

  
	
   

  	
  8.11.

  	
  Transactions with
  Affiliates

  
	
   

  	
  8.12.

  	
  Limitation on Dividend
  Restrictions

  
	
   

  	
  8.13.

  	
  Limitation on Negative
  Pledges

  
	
   

  	
   

  	
   

  
	
  9.

  	
  DEFAULT

  
	
   

  	
   

  
	
   

  	
  9.1.

  	
  Events of
  Default

  
	
   

  	
  9.2.

  	
  Remedies

  
	
   

  	
   

  	
   

  
	
  10.

  	
  OTHER PROVISIONS

  
	
   

  	
   

  
	
   

  	
  10.1.

  	
  Amendments
  and Waivers

  
	
   

  	
  10.2.

  	
  Notices

  
	
   

  	
  10.3.

  	
  No Waiver; Cumulative
  Remedies

  
	
   

  	
  10.4.

  	
  Survival
  of Representations and Warranties and Certain Obligations

  
	
   

  	
  10.5.

  	
  Expenses

  
	
   

  	
  10.6.

  	
  Successors
  and Assigns

  
	
   

  	
  10.7.

  	
  Counterparts

  
	
   

  	
  10.8.

  	
  Set-off

  
	
   

  	
  10.9.

  	
  Construction

  
	
   

  	
  10.10.

  	
  Governing Law

  
	
   

  	
  10.11.

  	
  Headings
  Descriptive

  
	
   

  	
  10.12.

  	
  Severability

  
	
   

  	
  10.13.

  	
  Integration

  
	
   

  	
  10.14.

  	
  Consent
  to Jurisdiction

  
	
   

  	
  10.15.

  	
  Service of
  Process

  
	
   

  	
  10.16.

  	
  No Limitation on
  Service or Suit

  
	
   

  	
  10.17.

  	
  WAIVER
  OF TRIAL BY JURY

  

 

iii

 

Exhibits

 

	
  Exhibit A-1

  	
   

  	
  Form of Revolving Credit Note

  
	
  Exhibit A-2

  	
   

  	
  Form of Term Note

  
	
  Exhibit B

  	
   

  	
  Form of Borrowing
  Request

  
	
  Exhibit C

  	
   

  	
  Form of Notice of
  Conversion

  
	
  Exhibit D

  	
   

  	
  Form of Security
  Agreement

  
	
  Exhibit E

  	
   

  	
  Form of Subsidiary
  Guarantee

  
	
  Exhibit F

  	
   

  	
  Form of Compliance
  Certificate

  
	
  Exhibit G

  	
   

  	
  Form of Borrowing Base
  Certificate

  

 

Schedules

 

	
  Schedule 4.1

  	
   

  	
  List of Subsidiaries;
  Capitalization

  
	
  Schedule 4.12

  	
   

  	
  List of Plans

  
	
  Schedule 4.15

  	
   

  	
  List of Licenses and
  Intellectual Property Agreements

  
	
  Schedule 8.2

  	
   

  	
  List of Existing Liens

  
	
  Schedule 8.5

  	
   

  	
  List of Existing
  Investments

  

 

iv

 

AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”)
dated as of November 5, 2001 by and between META GROUP, INC., a Delaware
corporation (the “Borrower”) and THE BANK OF NEW YORK (the “Bank”).

 

RECITALS:

 

A.            The Bank and the
Borrower have previously entered into that certain Credit Agreement, dated as
of September 18, 2000 (as amended, the “Prior Credit Agreement”).

 

B.            It is the intention of the parties
hereto that this Agreement amend and restate the terms of the Prior Credit
Agreement in its entirety, and that, on the Effective Date, the Loans under and
as defined in the Prior Credit Agreement be Loans under this Agreement, evidenced
and secured by the applicable Loan Documents (hereinafter defined).

 

C.            Subject to and upon the terms and
conditions herein set forth, the Bank is willing to renew, extend, and amend
the Prior Credit Agreement pursuant to the terms of this Agreement.

 

NOW, THEREFORE, IN
CONSIDERATION OF THE PREMISES AND AGREEMENTS CONTAINED HEREIN, THE PARTIES
HERETO AGREE AS FOLLOWS:

 

1.             DEFINITIONS AND PRINCIPLES OF
CONSTRUCTION

 

1.1.          Definitions

 

As used in this Agreement, terms defined in the
recitals have the meanings therein indicated, and the following terms have the
following meanings:

 

“ABR Advances”: the Revolving Credit Loans or
the Term Loan, as the case may be, (or any portions thereof) at such time as
they (or such portions) are made and/or being maintained at a rate of interest
based upon the Alternate Base Rate.

 

“Accountants”: Deloitte & Touche, or such
other independent certified public accountants of nationally recognized
standing chosen by the Borrower and acceptable to the Bank in its reasonable
judgment.

 

“Accounts”: “accounts” as defined in the Uniform
Commercial Code as in effect in the State of New York.

 

“Accumulated Funding Deficiency”: as defined in
Section 302 of ERISA.

 

“Acquisition”: with respect to any Person, the
purchase or other acquisition by such Person, by any means whatsoever
(including through a merger, dividend or otherwise and whether in a single
transaction or in a series of related transactions), of (i) any Capital Stock
of, or other equity securities of, any other Person if, immediately thereafter,
such other Person would be either a Subsidiary of such Person or otherwise
under the control of such Person, (ii)

 

 

any Operating Entity, or (iii) any property of (A) any other Person or
(B) any Operating Entity, in either case other than in the ordinary course of
business, provided, however, that no acquisition of all or substantially all of
the assets of such other Person or Operating Entity shall be deemed to be in
the ordinary course of business.

 

“Advance”: an ABR Advance or a LIBOR Advance,
as the case may be.

 

“Affiliate”: as to any Person, any other Person
which, directly or indirectly, controls, is controlled by, or is under common
control with, such Person.

 

“Agreement”: this Credit Agreement, as the same
may be amended, supplemented or otherwise modified from time to time.

 

“Alternate Base Rate”: on any date, a rate of
interest per annum equal to the higher of (i) the Federal Funds Rate in effect
on such date plus 0.50% or (ii) the Prime Rate in effect on such date.

 

“Applicable Margin”: with respect to the unpaid
principal balance of Revolving Credit Loans or the Term Loan, as the case may
be (i) consisting of LIBOR Advances, 2.50%, and (ii) consisting of ABR
Advances, 0.00%.

 

“Authorized Signatory”: as to (i) any Person
which is a corporation, the chairman of the board, the president, any vice
president, the chief financial officer or any other officer (acceptable to the
Bank) of such Person, and (ii) any Person which is not a corporation, a general
partner, Managing Person or other appropriate appointed officer (acceptable to
the Bank) thereof.

 

“Available Revolving Credit Commitment”: at any
date of determination, an amount equal to the excess, if any, of (a) the amount
of the Revolving Credit Commitment over (b) the sum of (i) the aggregate unpaid
principal amount at such time of all Revolving Credit Loans plus (ii)
the Letter of Credit Exposure.

 

“Bond Collateral”:  the portion of the Collateral consisting of FHA bonds and the
proceeds thereof, as such Collateral may be substituted from time to time with
other Liquid Investments.

 

“Borrowing Date”: any Business Day on which the
Bank makes a Loan or issues a Letter of Credit.

 

“Borrowing Base”: at any date of determination,
an amount equal to 80% of Eligible Accounts Receivable at such date.  The Borrowing Base shall be determined from
time to time by the Bank by reference to the Borrowing Base Certificate most
recently delivered to it.

 

“Borrowing Base Certificate”: a certificate
substantially in the form of Exhibit G.

 

“Borrowing Request”: a request for one or more
Advances, substantially in the form of Exhibit B.

 

2

 

“Business Day”: any day other than a Saturday,
a Sunday or a day on which commercial banks located in New York City are
authorized or required by law or other governmental action to close and, with
respect to all notices and determinations in connection with, and payments of
principal and interest on, LIBOR Advances, which is also a day on which
eurodollar funding between banks may be carried on in London, England.

 

“Capital Expenditures”: for any period, the
aggregate of all expenditures incurred by the Borrower and its Subsidiaries
during such period which, in accordance with GAAP, are required to be shown as
additions to property, plant, equipment  or similar fixed asset accounts reflected
on the consolidated balance sheet of the Borrower and its Subsidiaries,
provided, however, that “Capital Expenditures” shall not include (i)
capitalized leases, or (ii) expenditures of proceeds of insurance settlements
in respect of lost, destroyed or damaged assets, equipment or other property to
the extent such expenditures are made to replace or repair such lost, destroyed
or damaged assets, equipment or other property within six months of the receipt
of such proceeds.

 

“Capital Lease Obligations”: with respect to
any Person, obligations of such Person with respect to leases which are
required to be capitalized for financial reporting purposes in accordance with
GAAP.

 

“Capital Stock”: as to any Person, all shares,
interests, partnership interests, limited liability company interests,
participations, rights in or other equivalents (however designated) of such
Person’s equity (however designated) and any rights, warrants or options
exchangeable for or convertible into such shares, interests, participations,
rights or other equity.

 

“Change of Control”: the acquisition of
ownership, directly or indirectly, beneficially or of record, by any Person or
group (within the meaning of the Securities Exchange Act of 1934 and the rules
of the Securities and Exchange Commission thereunder as in effect on the date
hereof), of shares representing 50% or more of the aggregate ordinary voting
power or economic interests represented by the issued and outstanding equity
securities of the Borrower on a fully diluted basis.

 

“Code”: the Internal Revenue Code of 1986, as
the same may be amended from time to time, or any successor thereto, and the
rules and regulations issued thereunder, as from time to time in effect.

 

“Collateral”: the property in which a security
interest is granted under the Collateral Documents.

 

“Collateral Documents”: the Security Agreement
and all documents executed or delivered in connection therewith.

 

“Commitment Fee”: as defined in Section 3.2(a).

 

“Commitment”: the Revolving Credit Commitment,
the Term Loan Commitment or the Letter of Credit Commitment, as the case may
be.

 

3

 

“Compliance Certificate”: a certificate
substantially in the form of Exhibit F.

 

“Contingent Obligation”: as to any Person (a “secondary
obligor”), any obligation of such secondary obligor (i) guaranteeing or in
effect guaranteeing any return on any investment made by another Person, or
(ii) guaranteeing or in effect guaranteeing any Indebtedness, lease, dividend
or other obligation (a “primary obligation”) of any other Person (a “primary
obligor”) in any manner, whether directly or indirectly, including, without
limitation, any obligation of such secondary obligor, whether contingent, (A)
to purchase any primary obligation or any property constituting direct or
indirect security therefor, (B) to advance or supply funds (x) for the purchase
or payment of any primary obligation or (y) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of a primary obligor, (C) to purchase property, securities or services
primarily for the purpose of assuring the beneficiary of any primary obligation
of the ability of a primary obligor to make payment of a primary obligation,
(D) otherwise to assure or hold harmless the beneficiary of a primary
obligation against loss in respect thereof, and (E) in respect of the
liabilities of any partnership in which a secondary obligor is a general
partner, except to the extent that such liabilities of such partnership are
nonrecourse to such secondary obligor and its separate property, provided,
however, that the term “Contingent Obligation” shall not include the indorsement
of instruments for deposit or collection in the ordinary course of
business.  The amount of any Contingent
Obligation of a Person shall be deemed to be an amount equal to the stated or
determinable amount of a primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith.

 

“Conversion Date”: the date on which: (i) a
LIBOR Advance is converted to an ABR Advance, (ii) a LIBOR Advance is continued
as a new LIBOR Advance, or (iii) an ABR Advance is converted to a LIBOR
Advance.

 

“Credit Agreement”: this Amended and Restated
Credit Agreement, as the same may be amended from time to time.

 

“Credit Party”: the Borrower and each other
party (other than the Bank) to a Loan Document.

 

“Debt Service”: for any period, with respect to
the Borrower and its Subsidiaries for each of the following, the sum of (i)
Interest Expense for such period, plus (ii) all scheduled payments of
principal during such period on Indebtedness which had, on the date of creation
of such Indebtedness, a final maturity which was more than twelve months after
such date.

 

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

 

4

 

“Defaulted Account”: any Account of the
Borrower which has been or should have been charged off as not collectible in
conformity with the accounting policies of the Borrower in effect at the time
of determination.

 

“Disposition”: with respect to any Person, any
sale, assignment, transfer or other disposition by such Person, by any means,
of (i) the Capital Stock of, or other equity interests of, any other Person,
(ii) any Operating Entity, or (iii) any other property of such Person other
than in the ordinary course of business, provided, however, that no such sale,
assignment, transfer or other disposition of property shall be deemed to be in
the ordinary course of business (a) if the fair market value thereof is in
excess of $250,000, or (b) to the extent that the fair market value thereof,
when aggregated with all other sales, assignments, transfers and other
dispositions made by such Person within the same fiscal year, exceeds $500,000,
and then only to the extent of such excess, if any, or (c) if it is the sale,
assignment, transfer or disposition of (1) all or substantially all of the
property of such Person or (2) any Operating Entity.

 

“Dollars” and “$”: lawful currency of
the United States.

 

“Domestic Subsidiary”: any Subsidiary which is
organized and existing under the laws of a jurisdiction of, and conducts its
business primarily in, the United States of America.

 

“EBITDA”: for any period, net income of the
Borrower and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP plus the sum of, without duplication, (i)
Interest Expense, (ii) Income Tax Expense and (iii) depreciation, amortization
and other non-cash charges of the Borrower and its Subsidiaries (including
amortization or other expense recognitions of any costs associated with asset
write-ups), each to the extent deducted in determining such net income for such
period; provided, however, that for purposes of this calculation,
net income shall exclude extraordinary gains and losses from sales, exchanges
and other dispositions of property not in the ordinary course of business and
other non-recurring items.

 

“Effective Date”: November 5, 2001.

 

“Eligible Accounts Receivable”: An amount equal
to the aggregate outstanding balance of all Accounts of the Borrower and its
Domestic Subsidiaries payable in the United States of America in Dollars, as
set forth in the consolidated aging reports of billed Accounts for the Borrower
and its Domestic Subsidiaries as of such time, provided  that,
unless otherwise approved in writing by the Bank, no amount owing in respect of
any Account shall be deemed to be included in any calculation of Eligible
Accounts Receivable if:

 

(a)           (i) 
such Account is not a bona fide, valid and legally enforceable
obligation of the Obligor thereon arising from the actual sale and delivery of
goods to or rendition to and acceptance of services by such Obligor, or
(ii)  such Account otherwise does not
represent a final sale or transfer of title to such Obligor,

 

5

 

(b)           (i) 
the Obligor thereon is any Affiliate of the Borrower or any Subsidiary,
or any employee, officer, sales representative, agent (other than any such
sales representative or agent which has an independent contractor relationship
with the Borrower or any Subsidiary), director or stockholder holding 10% or
more of the of the Borrower, any Subsidiary or any of their Affiliates, or
(ii)  the sale giving rise to such
Account is to an Obligor in any jurisdiction outside the United States;

 

(c)           such Account was, at the date of the
original issuance of the respective invoice therefor, payable more than 31 days
after such date;

 

(d)           such Account remains unpaid for more
than 60 days after the date set forth for payment in the invoice originally
issued therefor;

 

(f)            such Account is a Defaulted Account;

 

(g)           a proceeding under bankruptcy or
similar laws has occurred and is continuing with respect to the Obligor
thereon;

 

(h)           it is an Account which, pursuant to
any agreement between the Borrower or any of its Subsidiaries and the Obligor
thereon, may be set off or charged against any trade payable, rebate obligation
or other similar liability owing to such Obligor;

 

(i)            such Account is the result of a
chargeback, debit memo or a reinvoice of a disputed Account or Defaulted
Account;

 

(j)            the Obligor thereon has disputed its
liability in writing on, or the Obligor thereon has made any written claim or
defense with respect to, such Account or any other Account due from such
Obligor to the Borrower or any Subsidiary, which has not been resolved (but
only the amount of such Account that is disputed or subject to claim or defense
or is unresolved shall be excluded from the calculation of Eligible Accounts
Receivable);

 

(k)           such Account is not owned solely by
the Borrower or any Subsidiary free and clear of all Liens or other rights or
claims of any other Person (except in favor of the Bank);

 

(l)            such Account is subject to any
material contractual restrictions on the transfer, assignability or sale
thereof, enforceable against the assignee, except pursuant to any Loan Document
or any other agreement or instrument governing any Indebtedness of the Borrower
and its Subsidiaries which is permitted to be incurred by the Borrower and its
Subsidiaries pursuant to this Agreement; or

 

(m)          the Bank does not have a valid and
perfected first priority security interest in such Account or such Account does
not conform in all material respects to the

 

6

 

representations
and warranties contained in this Agreement or any of the Collateral Documents.

 

For purposes of
determining Eligible Accounts Receivable, the aggregate amount owing in respect
of Accounts meeting the foregoing criteria for inclusion in the determination
of Eligible Accounts Receivable shall be reduced by (i) an amount equal to the net
credit balances owed to any customers, (ii) an amount equal to the amount of
any reserve for the value of an accrual for the estimated current liability for
rebates and return and credit memos with respect to such Accounts, determined
in conformity with the accounting policies of the Borrower and its Subsidiaries
as in effect from time to time and (iii) an amount equal to the portion of any
Account representing delivery or freight which has been or should have been
charged-off as not collectable in conformity with the accounting policies of
the Borrower and its Subsidiaries as in effect from time to time.

 

“Employee Benefit Plan”: an employee benefit
plan within the meaning of Section 3(3) of ERISA maintained, sponsored or
contributed to by the Borrower, any of its Subsidiaries or any ERISA Affiliate.

 

“Employee Stock Options”: options or other
rights to purchase common shares of the Borrower issued exclusively to
directors, officers and employees of the Borrower and its Subsidiaries pursuant
to a plan or arrangement adopted by the board of directors of the Borrower.

 

“Environmental Laws”: any and all federal,
state and local laws relating to the environment, the use, storage,
transporting, manufacturing, handling, discharge, disposal or recycling of
hazardous substances, materials or pollutants or industrial hygiene, and
including, without limitation, (i) the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 USCA §9601 et  seq.;
(ii) the Resource Conservation and Recovery Act of 1976, as amended, 42 USCA
§6901 et  seq.; (iii) the Toxic Substance Control Act, as amended,
15 USCA §2601 et  seq.; (iv) the Water Pollution Control Act, as
amended, 33 USCA §1251 et  seq.; (v) the Clean Air Act, as
amended, 42 USCA §7401 et seq.; (vi) the Hazardous Materials
Transportation Authorization Act of 1994, as amended, 49 USCA §5101 et  seq.
and (vii) all rules, regulations, judgments, decrees, injunctions and
restrictions thereunder and any analogous state law.

 

“ERISA”: the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the rules and
regulations issued thereunder, as from time to time in effect.

 

“ERISA Affiliate”: when used with respect to an
Employee Benefit Plan, ERISA, the PBGC or a provision of the Code pertaining to
employee benefit plans, any Person which is a member of any group of
organizations within the meaning of Sections 414(b) or (c) of the Code (or,
solely for purposes of potential liability under Section 302(c)(11) of ERISA
and Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, Sections 414(m) or (o) of the Code) of
which the Borrower or any of its Subsidiaries is a member.

 

7

 

“Event of Default”: as defined in Section 9.1.

 

“Existing L/Cs”: all letters of credit issued
(or deemed issued) pursuant to the Prior Credit Agreement.

 

“Facility Fee”: as defined in Section 3.2(b).

 

“Federal Funds Rate”: for any day, a rate per
annum (expressed as a decimal, rounded upwards, if necessary, to the next
higher 1/100 of 1%) equal to the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers on such day, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day, provided  that
(i) if the day for which such rate is to be determined 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 (ii) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average of the quotations for such day on such
transactions received by the Bank.

 

“Financial Officer”: as to any Person, the
chief financial officer of such Person or such other officer as shall be
reasonably satisfactory to the Bank.

 

“Fixed Charge Coverage Ratio”: at any date of
determination, the ratio of (a) EBITDA minus Capital Expenditures to (b)
the sum of Debt Service plus Income Tax Expense, in each case for the
four fiscal quarter period ending on such date.

 

“Fixed Rate Funding Loss” means all liquidated
damages, break funding losses and other losses, claims, damages or other
amounts payable by the Borrower to the Bank under any Interest Rate Protection
Product, including, without limitation, any amounts payable by reason of an
early termination of any Interest Rate Protection Product.

 

“Foreign Subsidiary”: any Subsidiary which does
not qualify under the definition of Domestic Subsidiary.

 

“Funded Debt”: on any date (x) during the
Revolving Credit Commitment Period, the sum of (i) the aggregate principal
amount of Revolving Credit Loans outstanding on such date plus (ii) the
principal amount of all senior indebtedness for borrowed money of the Borrower
and its Subsidiaries outstanding on such date which has a final maturity of
more than twelve months from such date, and (y) after the Revolving Credit Commitment
Period, the sum of (i) the outstanding principal balance of the Term Loan on
such date plus (ii) the principal amount of all senior indebtedness for
borrowed money of the Borrower and its Subsidiaries (other than the Term Loan)
outstanding on such date which has a final maturity of more than twelve months
from such date.

 

“GAAP”: generally accepted accounting
principles in effect in the United States of America as of the date of
determination, consistently applied.

 

8

 

“Governmental Authority”: any foreign, federal,
state, municipal or other government, or any department, commission, board,
bureau, agency, public authority or instrumentality thereof, or any court or
arbitrator.

 

“Hazardous Substance”: any hazardous or toxic
substance, material or waste, including, but not limited to, (i) those
substances, materials, and wastes listed in the United States Department of
Transportation Hazardous Materials Table (49 CFR 172.101) or by the
Environmental Protection Agency as hazardous substances (40 CFR Part 302) and
amendments thereto and replacements thereof and (ii) any substance, pollutant
or material defined as, or designated in, any Environmental Law as a “hazardous
substance,” “toxic substance,” “hazardous material,” “hazardous waste,”
“restricted hazardous waste,” “pollutant,” “toxic pollutant” or words of
similar import.

 

“Income Tax Expense”: for any period, the
greater of (i) accrued income tax expense calculated in accordance with GAAP,
or (ii) income taxes paid in cash, in each case for such period of the Borrower
and its Subsidiaries determined on a consolidated basis.

 

“Indebtedness”: as to any Person, at a
particular time, all items which constitute, without duplication, (i)
indebtedness for borrowed money, (ii) indebtedness in respect of the deferred
purchase price of property (other than trade payables incurred in the ordinary
course of business), (iii) indebtedness evidenced by notes, bonds, debentures
or similar instruments, (iv) obligations with respect to any conditional sale
or title retention agreement, (v) indebtedness arising under acceptance
facilities and the amount available to be drawn under all letters of credit
issued for the account of such Person and, without duplication, all drafts
drawn thereunder to the extent such Person shall not have reimbursed the issuer
in respect of the issuer’s payment thereof, (vi) all liabilities secured by any
Lien on any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof (other than
carriers’, warehousemen’s, mechanics’, repairmen’s or other like non-consensual
statutory Liens arising in the ordinary course of business), (vii) Capital
Lease Obligations, (viii) obligations under interest rate or foreign currency
hedging arrangements at market value, (ix) all obligations of such Person in
respect of Capital Stock subject to mandatory redemption or redemption at the
option of the holder thereof, in whole or in part, and (x) all Contingent
Obligations of such Person in respect of any of the foregoing.

 

“Intellectual Property”: as defined in Section
4.15.

 

“Intercompany Indebtedness”: loans which are
made (i) by the Borrower to any Subsidiary Guarantor, or (ii) by a direct or
indirect wholly-owned Subsidiary of the Borrower to the Borrower or to a
Subsidiary Guarantor.

 

“Interest Expense”: for any period, the sum of,
without duplication, all interest (adjusted to give effect to all interest rate
swap, cap or other interest rate hedging arrangements and fees and expenses
paid in connection therewith) paid in cash in respect of all Indebtedness
during such period of the Borrower and its Subsidiaries as determined on a
consolidated basis.

 

9

 

“Interest Payment Date”: (i) during the
Revolving Credit Commitment Period (x) as to any ABR Advance, the first day of
each month commencing on the first of such days to occur after such ABR Advance
is made or any LIBOR Advance is converted to an ABR Advance, (y) as to any
LIBOR Advance as to which the Borrower has selected an Interest Period of one,
two or three months, the last day of such Interest Period, and (z) as to any
LIBOR Advance as to which the Borrower has selected an Interest Period of six
months, the date which occurs three months from the first day of such Interest
Period and the last day of such Interest Period; (ii) after the Revolving
Credit Commitment Period, with respect to all Advances, the first day of each
month; and (iii) the Maturity Date.

 

“Interest Period”: with respect to any LIBOR
Advance, the period commencing on, as the case may be, the Borrowing Date or
Conversion Date with respect to such LIBOR Advance and ending one, two, three
or six months thereafter as selected by the Borrower and agreed to by the Bank,
provided, however, that:

 

(a)           if any Interest Period would otherwise
end on a day which is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into another calendar month,
in which event such Interest Period shall end on the immediately preceding
Business Day;

 

(b)           any Interest Period which 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
the Interest Period;

 

(c)           no Interest Period selected in
respect of the conversion of any LIBOR Advance shall end after (i) the
Revolving Credit Termination Date, for the period prior to the Revolving Credit
Termination Date, and (ii) the Maturity Date, for the period after the Term
Loan Conversion Date;

 

(d)           the Borrower shall select Interest
Periods such that, on each date that a mandatory scheduled principal payment is
required to be made with respect to the Term Loan, (i) the aggregate principal
balance of all ABR Advances comprising the Term Loan outstanding on such date,
plus (ii) the aggregate principal balance of each LIBOR Advance comprising the
Term Loan, the applicable Interest Period of which shall end on or before such
date, shall equal or exceed the aggregate principal balance of the Term Loan
required to be paid on such date;

 

(e)           the Borrower shall select Interest
Periods so that not more than ten (10) different Interest Periods shall be
outstanding at any one time under the Loans; and

 

(f)            if the Borrower shall enter into any
Interest Rate Protection Product with respect to the Term Loan, each Interest
Period with respect to the amount of

 

10

 

the Term Loan equal to the notional amount in such
Interest Rate Protection Product shall be one month.

 

“Interest Rate Protection Product”  means
any interest rate swap, cap, collar or floor agreement, hedge device or other
agreement or arrangement entered into by the Borrower with the Bank at any time
with respect to a notional amount equal to the all or any portion of the
outstanding principal balance of the Term Loan, the purpose of which is to
provide a fixed rate of interest payable by the Borrower with respect to such
portion of the Term Loan.

 

“Investments”: as defined in Section 8.5.

 

“Letter of 
Credit Agreement”: each Application and Agreement for Standby Letter
of Credit, in the form provided by the Bank from time to time.

 

“Letter of Credit Commitment”: the commitment
of the Bank to issue Letters of Credit under and in accordance with the terms
of this Agreement.

 

“Letter of Credit Commitment Amount”:
$5,000,000, as reduced from time to time pursuant to Section 2.6.

 

“Letter of Credit Commitment Period”: the
period from the date hereof until the Business Day immediately preceding the
Maturity Date.

 

“Letter of Credit Exposure”: at any date, the
sum, without duplication, of (i) the aggregate amount which may be drawn under
all unexpired Letters of Credit outstanding on such date (whether or not the
conditions for drawing thereunder have or may be satisfied), and (ii) the
aggregate unpaid reimbursement obligations in respect of the Letters of Credit
on such date.

 

“Letter of Credit”: as defined in Section 2.10.

 

“Leverage Ratio”: at any date of determination,
the ratio of (x) Funded Debt on such date to (y) EBITDA for the period of four
fiscal quarters ending on such date.

 

“LIBOR Advances”: collectively, the Revolving
Credit Loans or the Term Loan, as the case may be, (or any portions thereof),
at such time as they (or such portions) are made and/or being maintained at a
rate of interest based upon LIBOR.

 

“LIBOR”: with respect to the Interest Period
applicable to any LIBOR Advance, a rate of interest per annum, as determined by
the Bank, (rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point) equal to the rate for deposits in U.S. Dollars for a period
comparable to such Interest Period which appears on the Telerate Page 3750 as
of 11:00 a.m., London time, on the day that is two London Banking Days prior to
the first day of such Interest Period. 
If such rate does not appear on the Telerate Page 3750, LIBOR shall
mean, for such Interest Period, the rate per annum (rounded, if necessary, to
the nearest one hundred-thousandth of a percentage point) at which deposits in
U.S. Dollars are offered by four major banks in the London interbank market at
approximately 11:00 a.m., London time, on the day that

 

11

 

is two London Banking Days prior to the first day of such Interest
Period to prime banks in the London interbank market for a period comparable to
such Interest Period and in an amount comparable to the outstanding principal
amount of such LIBOR Advance. The Bank will request the principal London office
of each such bank to provide a quotation of its rate.  If at least two such quotations are provided as requested, the
rate for that Interest Period will be the arithmetic mean of the
quotations.  If fewer than two
quotations are provided as requested, the rate for that Interest Period will be
the arithmetic mean of the rates quoted by major banks in New York City,
selected by the Bank, at approximately 11:00 a.m., New York City time, on the
date that is two Business Days prior to the first day of such Interest Period
for loans in U.S. Dollars to leading European banks for a period comparable to
such Interest Period and in an amount comparable to the outstanding principal
amount of such LIBOR Advance.

 

“License”: as defined in Section 4.15.

 

“Lien”: any mortgage, pledge, hypothecation,
assignment, deposit or preferential arrangement, encumbrance, lien (statutory
or other), or other security agreement or security interest of any kind or
nature whatsoever, including, without limitation, any conditional sale or other
title retention agreement and any capital or financing lease having
substantially the same economic effect as any of the foregoing.

 

“Liquid Investments”: (i)
normal business banking accounts, (ii) dollar denominated time deposits,
certificates of deposit and bankers acceptances maturing within 180 days from
the date of acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by, any domestic office of any
commercial bank whose (or whose parent company’s) unsecured non-credit
supported short-term commercial paper rating at the time of such acquisition is
the highest credit rating obtainable from Standard & Poor’s Ratings
Services, a division of The McGraw-Hill Companies, Inc., or any successor
thereto (“S&P”) and Moody’s Investors Service, Inc. or any successor
thereto (“Moody’s”) or, if rated by only one such rating agency, the
highest credit rating obtainable from such rating agency, (iii) securities
issued, or directly and fully guaranteed, or insured, by the United States of
America or any agency or instrumentality thereof (provided that the full faith
and credit of the United States of America is pledged in full support thereof)
having maturities of not more than one year from the date of acquisition, (iv)
commercial paper maturing within 270 days from the date of acquisition thereof
and having, at such date of acquisition, the highest credit rating obtainable
from S&P or from Moody’s, (v) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one year from the
date of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either S&P or Moody’s, and (vi) equity
securities traded on any nationally recognized securities exchange in the
United States of America.

 

“Loan Documents”: collectively, this Agreement,
the Note, each Letter of Credit Agreement, the Collateral Documents and any
documentation governing an Interest Rate Protection Product.

 

12

 

“Loans”:
the Revolving Credit Loans and/or the Term Loan, as the case may be.  The term “Loans” shall also include all
loans made under the Prior Credit Agreement which are outstanding on the
Effective Date.

 

“London Banking Day”: any day on which
commercial banks are open for general business (including dealings in foreign
exchange and foreign currency deposits) in London, England.

 

“Margin Stock”: any “margin stock”, as defined
in Regulation U of the Board of Governors of the Federal Reserve System, as
amended, supplemented or otherwise modified from time to time.

 

“Material Adverse Change”: a material adverse
change in (i) the financial condition, operations, business, prospects or
property of (A) the Borrower or (B) the Borrower and its Subsidiaries taken as
a whole, (ii) the ability of the Borrower or any of its Subsidiaries to perform
its obligations under the Loan Documents to which it is a party or (iii) the
ability of the Bank to enforce the Loan Documents.

 

“Material Adverse Effect”: a material adverse
effect on (i) the financial condition, operations, business, prospects or
property of (A) the Borrower or (B) the Borrower and its Subsidiaries taken as
a whole, (ii) the ability of the Borrower or any of its Subsidiaries to perform
its obligations under the Loan Documents to which it is a party or (iii) the
ability of the Bank to enforce the Loan Documents.

 

“Maturity Date”: November 4, 2004, or, with
respect to either Note, such earlier date on which such Note shall become due
and payable, whether by acceleration or otherwise.

 

“Multiemployer Plan”: a Pension Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.

 

“Note”: the Revolving Credit Note or the Term
Note, as the context requires; and “Notes” means the Revolving Credit Note and
Term Note, collectively.

 

“Notice of Conversion”: a notice substantially
in the form of Exhibit C.

 

“Obligor”: the purchaser of goods and services
giving rise to an Account or any other Person obligated to make payment in
respect to such Account.

 

“Operating Entity”: any Person or any business
or operating unit of a Person which is, or could be, operated separate and
apart from (i) the other businesses and operations of such Person, or (ii) any
other line of business or business segment.

 

“Organizational Documents”: as to any Person
which is (i) a corporation, the certificate or articles of incorporation and
by-laws of such Person, (ii) a limited liability company, the limited liability
company agreement or similar agreement of such Person, (iii) a

 

13

 

partnership, the partnership agreement or similar agreement of such
Person, or (iv) any other form of entity or organization, the organizational
documents analogous to the foregoing.

 

“PBGC”: the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA, or any
Governmental Authority succeeding to the functions thereof.

 

“Pension Plan”: at any date of determination,
any Employee Benefit Plan (including a Multiemployer Plan), the funding
requirements of which (under Section 302 of ERISA or Section 412 of the Code)
are, or at any time within the six years immediately preceding such date, were
in whole or in part, the responsibility of the Borrower, any of its
Subsidiaries or any ERISA Affiliate.

 

“Permitted Lien”: a Lien permitted to exist
under Section 8.2.

 

“Person”: any individual, firm, partnership,
limited liability company, joint venture, corporation, association, business
enterprise, joint stock company, unincorporated association, trust,
Governmental Authority or any other entity, whether acting in an individual,
fiduciary, or other capacity, and for the purpose of the definition of “ERISA
Affiliate”, a trade or business.

 

“Prime Rate”: a rate of interest per annum
equal to the rate of interest publicly announced in New York City by the Bank
from time to time as its prime commercial lending rate (which rate is not the
lowest rate at which the Bank may make extensions of credit), such rate to be
adjusted automatically (without notice) on the effective date of any change in
such publicly announced rate.

 

“Prior Credit Agreement”: as defined in the
Recitals hereto.

 

“Prohibited Transaction”: a transaction which
is prohibited under Section 4975 of the Code or Section 406 of ERISA and not
exempt under Section 4975 of the Code or Section 408 of ERISA.

 

“Real Property”: all real property owned or
leased by the Borrower or any of its Subsidiaries.

 

“Regulatory Change”: (i) the introduction or
phasing in of any law, rule or regulation after the Effective Date, (ii) the
issuance or promulgation after the Effective Date of any directive, guideline
or request from any central bank or United States or foreign Governmental
Authority (whether or not having the force of law), or (iii) any change after
the Effective Date in the interpretation of any existing law, rule, regulation,
directive, guideline or request by any central bank or United States or foreign
Governmental Authority charged with the administration thereof.

 

14

 

“Reimbursement Obligations”: all of the
obligations and liabilities of the Borrower (a) under each Letter of Credit
Agreement, and (b) hereunder in respect of the Letters of Credit.

 

“Reportable
Event”: with respect to any Pension Plan, (i) any event set forth in
Sections 4043(c) (other than a Reportable Event as to which the 30 day notice
requirement is waived by the PBGC under applicable regulations), 4062(c) or
4063(a) of ERISA or the regulations thereunder, (ii) an event requiring the
Borrower, any of its Subsidiaries or any ERISA Affiliate to provide security to
a Pension Plan under Section 401(a)(29) of the Code, or (iii) any failure to
make any payment required by Section 412(m) of the Code.

 

“Restricted
Payment”: as to any Person (i) any dividend or other distribution, direct
or indirect, on account of any shares of Capital Stock or other equity interest
in such Person now or hereafter outstanding (other than a dividend payable
solely in shares of such Capital Stock to the holders of such shares), (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition, direct or indirect, of any shares of any class of Capital Stock or
other equity interest in such Person now or hereafter outstanding, and (iii)
any payment of principal or premium with respect to Indebtedness of such Person
to any Affiliate, whether at maturity, upon acceleration, or otherwise.

 

“Revolving
Credit Commitment”: the Bank’s undertaking during the Revolving Credit
Commitment Period to make Revolving Credit Loans, subject to the terms and
conditions hereof, in an aggregate outstanding principal amount not exceeding
at any time the lesser of (i) the Revolving Credit Commitment Amount, or (ii)
the Borrowing Base at such time

 

“Revolving
Credit Commitment Amount”: $12,000,000, as reduced from time to time
pursuant to Section 2.6.

 

“Revolving
Credit Commitment Period”: the period from the date hereof until the
Business Day immediately preceding the Revolving Credit Termination Date.

 

“Revolving
Credit Loan” and “Revolving Credit Loans”: as defined in
Section 2.1.

 

“Revolving
Credit Termination Date”: the earlier of the Business Day immediately
preceding the Maturity Date or such other date upon which the Revolving Credit
Commitment shall have been terminated in accordance with Section 2.6 or Section
9.2.

 

“Sale and
Leaseback Transaction”: any transaction or series of related transactions
pursuant to which a Person sells or transfers any property in connection with
the leasing, or the resale against installment payments, of such property to
the seller or transferor.

 

“Security
Agreement”: the Amended and Restated Security Agreement, substantially in
the form of Exhibit D, as the same may be amended, supplemented or otherwise
modified from time to time.

 

15

 

“Solvent”:
as to any Person, (i) such Person’s total assets exceed its total liabilities, and
(ii) such Person is not insolvent, as such term is defined in
Section 101(32) of the Bankruptcy Code (11 U.S.C. § 101 et seq.).

 

“Special Counsel”: Emmet, Marvin & Martin,
LLP, special counsel to the Bank.

 

“Subsidiary”: as to any Person, any
corporation, association, partnership, limited liability company, joint venture
or other business entity of which such Person or any Subsidiary of such Person,
directly or indirectly, either (i) in respect of a corporation, owns or
controls more than 50% of the outstanding Capital Stock having ordinary voting
power to elect a majority of the board of directors, irrespective of whether a
class or classes shall or might have voting power by reason of the happening of
any contingency, or (ii) in respect of an association, partnership, limited
liability company, joint venture or other business entity, is entitled to share
in more than 50% of the profits and losses, however determined.

 

“Subsidiary Guarantor”: collectively, MG
(Bermuda) Ltd., META Group Australia Holdings PTY. Limited, Cenntinum PTE LTD.
and 1422722 Ontario Inc. and each other each Subsidiary of the Borrower which
has executed and delivered to the Bank a Subsidiary Guaranty or a supplement
thereto.

 

“Subsidiary Guaranty”: the Amended and Restated
Subsidiary Guaranty, substantially in the form of Exhibit E, as amended,
supplemented or otherwise modified from time to time.

 

“Taxes”: any and all present or future income,
stamp, franchise or other taxes, levies, imposts, duties, fees, assessments,
deductions, withholdings, or other charges of whatever nature, now or hereafter
imposed, levied, collected, withheld, or assessed by any jurisdiction, or by
any department, agency, state or other political subdivision thereof or
therein.

 

“Telerate Page 3750”: the display page so
designated on Bridge’s Telerate Service (or such other page as may replace that
page on that service), or such other service as may be nominated as the
information vendor, for purposes of displaying rates or prices comparable to
LIBOR.

 

“Term Loan”: as defined in Section 2.3.

 

“Term Loan Commitment Amount”: $8,000,000.

 

“Term Note”: as defined in Section 2.4.

 

“Termination Event”: with respect to any
Pension Plan, (i) a Reportable Event, (ii) the termination of a Pension Plan,
or the filing of a notice of intent to terminate a Pension Plan, or the
treatment of a Pension Plan amendment as a termination under Section 4041(c) of
ERISA, (iii) the institution of proceedings to terminate a Pension Plan under
Section 4042 of ERISA, or (iv) the appointment of a trustee to administer any
Pension Plan under Section 4042 of ERISA.

 

16

 

“Total Commitment Amount”:  at any time, the sum of the Revolving Credit
Commitment Amount and the Term Loan Commitment Amount at such time.

 

1.2.          Principles of Construction

 

(a)           All
terms defined in this Agreement shall have the meanings given such terms herein
when used in the other Loan Documents or any certificate, opinion or other
document made or delivered pursuant hereto or thereto, unless otherwise defined
therein.

 

(b)           As
used in the Loan Documents and in any certificate, opinion or other document
made or delivered pursuant thereto, accounting terms not defined in Section
1.1, and accounting terms partly defined in Section 1.1, to the extent not
defined, shall have the respective meanings given to them under GAAP.  If at any time any change in GAAP would
affect the computation of any financial ratio or requirement set forth in this
Agreement, the Bank and the Borrower shall negotiate in good faith to amend
such ratio or requirement to reflect such change in GAAP, 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) the Borrower
shall provide to the Bank 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.

 

(c)           The
words “hereof”, “herein”, “hereto” and “hereunder” and similar words when used
in a Loan Document shall refer to such Loan Document as a whole and not to any
particular provision thereof, and Section, schedule and exhibit references
contained therein shall refer to Sections thereof or schedules or exhibits
thereto unless otherwise expressly provided therein.

 

(d)           Unless
the context otherwise requires, words in the singular number include the
plural, and words in the plural include the singular.

 

(e)           Unless
specifically provided in a Loan Document to the contrary, any reference to a
time shall refer to such time in New York City.

 

(f)            Unless
specifically provided in a Loan Document to the contrary, in the computation of
periods of time from a specified date to a later specified date, the word
“from” means “from and including” and the words “to” and “until” each means “to
but excluding”.

 

(g)           References
in any Loan Document to a fiscal period shall refer to that fiscal period of
the Borrower.

 

1.3.          Matters Regarding the Prior Credit
Agreement

 

On the Effective Date, (i) if the aggregate amount of
the Revolving Credit Loans and Letter of Credit Exposure (as such terms are
defined in the Prior Credit Agreement) exceeds the Total Commitment Amount, the
Borrower shall pay to the Bank (as a prepayment under the Prior Credit
Agreement) the amount of such excess plus all accrued and unpaid interest
thereon and any other sums payable in connection therewith pursuant to the
Prior Credit Agreement, and (ii) loans outstanding under the Prior Credit
Agreement shall thereafter be converted first to the

 

17

 

Term Loan pursuant to Section 2.3, and to the extent of any such loans
in excess of the Term Loan Commitment Amount, the balance of such loans shall
be converted to Revolving Credit Loans hereunder pursuant to Section 2.1.

 

1.4.          Continuation of Collateral.

 

The parties expressly agree that all Collateral
pledged as Collateral under the security documents for the Prior Credit
Agreement which continues to be collateral as of the date hereof under the
security documents for the Prior Credit Agreement shall be deemed to be
Collateral as of the date hereof for all purposes under the Collateral
Documents and this Agreement.

 

2.             AMOUNT AND TERMS OF LOANS

 

2.1.          Revolving Credit Loans

 

Subject to the terms and conditions hereof, the Bank
agrees to make revolving credit loans (each a “Revolving Credit Loan”
and collectively with all other Revolving Credit Loans, the “Revolving
Credit Loans”) to the Borrower from time to time during the Revolving
Credit Commitment Period, provided  that (a) the aggregate
principal amount of the Revolving Credit Loans outstanding at any time shall
not exceed (1) the Revolving Credit Commitment Amount minus (2) the
Letter of Credit Exposure, and (b) after giving effect to any requested
Revolving Credit Loan, the sum of all Revolving Credit Loans plus the
outstanding principal balance of the Term Loan shall not exceed the Borrowing
Base.  During the Revolving Credit
Commitment Period, the Borrower may borrow, prepay in whole or in part and
reborrow under the Revolving Credit Commitment, all in accordance with the
terms and conditions of this Agreement. 
Subject to the provisions of Sections 2.5(a) and 3.3, at the option of
the Borrower, Revolving Credit Loans may be made as (i) one or more ABR
Advances, (ii) one or more LIBOR Advances or (iii) any combination
thereof.  Loans outstanding under the
Prior Credit Agreement on the Effective Date in excess of the Term Loan
Commitment Amount shall be deemed to be Revolving Credit Loans under this
Agreement.  Each LIBOR Advance and each
ABR Advance with respect to such loans shall continue as a LIBOR Advance or ABR
Advance hereunder, as the case may be.

 

2.2.          Revolving
Credit Note.

 

The Revolving Credit Loans to the Borrower shall be
evidenced by a promissory note (the “Revolving Credit Note”)
substantially in the form of Exhibit A-1, with appropriate insertions therein,
payable to the order of the Bank, dated the Effective Date, and in a principal
amount equal to the Revolving Credit Commitment Amount.  The outstanding principal balance of the
Revolving Credit Loans shall be due and payable on the Maturity Date.

 

2.3.          Term Loan.

 

Subject to the terms and conditions hereof, on the
Effective Date, a portion of the loans outstanding under the Prior Credit
Agreement in an amount equal to the Term Loan

 

18

 

Commitment Amount shall be converted to a fully advanced, non-revolving
term loan hereunder (the “Term Loan”). 
Each LIBOR Advance and each ABR Advance with respect to such loans shall
continue as a LIBOR Advance or ABR Advance hereunder, as the case may be.  From the Effective Date, and subject to the
provisions of Sections 2.5(a) and 3.3, at the option of the Borrower, the Term
Loan may be comprised of (i) one or more ABR Advances, (ii) one or more LIBOR
Advances or (iii) any combination thereof, provided that if the Borrower shall
enter into any Interest Rate Protection Product with respect to the Term Loan,
the portion of the Term Loan equal to the notional amount in such Interest Rate
Protection Product shall be a LIBOR Advance through and including the date that
such Interest Rate Protection Product shall expire or be terminated.

 

2.4.          Term Note.

 

(a)           The
Term Loan shall be evidenced by a promissory note (the “Term Note”)
substantially in the form of Exhibit A-2, with appropriate insertions therein,
payable to the order of the Bank, dated the Effective Date, and in the
principal amount of the Term Loan.

 

(b)           The
principal amount of the Term Loan shall be payable in 36 consecutive monthly
installments of $222,222.22 each, payable on the first day of each month
commencing on the first such date following the Effective Date, and the balance
thereof, plus all accrued and unpaid interest thereon, shall be payable on the
Maturity Date.

 

2.5.          Procedure for Borrowing.

 

(a)           The
Borrower may borrow under the Revolving Credit Commitment on any Business Day
during the Revolving Credit Commitment Period, provided  that the
Borrower shall have delivered a Borrowing Request, together with a current
Borrowing Base Certificate, to the Bank, which shall be sent by
telecopy (confirmed promptly, and in any event within five Business Days, by
the delivery to the Bank of a manually signed counterpart), no later than:
11:00 a.m. of the third Business Day prior to the requested Borrowing Date, in
the case of LIBOR Advances, and 11:00 a.m. on the requested Borrowing Date, in
the case of ABR Advances, specifying (A) the aggregate principal amount to be
borrowed, (B) the requested Borrowing Date, (C) whether such borrowing is to
consist of one or more LIBOR Advances, an ABR Advance, or a combination thereof
and (D) if the borrowing is to consist of one or more LIBOR Advances, the
length of the Interest Period for each such LIBOR Advance.  Each (i) LIBOR Advance made on each
Borrowing Date, when aggregated with all amounts to be converted to a LIBOR
Advance on such date and having the same Interest Period as the LIBOR Advance
to be made, shall equal no less than $500,000 or a whole multiple of $100,000
in excess thereof, and (ii) ABR Advance made on each Borrowing Date shall equal
no less than $100,000 or an integral multiple thereof (or, if less, the
Available Revolving Credit Commitment on such date).

 

(b)           Subject
to the satisfaction of the terms and conditions of this Agreement, as
determined by the Bank, the requested Loans shall be made available by the Bank
on the requested Borrowing Date to the Borrower at the office of the Bank
specified in Section 10.2 by

 

19

 

crediting the account of the Borrower on the books of such office with
the amount of such requested Loans.

 

(c)           If
the Bank makes a new Loan on a Borrowing Date on which the Borrower is to repay
a Loan, the Bank shall apply the proceeds of the new Loan to make such
repayment, and only the excess of the proceeds of the new Loan over the Loan
being repaid need be made available to the Borrower.

 

2.6.          Termination of Commitment; Reduction
of Commitment Amount

 

(a)           The
Borrower shall have the right, upon at least three Business Days’ prior written
notice to the Bank, to terminate the Revolving Credit Commitment or from time
to time to permanently reduce the Revolving Credit Commitment Amount, provided
that (x) any such reduction shall be in the amount of $1,000,000 or a
whole multiple of $500,000 in excess thereof, and (y) the Revolving Credit
Commitment Amount may not be reduced to less than $1,000,000 without
terminating the Revolving Credit Commitment. Simultaneously with each reduction
of the Revolving Credit Commitment Amount under this Section, the Borrower
shall pay the Commitment Fee accrued on the amount by which the Revolving
Credit Commitment Amount has been reduced.

 

(b)           Reduction
of the Letter of Credit Commitment Amount. 
The Letter of Credit Commitment Amount shall not be reduced until such
time as the Revolving Credit Commitment Amount shall equal such Letter of
Credit Commitment Amount, and thereafter shall in each case be reduced,
automatically, by a sum equal to the amount of each such reduction in the
Revolving Credit Commitment Amount.

 

2.7.          Prepayments of the Loans; Payment on
Maturity

 

(a)           Voluntary
Prepayments. The Borrower may, at its option, prepay the Loans without
premium or penalty (but subject to Section 3.4), in full at any time or in part
from time to time by notifying the Bank in writing no later than 12:00 noon on
the proposed prepayment date, in the case of Loans consisting of ABR Advances,
and at least three Business Days prior to the proposed prepayment date, in the
case of Loans consisting of LIBOR Advances, specifying whether the Advances to
be prepaid are ABR Advances or LIBOR Advances or a combination thereof, the
amount to be prepaid and the date of prepayment.  Each such notice shall be irrevocable and the amount specified in
each such notice, together with interest accrued on such amount to the date of
prepayment, shall be due and payable on the date specified.  Each partial prepayment pursuant to this
subsection shall be in an aggregate principal amount of $250,000 or a whole
multiple of $50,000 in excess thereof, or, if less, the outstanding principal
balance of the Revolving Credit Loans or Term Loan, as the case may be.  After giving effect to any partial
prepayment with respect to LIBOR Advances which were made (whether as the
result of a borrowing or a conversion) on the same date and which had the same
Interest Period, the outstanding principal balance of such LIBOR Advances shall
exceed (subject to Section 3.3) $500,000 or a whole multiple of $100,000 in
excess thereof.

 

20

 

(b)           Mandatory
Prepayments Relating to Sales of Capital Stock. An amount equal to 100% of
the net proceeds of any public secondary offering of Capital Stock of the
Borrower shall be applied to prepay the Loans within one Business Day after the
receipt thereof by the Borrower.

 

(c)           Mandatory
Prepayments Relating to Terminations of the Revolving Credit Commitment and
Reductions of the Revolving Credit Commitment Amount.  (i) Simultaneously with the termination of
the Revolving Credit Commitment under Section 2.6, the Borrower shall prepay
the Revolving Credit Loans in full; and (ii) simultaneously with a reduction of
the Revolving Credit Commitment Amount under Section 2.6, the Borrower shall
prepay the Revolving Credit Loans by the aggregate amount, if any, by which the
sum of the aggregate principal amount of the Revolving Credit Loans plus
the Letter of Credit Exposure exceeds the Revolving Credit Commitment Amount as
so reduced.

 

(d)           Mandatory
Borrowing Base Prepayment.  On any
date that the aggregate amount of all Loans then outstanding exceeds the
Borrowing Base, the Borrower shall prepay the Loans on such date in an amount
equal to such excess.

 

(e)           Prepayments
Generally. With each prepayment of a Loan, the Borrower shall pay all
interest accrued on the principal amount prepaid to the date of
prepayment.  Each prepayment of the Term
Loan shall be applied against the remaining installments of principal required
to be paid pursuant to Section 2.4(b) in the inverse order of the maturity
thereof.  Unless otherwise specified by
the Borrower, each prepayment of Loans shall first be applied to ABR Advances.

 

(f)            Maturity.  The outstanding principal balance of the
Loans, all accrued and unpaid interest thereon and all fees and expenses
payable hereunder shall be due and payable on the Maturity Date.

 

2.8.          Payments

 

(a)           Each
payment of principal and interest on the Loans and of all of the fees to be
paid to the Bank in connection with this Agreement shall be made by the
Borrower prior to 1:00 p.m. on the date such payment is due to the Bank at the
Bank’s office specified in Section 10.2, in each case in lawful money of the
United States, in immediately available funds and without set-off or
counterclaim.  The failure of the
Borrower to make any such payment by such time shall not constitute a Default, provided
that such payment is made on such due date, but any such payment made
after 1:00 p.m. on such due date shall be deemed to have been made on the next
Business Day for the purpose of calculating interest on amounts outstanding on
the Loans.

 

(b)           If
any payment hereunder or under the Notes shall be due and payable on a day
which is not a Business Day, the due date thereof (except as otherwise provided
in the definition of Interest Period) shall be extended to the next Business
Day and (except with respect to payments in respect of the Fees) interest shall
be payable at the applicable rate specified herein

 

21

 

during such extension, provided, however that if such next Business Day
is after the Maturity Date, any such payment shall be due on the immediately
preceding Business Day.

 

2.9.          Use of Proceeds

 

The Borrower agrees that the proceeds of the Loans
shall be applied first to the refinancing of the loans outstanding under the
Prior Credit Agreement in accordance with the provisions of Sections 2.1 and
2.3.  Thereafter, Revolving Credit Loans
shall be used solely, directly or indirectly, to (i) fund the Acquisition of
independent sales representative offices of the Borrower and other
Acquisitions, in either case, subject to the provisions of Section 8.5(e), and
(ii) provide working capital for the Borrower and its Subsidiaries and for
their general corporate purposes not inconsistent with the provisions
hereof.  No part of the proceeds of any
Loan nor any Letter of Credit will be used, directly or indirectly, for a
purpose which violates any law, including, without limitation, the provisions
of Regulations T, U or X of the Board of Governors of the Federal Reserve
System, as amended.

 

2.10.        Letter of Credit Sub-facility

 

(a)           Subject
to the terms and conditions of this Agreement, the Bank agrees to issue standby
letters of credit (each, a “Letter of Credit”) during the Letter of
Credit Commitment Period for the account of the Borrower, provided that
immediately after the issuance of each Letter of Credit (i) the Letter of
Credit Exposure shall not exceed the Letter of Credit Commitment Amount, (ii)
the sum of the aggregate principal amount of the Revolving Credit Loans plus
the Letter of Credit Exposure would not exceed the Revolving Credit Commitment
Amount, and (iii) the sum of the aggregate principal amount of all Loans plus
the Letter of Credit Exposure would not exceed the Borrowing Base.  Each of the Existing L/Cs shall be deemed to
have been issued under the Letter of Credit Commitment and shall be a “Letter
of Credit” under this Agreement.

 

(b)           Each
Letter of Credit shall have an expiration date which shall not be later than
the Business Day immediately preceding the Maturity Date, provided  however,
that the Bank may agree, in its sole discretion, to issue Letters of Credit
which have an expiration date later than the Revolving Credit Termination Date,
at such time or times prior  to the Term Loan Election having
occurred.  In the event that any Letters
of Credit remain outstanding on the Maturity Date, whether the Maturity Date
has occurred because of the Term Loan Election not having occurred or
otherwise, the Borrower shall deposit with the Bank on the Maturity Date an
amount equal to the Letter of Credit Exposure on the Maturity Date in a cash
collateral account under the exclusive control of the Bank.

 

(c)           Each
Letter of Credit shall be issued for the account of the Borrower in support of
an obligation of the Borrower in favor of a beneficiary who has requested the
issuance of such Letter of Credit as a condition to a transaction entered into
in connection with the business of the Borrower.  The Borrower shall give the Bank a Letter of Credit Agreement for
such Letter of Credit by 12:00 noon on the requested date of issuance of a
Letter of Credit.  Each Letter of Credit
shall be in form and substance reasonably satisfactory to the Bank, with such

 

22

 

provisions with respect to the conditions under which a drawing may be
made thereunder and the documentation required in respect of such drawing as
the Bank shall reasonably require.

 

(d)           In
determining whether to pay under any Letter of Credit, the Bank shall have no
obligation to the Borrower other than to confirm that any documents required to
be delivered under such Letter of Credit have been delivered and that they
appear to comply on their face with the requirements of such Letter of
Credit.  Upon each payment by the Bank
under a Letter of Credit, the Borrower shall reimburse the Bank for the amount
thereof upon demand therefor by the Bank. 
If all or any portion of any Reimbursement Obligation in respect of a
Letter of Credit shall not be paid when due (whether upon demand, by
acceleration or otherwise), such overdue 
amount shall bear interest, payable upon demand by the Bank, at a rate
per annum equal to the Alternate Base Rate plus the Applicable Margin
applicable to ABR Advances plus 2%, from the date of such nonpayment
until paid in full (whether before or after the entry of a judgment thereon).

 

(e)           Notwithstanding
anything to the contrary contained in any Letter of Credit Agreement, to the
extent that the terms of this Agreement shall be inconsistent with the terms of
such Letter of Credit Agreement, the terms of this Agreement shall govern.

 

2.11.        Absolute Obligation with respect to
Letter of Credit Payments

 

The Borrower’s obligation to reimburse the Bank for
each payment under or in respect of a Letter of Credit shall be absolute and
unconditional under any and all circumstances and irrespective of any set-off,
counterclaim or defense to payment which the Borrower may have or have had
against the beneficiary of such Letter of Credit, the Bank or any other Person,
including any defense based on the failure of any drawing to conform to the
terms of such Letter of Credit, any drawing document proving to be forged,
fraudulent or invalid, or the illegality, invalidity, irregularity or
unenforceability of such Letter of Credit, this Agreement or any other Loan
Document,provided that with respect to any Letter
of Credit, the foregoing shall not relieve the Bank of any liability it may
have to the Borrower for any actual damages sustained by the Borrower arising
from a wrongful pay­ment under such Letter of Credit made as a result of the
Bank’s gross negligence or will-ful misconduct.

 

3.             INTEREST, FEES, YIELD PROTECTIONS, ETC.

 

3.1.          Interest Rate and Payment Dates

 

(a)           Prior
to Maturity.  Except as otherwise
provided in Sections 3.1(b) and 3.1(c), prior to maturity, the Loans shall bear
interest on the outstanding principal balance thereof at the applicable
interest rate or rates per annum set forth below:

 

23

 

	
  Advances

  	
   

  	
  Interest Rate

  
	
  Each ABR Advance

  	
   

  	
  Alternate Base Rate

  
	
   

  	
   

  	
   

  
	
  Each LIBOR Advance

  	
   

  	
  LIBOR for the applicable Interest Period

  plus the Applicable Margin

  

 

(b)           Late
Charges.  If all or any portion of
the principal balance of or interest payable on any of the Loans or any other
amount payable under the Loan Documents shall not be paid when due (whether at
the stated maturity thereof, by acceleration or otherwise), such overdue amount
shall bear interest at a rate per annum (whether before or after the entry of a
judgment thereon) equal to 2% plus the rate which would otherwise be
applicable pursuant to Section 3.1(a), from the date such amount was due to the
date such amount is paid in full.  For
purposes of the preceding sentence, the rate applicable pursuant to Section
3.1(a) to any overdue principal, interest or other amount payable under the
Loan Documents shall be (i) in the case of an overdue principal balance of any
LIBOR Advance, the applicable LIBOR plus the Applicable Margin until the
last day of the applicable Interest Period (or the earlier termination thereof
pursuant to this Agreement) and thereafter at the Alternate Base Rate and (ii)
in all other cases, the Alternate Base Rate. 
All such interest shall be payable on demand.

 

(c)           Computation.  Interest on (i) ABR Advances to the extent
based on the Prime Rate shall be calculated on the basis of a 365 or 366-day
year (as the case may be), and (ii) ABR Advances (to the extent based on the
Federal Funds Rate), and LIBOR Advances shall be calculated on the basis of a
360-day year for the actual number of days elapsed.  Except as otherwise provided in Section 3.1(b), interest shall be
payable in arrears on each Interest Payment Date and upon each payment
(including prepayment) of the Loans. 
Any change in the interest rate on the Loans resulting from a change in
the Alternate Base Rate or reserve requirements shall become effective as of
the opening of business on the day on which such change shall become
effective.  Each determination of the
Alternate Base Rate or a LIBOR by the Bank pursuant to this Agreement shall be
conclusive and binding on all parties hereto absent manifest error.  At no time shall the interest rate payable
on the Loans, together with the fees and all other amounts payable under the
Loan Documents to the Bank, to the extent the same are construed to constitute
interest, exceed the maximum rate of interest permitted by applicable law.

 

3.2.          Fees

 

(a)           Commitment
Fee. The Borrower agrees to pay to the Bank a fee on the amount of the
average daily difference between the outstanding Revolving Credit Loans and the
Revolving Credit Commitment Amount at the rate of 0.25% per annum (the “Commitment
Fee”). The Commitment Fee shall be payable quarterly in arrears, calculated
through the last day of each March, June, September and December of each year,
commencing on the first such day following the Effective Date, and ending on
the Revolving Credit Termination Date. The Commitment Fee shall be calculated
on the basis of a 365 or 366 day year, as the case may be, for the actual
number of days elapsed.  As soon as
possible on or after each quarter-end date, the

 

24

 

Bank shall notify the Borrower of the Commitment Fee due for the
preceding quarter, and the Borrower shall remit payment thereof to the Bank
within ten (10) Business Days thereafter.

 

(b)           Facility
Fee.  The Borrower agrees to pay to
the Bank a non-refundable fee based upon the Total Commitment Amount (the “Facility
Fee”) in the amount of $85,000.  The
Facility Fee shall be payable to the Bank on the Effective Date in funds
immediately available to the Bank

 

(c)           Letter
of Credit Fees.  The Borrower agrees
to pay to the Bank the Bank’s standard fees with respect to each Letter of
Credit, plus an issuance fee equal to 1.50% of the face amount of such Letter
of Credit.

 

3.3.          Conversions

 

(a)           Provided
no Default or Event of Default shall exist, the Borrower may elect from time to
time to convert one or more LIBOR Advances to ABR Advances by submitting a duly
executed Notice of Conversion to the Bank at least one Business Day prior to
such election, which notice shall be irrevocable, specifying the amount to be
converted, provided  that any such conversion of LIBOR Advances
shall only be made on the last day of the Interest Period applicable
thereto.  In addition, the Borrower may
elect from time to time to (i) convert ABR Advances to LIBOR Advances and (ii)
continue LIBOR Advances as new LIBOR Advances, in each case by giving the Bank
at least three Business Days’ prior irrevocable notice of such election,
specifying the amount to be so converted and the initial Interest Period
relating thereto, provided  that any such conversion of ABR
Advances to LIBOR Advances shall only be made on a Business Day and any such
conversion of LIBOR Advances to new LIBOR Advances shall only be made on the
last day of the Interest Period applicable to the LIBOR Advances which are to
be converted to such new LIBOR Advances. 
Advances may be converted pursuant to this Section in whole or in part, provided
that the amount to be converted to a LIBOR Advance, when aggregated with
any LIBOR Advance to be made on such date in accordance with Section 2.5(a) and
having the same Interest Period, shall be $500,000 or a whole multiple of
$100,000 in excess thereof.

 

(b)           Provided
no Default or Event of Default shall exist, the Borrower may enter into an
Interest Rate Protection Product with respect to all or a portion of the
outstanding balance of the Term Loan, provided that on the effective date of
such Interest Rate Protection Product, such portion of the Term Loan to be made
subject to such Interest Rate Protection Product (the “Term Loan Notional
Amount”) shall not be a LIBOR Advance having an Interest Period longer than
one month.  The Borrower shall give the
Bank at least three Business Day’s prior notice thereof, specifying the amount
to be made subject to such Interest Rate Protection Product.

 

(c)           Upon
the occurrence and during the continuance of a Default or an Event of Default,
all LIBOR Advances shall be automatically converted to ABR Advances on the last
day of the applicable Interest Period.

 

25

 

(d)           Each
conversion shall be effected by the Bank by applying the proceeds of the new
ABR Advance or LIBOR Advance, as the case may be, to the Advances (or portion
thereof) being converted. Any such conversion shall not constitute a borrowing
for purposes of Section 6.

 

(e)           If
the Borrower shall have failed to elect to continue a LIBOR Advance as a new
LIBOR Advance prior to the expiration of its Interest Period, the amount of the
Loan represented by such Advance shall be automatically converted to an ABR
Advance at the expiration of its Interest Period.

 

3.4.          Indemnification for Loss

 

(a)           Notwithstanding
anything contained herein to the contrary, if the Borrower shall fail for any
reason to borrow or convert an Advance after it shall have given notice to do
so in which it shall have requested a LIBOR Advance, or if a LIBOR Advance
shall be terminated for any reason prior to the last day of the Interest Period
applicable thereto, or if any repayment or prepayment of the principal amount
of a LIBOR Advance is made by the Borrower for any reason on a date which is
prior to the last day of the Interest Period applicable thereto, the Borrower
agrees to indemnify the Bank against, and to pay on demand directly to the Bank
the amount (calculated by the Bank using any method chosen by the Bank which is
customarily used by the Bank for such purpose) equal to any loss or
out-of-pocket expense suffered by the Bank as a result of such failure to
borrow or convert, or such termination, repayment or prepayment, including any
loss, cost or expense suffered by the Bank in liquidating or employing deposits
acquired to fund or maintain the funding of such LIBOR Advance, or redeploying
funds prepaid or repaid, in amounts which correspond to such LIBOR Advance, and
any internal processing charge customarily charged by the Bank in connection
therewith.

 

(b)           If
(i) for any reason after the Borrower has entered into an Interest Rate
Protection Product, any Fixed Rate Funding Loss shall occur under or pursuant
to such Interest Rate Protection Product the Borrower shall pay the amount of
such Fixed Rate Funding Loss to the Bank immediately upon demand.

 

3.5.          Capital Adequacy

 

If the amount of capital required or expected to be
maintained by the Bank or any Person directly or indirectly owning or
controlling the Bank (each a “Control Person”), shall be affected by the
occurrence of a Regulatory Change and the Bank shall have determined that such
Regulatory Change shall have had or will thereafter have the effect of reducing
(i) the rate of return on the Bank’s or such Control Person’s capital, or (ii)
the asset value to the Bank or such Control Person of the Loans made or
maintained by the Bank or the Reimbursement Obligations, in any case to a level
below that which the Bank or such Control Person could have achieved or would
thereafter be able to achieve but for such Regulatory Change (after taking into
account the Bank’s or such Control Person’s policies regarding capital
adequacy) by an amount deemed by the Bank to be material to the Bank or Control
Person, then, within ten days after demand by the Bank, the Borrower shall pay
to the Bank or such Control Person such additional amount or

 

26

 

amounts as shall be sufficient to compensate the Bank or such Control
Person, as the case may be, for such reduction.

 

3.6.          Reimbursement for Increased Costs

 

If the Bank shall determine that a Regulatory Change:

 

(a)           does or shall subject it to any Taxes
of any kind whatsoever with respect to any LIBOR Advances or its obligations
under this Agreement to make LIBOR Advances, or change the basis of taxation of
payments to it of principal, interest or any other amount payable hereunder in
respect of its LIBOR Advances, or impose on the Bank any other condition,
including any Taxes required to be withheld from any amounts payable under the
Loan Documents (except for imposition of, or change in the rate of, tax on the
overall net income of the Bank); or

 

(b)           does or shall impose, modify or make
applicable any reserve, special deposit, compulsory loan, assessment, increased
cost or similar requirement against assets held by, or deposits of, or advances
or loans by, or other credit extended by, or any other acquisition of funds by,
any office of the Bank in respect of its LIBOR Advances which is not otherwise
included in the determination of a LIBOR;

 

and the result of any of
the foregoing is to increase the cost to the Bank of making, renewing,
converting or maintaining its LIBOR Advances or its commitment to make such
LIBOR Advances, or to reduce any amount receivable hereunder in respect of its
LIBOR Advances, then, in any such case, the Borrower shall pay the Bank within
ten days after demand therefor, such additional amount as is sufficient to
compensate the Bank for such additional cost or reduction in such amount
receivable which the Bank deems to be material as determined by the Bank;
provided, however, that nothing in this Section shall require the Borrower to
indemnify the Bank with respect to withholding Taxes for which the Borrower has
no obligation under Section 3.9.  No
failure by the Bank to demand, and no delay in demanding, compensation for any
increased cost shall constitute a waiver of its right to demand such
compensation at any time.  A statement
setting forth the calculations of any additional amounts payable pursuant to
this Section submitted by the Bank to the Borrower shall be conclusive absent
manifest error.

 

3.7.          Illegality of Funding

 

Notwithstanding any other provision hereof, if the
Bank shall reasonably determine that any law, regulation, treaty or directive,
or any change therein or in the interpretation or application thereof, shall
make it unlawful for the Bank to make or maintain any LIBOR Advance as
contemplated by this Agreement, the Bank shall promptly notify the Borrower
thereof, and (i) the commitment of the Bank to make such LIBOR Advances or
convert ABR Advances to LIBOR Advances shall forthwith be suspended, (ii) the
Bank shall fund each requested LIBOR Advance as an ABR Advance and (iii) the
Loans then outstanding as such LIBOR Advances shall be converted automatically
to ABR Advances on the last day of the then current Interest Period applicable
thereto or at such earlier time as may be required by

 

27

 

law.  If the commitment of the
Bank with respect to LIBOR Advances is suspended pursuant to this Section and
the Bank shall have obtained actual knowledge that it is once again legal for
the Bank to make or maintain LIBOR Advances, the Bank shall promptly notify the
Borrower thereof and, upon receipt of such notice by the Borrower, the Bank’s
commitment to make or maintain LIBOR Advances shall be reinstated.

 

3.8.          Substituted Interest Rate

 

In the event that (i) the Bank shall have determined
(which determination shall be conclusive and binding upon the Borrower) that by
reason of circumstances affecting the interbank eurodollar market either
adequate and reasonable means do not exist for ascertaining LIBOR applicable
pursuant to Section 3.1 or (ii) the Bank shall have determined (which
determination shall be conclusive and binding on the Borrower) that the
applicable LIBOR will not adequately and fairly reflect the cost to the Bank of
maintaining or funding loans bearing interest based on such LIBOR, with respect
to any portion of the Loans that the Borrower has requested be made as or
converted to LIBOR Advances (each, an “Affected Advance”), the Bank shall
promptly notify the Borrower (by telephone or otherwise, to be promptly
confirmed in writing) of such determination, on or, to the extent practicable,
prior to the requested Borrowing Date or Conversion Date for such Affected
Advances.  If the Bank shall give such
notice, (a) any Affected Advances shall be made as ABR Advances, (b) the
Advances (or any portion thereof) that were to have been converted to Affected
Advances shall be converted to ABR Advances and (c) any outstanding Affected
Advances shall be converted, on the last day of the then current Interest
Period with respect thereto, to ABR Advances. 
Until any notice under clauses (i) or (ii), as the case may be, of this
section has been withdrawn by the Bank (by notice to the Borrower promptly upon
either (x) the Bank having determined that such circumstances affecting the
interbank eurodollar market no longer exist and that adequate and reasonable
means do exist for determining LIBOR pursuant to Section 3.1 or (y) the Bank
having determined that circumstances no longer render the Advances (or any
portion thereof) Affected Advances), no further LIBOR Advances shall be
required to be made by the Bank, nor shall the Borrower have the right to
convert all or any portion of the Loans to or as LIBOR Advances.

 

3.9.          Taxes

 

All payments made by each Credit Party under the Loan
Documents shall be made free and clear of, and without reduction for or on
account of, any Taxes required by law to be withheld from any amounts payable
under the Loan Documents.  In the event
that such Credit Party is prohibited by law from making payments hereunder free
of deductions or withholdings, then such Credit Party shall pay such additional
amounts to the Bank as may be necessary in order that the actual amounts
received by the Bank in respect of interest and any other amounts payable under
the Loan Documents after deduction or withholding (and after payment of any
additional Taxes or other charges due as a consequence of the payment of such
additional amounts) shall equal the amount that would have been received if
such deduction or withholding were not required.

 

28

 

3.10.        Option to Fund

 

The Bank has indicated that, if the Borrower requests
a LIBOR Advance, the Bank may wish to purchase one or more deposits in order to
fund or maintain its funding of such LIBOR Advance during the Interest Period
with respect thereto; it being understood that the provisions of this Agreement
relating to such funding are included only for the purpose of determining the
rate of interest to be paid in respect of such LIBOR Advance and any amounts
owing under Sections 3.4 and 3.6.  The
Bank shall be entitled to fund and maintain its funding of all or any part of
each LIBOR Advance in any manner it sees fit, but all such determinations
hereunder shall be made as if the Bank had actually funded and maintained each
LIBOR Advance during the applicable Interest Period through the purchase of
deposits in an amount equal to such LIBOR Advance having a maturity
corresponding to such Interest Period. 
The Bank may fund each LIBOR Advance from or for the account of any
branch or office of the Bank as the Bank may choose from time to time.

 

4.             REPRESENTATIONS AND WARRANTIES

 

In order to induce
the Bank to enter into this Agreement and to make the Loans to the Borrower,
the Borrower represents and warrants that:

 

4.1.          Subsidiaries; Capitalization

 

As of the Effective Date, the only Subsidiaries of the
Borrower are MG (Bermuda) Ltd., META Group Australia Holdings PTY. Limited,
Cenntinum PTE LTD. and 1422722 Ontario Inc., and the authorized, issued and
outstanding Capital Stock of the Borrower and each such Subsidiary is as set
forth on Schedule 4.1.  As of the
Effective Date, except as set forth on Schedule 4.1, (i) the shares of, or
partnership or other interests in, each Subsidiary of the Borrower are owned
beneficially and of record by the Borrower or another Subsidiary of the
Borrower, are free and clear of all Liens, and are duly authorized, validly
issued, fully paid and nonassessable, (ii) neither the Borrower nor any of its
Subsidiaries has issued any securities convertible into, or options or warrants
for, any common or preferred equity securities thereof, (iii) there are no
agreements, voting trusts or understandings binding upon the Borrower or any of
its Subsidiaries with respect to the voting securities of the Borrower or any
of its Subsidiaries or affecting in any manner the sale, pledge, assignment or
other disposition thereof, including any right of first refusal, option,
redemption, call or other right with respect thereto, whether similar or
dissimilar to any of the foregoing, and (iv) all of the outstanding Capital
Stock of each Subsidiary of the Borrower is owned by the Borrower or another
Subsidiary of the Borrower.

 

4.2.          Existence and Power

 

The Borrower and each of its Subsidiaries is duly
organized or formed and validly existing in good standing under the laws of the
jurisdiction of its incorporation or formation, as the case may be, has all
requisite power and authority to own its property and to carry on its business
as now conducted, and is in good standing and authorized to do business in each
jurisdiction in which the nature of the business conducted therein or the
property owned by it

 

29

 

therein makes such qualification necessary, except where the failure to
be so qualified could have a Material Adverse Effect.

 

4.3.          Authority and Execution

 

The Borrower and each of its Subsidiaries has full legal
power and authority to enter into, execute, deliver and perform the terms of
the Loan Documents to which it is a party, all of which have been duly
authorized by all proper and necessary corporate, partnership or other
applicable action and are in full compliance with its Organizational
Documents.  The Borrower and each of its
Subsidiaries has duly executed and delivered the Loan Documents to which it is
a party.

 

4.4.          Binding Agreement

 

The Loan Documents (other than the Note) constitute,
and the Note, when issued and delivered pursuant hereto for value received,
will constitute, the valid and legally binding obligations of each Credit
Party, in each case, to the extent it is a party thereto, enforceable in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors’ rights generally.

 

4.5.          Litigation

 

There are no actions, suits or proceedings at law or
in equity or by or before any Governmental Authority (whether purportedly on
behalf of the Borrower, any of its Subsidiaries or any other Credit Party)
pending or, to the knowledge of the Borrower, threatened against the Borrower,
any of its Subsidiaries or any other Credit Party or which may affect the
property or rights of the Borrower, any of its Subsidiaries or any other Credit
Party, which (i) could reasonably be expected to have a Material Adverse
Effect, (ii) call into question the validity or enforceability of, or otherwise
seek to invalidate, any Loan Document, or (iii) might, individually or in the
aggregate, materially and adversely affect any of the transactions contemplated
by the Loan Documents.

 

4.6.          Required Consents

 

Except for information filings required to be made in
the ordinary course of business which are not a condition to the performance by
the Borrower or any of its Subsidiaries under the Loan Documents to which it is
a party, no consent, authorization or approval of, filing with, notice to, or exemption
by, stockholders or holders of any other equity interest, any Governmental
Authority or any other Person is required to authorize, or is required in
connection with the execution, delivery and performance of the Loan Documents
to which the Borrower or any of its Subsidiaries or any other Credit Party is a
party or is required as a condition to the validity or enforceability of the
Loan Documents to which any of the same is a party.

 

30

 

4.7.          Absence of Defaults; No Conflicting
Agreements

 

(a)           Neither
the Borrower, nor any of its Subsidiaries or any other Credit Party is in
default under any mortgage, indenture, contract or agreement to which it is a
party or by which it or any of its property is bound, the effect of which
default could reasonably be expected to have a Material Adverse Effect.  The execution, delivery or carrying out of
the terms of the Loan Documents will not constitute a default under, or result
in the creation or imposition of, or obligation to create, any Lien upon any
property of the Borrower or any of its Subsidiaries or result in a breach of or
require the mandatory repayment of or other acceleration of payment under or
pursuant to the terms of any such mortgage, indenture, contract or agreement.

 

(b)           Neither
the Borrower, any of its Subsidiaries nor any other Credit Party is in default
with respect to any judgment, order, writ, injunction, decree or decision of
any Governmental Authority which default could reasonably be expected to have a
Material Adverse Effect.

 

4.8.          Compliance with Applicable Laws

 

The Borrower and each of its Subsidiaries is complying
in all material respects with all statutes, regulations, rules and orders of
all Governmental Authorities which are applicable to the Borrower or such
Subsidiary, a violation of which could reasonably be expected to have a
Material Adverse Effect.

 

4.9.          Taxes

 

The Borrower and each of its Subsidiaries has filed or
caused to be filed all tax returns required to be filed and has paid, or has
made adequate provision for the payment of, all taxes shown to be due and
payable on said returns or in any assessments made against it (other than those
being contested as required under Section 7.4) which would be material to the
Borrower or any of its Subsidiaries, and no tax Liens have been filed with
respect thereto.  The charges, accruals
and reserves on the books of the Borrower and each of its Subsidiaries with
respect to all taxes are, to the best knowledge of the Borrower, adequate for the
payment of such taxes, and the Borrower knows of no unpaid assessment which is
due and payable against the Borrower or any of its Subsidiaries or any claims
being asserted which could reasonably be expected to have a Material Adverse
Effect, except such thereof as are being contested as required under Section
7.4, and for which adequate reserves have been set aside in accordance with
GAAP.

 

4.10.        Governmental Regulations

 

Neither the Borrower, any of its Subsidiaries nor any
Person controlled by, controlling, or under common control with, the Borrower
or any of its Subsidiaries, is subject to regulation under the Investment
Company Act of 1940, as amended, or is subject to any statute or regulation
which prohibits or restricts the incurrence of Indebtedness.

 

31

 

4.11.        Federal Reserve Regulations; Use of
Loan Proceeds

 

Neither the Borrower nor any of its Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin
Stock.  After giving effect to the
making of each Loan, Margin Stock will constitute less than 25% of the assets
(as determined by any reasonable method) of the Borrower and its Subsidiaries.

 

4.12.        Plans

 

The only Pension Plans in effect as of the Effective
Date are listed on Schedule 4.12. 
Each Employee Benefit Plan is in compliance with ERISA and the Code,
where applicable, in all material respects. 
The Borrower and each of its Subsidiaries and ERISA Affiliates has
complied with the requirements of Section 515 of ERISA with respect to each
Pension Plan which is a Multiemployer Plan. 
As of the Effective Date, the Borrower and its Subsidiaries and ERISA Affiliates
have no liability under Section 4201 or 4204 of ERISA (including the obligation
to satisfy secondary liability as a result of purchaser default).  The Borrower and its Subsidiaries and ERISA
Affiliates have, as of the Effective Date, made all contributions or payments
to or under each such Pension Plan required by law or the terms of such Pension
Plan or any contract or agreement with respect thereto.  No material liability to the PBGC has been,
or is expected by the Borrower, any of its Subsidiaries or any ERISA Affiliate
to be, incurred by the Borrower, any such Subsidiary or any ERISA Affiliate.
Each Employee Benefit Plan which is a group health plan within the meaning of
Section 5000(b)(1) of the Code is in material compliance with the continuation
of health care coverage requirements of Section 4980B of the Code.

 

4.13.        Financial Statements

 

The Borrower has heretofore delivered to the Bank
copies of the audited consolidated balance sheets of the Borrower as of
December 31, 2000 and the related consolidated statements of operations, stockholder’s
equity and cash flows for the fiscal years then ended (with the related notes
and schedules, the “Financial Statements”).  The Financial Statements fairly present the consolidated
financial condition and results of the operations of the Borrower and its
Subsidiaries as of the dates and for the periods indicated therein and have
been prepared in conformity with GAAP. 
Except as reflected in the Financial Statements or in the notes thereto,
neither the Borrower nor any of its Subsidiaries has any obligation or
liability of any kind (whether fixed, accrued, Contingent, unmatured or
otherwise) which, in accordance with GAAP, should have been shown on the
Financial Statements and was not.  Since
the date of the Financial Statements, the Borrower has conducted its business
only in the ordinary course and there has been no Material Adverse Change.

 

4.14.        Property

 

The Borrower and each of its Subsidiaries has (i) good
and marketable title to all of its property, title to which is material to the
Borrower or such Subsidiary and (ii) a valid

 

32

 

leasehold interest in all property, a leasehold interest in which is
material to the Borrower or such Subsidiary, in each case subject to no Liens,
except Permitted Liens.

 

4.15.        Intellectual Property; Licenses

 

(a)           The
Borrower and each of its Subsidiaries owns, or has the legal right to use, all
United States trademarks, trademark applications, trade names, service marks,
and copyrights and all technology, know-how, and processes necessary for each
of them to conduct its business as currently conducted (the “Intellectual
Property”), except for those the failure to own or have the legal right to
use would not be reasonably expected to have a Material Adverse Effect.  No claim has been asserted and is pending by
any Person challenging or questioning the use of any such Intellectual
Property, nor does the Borrower know of any such claim, and to the knowledge of
the Borrower the use of such Intellectual Property by the Borrower and its
Subsidiaries does not infringe on the rights of any Person, except for such
claims and infringements that in the aggregate would not be reasonably expected
to have a Material Adverse Effect.  No
event has occurred which permits or, to the best knowledge of the Borrower,
after notice or the lapse of time or both, or any other condition, could
reasonably be expected to permit, the revocation or termination of any license
or other right to use Intellectual Property which revocation or termination
could reasonably be expected to have a Material Adverse Effect.

 

(b)           Schedule
4.15 contains a list of each material license or other agreement in effect
on the Effective Date under which the Borrower has the right to utilize and
exploit any Intellectual Property owned or controlled by another Person (each,
a “License”), including (i) the name of the licensor, (ii) a description
of the Intellectual Property covered by the License, (iii) the territory in
which the License is exercisable, and (iv) the expiration date of the
License.  Except as indicated on
Schedule 4.15 or a supplement thereto delivered to the Bank, no material
default has occurred under any such License which is continuing or unremedied
on the Effective Date.

 

4.16.        Environmental Matters

 

(a)           No
Hazardous Substances have been generated or manufactured on, transported to or
from, treated at, stored at or discharged from any Real Property in material
violation of any Environmental Laws; no Hazardous Substances have been
discharged into subsurface waters under any Real Property in material violation
of any Environmental Laws; no Hazardous Substances have been discharged from
any Real Property on or into property or waters (including subsurface waters)
adjacent to any Real Property in material violation of any Environmental Laws;
and there are not now, nor ever have been, on any Real Property any underground
or above ground storage tanks regulated under any Environmental Laws.

 

(b)           Neither
the Borrower nor any of its Subsidiaries (i) has received notice (written or
oral) or otherwise learned of any claim, demand, suit, action, proceeding,
event, condition, report, directive, Lien, violation, non-compliance or
investigation indicating or concerning any potential or actual liability
(including, without limitation, potential liability for enforcement,
investigatory costs, cleanup costs, government response costs, removal costs,

 

33

 

remedial costs, natural resources damages, property damages, personal
injuries or penalties) arising in connection with: (x) any non-compliance with
or violation of the requirements of any applicable Environmental Laws, or (y)
the presence of any Hazardous Substance on any Real Property (or any Real
Property previously owned by the Borrower or any of its Subsidiaries) or the
release or threatened release of any Hazardous Substance into the environment,
(ii) has any threatened or actual liability in connection with the presence of
any Hazardous Substance on any Real Property (or any Real Property previously
owned by the Borrower or any of its Subsidiaries) or the release or threatened
release of any Hazardous Substance into the environment, (iii) has received
notice of any federal or state investigation evaluating whether any remedial
action is needed to respond to the presence of any Hazardous Substance on any
Real Property (or any Real Property previously owned by the Borrower or any of
its Subsidiaries) or a release or threatened release of any Hazardous Substance
into the environment for which the Borrower or any of its Subsidiaries is or
may be liable, or (iv) has received notice that the Borrower or any of its
Subsidiaries is or may be liable to any Person under any Environmental Law.

 

4.17.        Solvency

 

Immediately after giving effect to the transactions
contemplated by the Loan Documents, the Borrower and each of its Subsidiaries
will be Solvent.

 

4.18.        Security Interests

 

Subject to the continuing possession by the Bank of
the Collateral, the security interests granted under the Collateral Documents
will constitute valid, binding and continuing duly perfected first priority
Liens in and to the Collateral.

 

4.19.        Absence of Certain Restrictions

 

No indenture, certificate of designation for preferred
stock, agreement or instrument to which the Borrower or any of its Subsidiaries
is a party (other than this Agreement), prohibits or limits in any way,
directly or indirectly the ability of any Subsidiary of the Borrower to make
Restricted Payments or repay any Indebtedness to the Borrower or to another
Subsidiary of the Borrower.

 

4.20.        No Misrepresentation

 

No representation or warranty contained in any Loan
Document and no certificate or report from time to time furnished by the
Borrower or any of its Subsidiaries in connection with the transactions
contemplated hereby and thereby, contains or will contain a misstatement of
material fact, or, to the best knowledge of the Borrower, omits or will omit to
state a material fact required to be stated in order to make the statements
therein contained not misleading in the light of the circumstances under which
made, provided  that any projections or pro-forma financial
information contained therein are based upon good faith estimates and
assumptions believed by the Borrower to be reasonable at the time made, it
being recognized by the Bank that

 

34

 

such projections as to future events are not to be viewed as facts, and
that actual results during the period or periods covered thereby may differ
from the projected results.

 

5.             CONDITIONS TO FIRST LOANS

 

In addition to the conditions precedent set forth in
Article 6, the obligation of the Bank to make Loans on the first Borrowing Date
shall be subject to the fulfillment of the following conditions precedent:

 

5.1.          Evidence of Action

 

The Bank shall have received a certificate, dated the
Effective Date, of the Secretary or Assistant Secretary of each Credit Party
(i) attaching a true and complete copy of the resolutions of its board of
directors or the equivalent and of all documents evidencing all necessary
corporate or similar action (in form and substance satisfactory to the Bank)
taken by it to authorize the Loan Documents to which it is a party and the
transactions contemplated thereby, (ii) attaching a true and complete copy of
its Organizational Documents, (iii) setting forth the incumbency of its
officers who may sign the Loan  Documents, including therein a signature
specimen of such officer or officers and (iv) attaching a certificate of good
standing of the Secretary of State of the jurisdiction of its formation and of
each other jurisdiction in which it is qualified to do business.

 

5.2.          This Agreement

 

The Bank shall have received counterparts of this
Agreement duly executed by an Authorized Signatory of the Borrower.

 

5.3.          Note

 

The Bank shall have received the Notes, dated the
Effective Date and duly executed by an Authorized Signatory of the Borrower.

 

5.4.          Security Agreement

 

The Bank shall have received the Security Agreement,
dated the Effective Date and duly executed by an Authorized Signatory of the
Borrower, together with the following:

 

(a)           one
or more share certificates, representing (i) all of the issued and outstanding
Capital Stock of each Domestic Subsidiary of the Borrower (provided that the
Borrower shall have 30 days from the date hereof to deliver such share
certificates) and (ii) 60% of the issued and outstanding Capital Stock of each
Foreign Subsidiary of the Borrower which is not a Subsidiary Guarantor, in each
case together with one undated stock power, executed in blank by an Authorized
Signatory of the Borrower;

 

(b)           verification
that the Bond Collateral continues to be held in a restricted safekeeping
account #241033 maintained by the Bank; and

 

35

 

(c)           such
other documents as the Bank may require in connection with the perfection of
its security interests therein.

 

5.5.          Subsidiary Guaranty

 

The Bank shall have received the Subsidiary Guaranty,
dated the Effective Date and duly executed by an Authorized Signatory of each
Subsidiary Guarantor.

 

5.6.          Officer’s Certificate

 

The Bank shall have received a certificate, in all
respects satisfactory to the Bank, of an officer of the Borrower, dated the
Effective Date, certifying that:

 

(a)           Absence
of Litigation.  There shall be no
injunction, writ, preliminary restraining order or other order of any nature
issued by any Governmental Authority in any respect affecting the transactions
provided for in the Loan Documents and no action or proceeding by or before any
Governmental Authority shall have been commenced or be pending or, to the
knowledge of the Borrower, threatened, seeking to prevent or delay the
transactions contemplated by the Loan Documents or challenging any other terms
and provisions hereof or thereof or seeking any damages in connection
therewith.

 

(b)           Approvals
and Consents.  All approvals and
consents of all Persons required to be obtained in connection with the
consummation of the transactions contemplated by the Loan Documents shall have
been obtained and shall be in full force and effect, and all required notices
shall have been given and all required waiting periods shall have expired.

 

(c)           Absence
of Material Adverse Change.  No
Material Adverse Change in the business, assets, liabilities, financial
condition or results of operations of the Borrower shall have occurred since
the date of the Financial Statements.

 

(d)           No
Liens other than Permitted Liens. 
Upon the making of Loans on the Effective Date, there will exist no
Liens other than Permitted Liens.

 

5.7.          Compliance Certificate

 

The Bank shall have received a Compliance Certificate,
certified by a Financial Officer of the Borrower.

 

5.8.          Opinion of Counsel to the Borrower

 

The Bank shall have received an opinion, dated the
Effective Date, of Wiggin & Dana, counsel to the Borrower, which shall be
addressed to the Bank and in form and substance satisfactory to the Bank and
Special Counsel.  It is understood that
such opinion is being delivered to the Bank at the direction of the Borrower
and that the Bank may and will rely on such opinion.

 

36

 

5.9.          Search Reports and Related Documents

 

The Bank shall have received UCC, tax and judgment
lien search reports with respect to each applicable public office where Liens
are or may be filed, disclosing that there are no Liens of record in such
office showing the Borrower or any of its Subsidiaries as debtor thereunder
(other than Permitted Liens).

 

5.10.        Approval of Special Counsel

 

All legal matters incident to the making of the Loans
on the Effective Date shall be reasonably satisfactory to Special Counsel.

 

 

5.11.        Fees

 

The Facility Fee, and all other fees payable to the
Bank on the Effective Date, shall have been paid.

 

5.12.        Fees and Expenses of Special Counsel

 

The fees and expenses of Special Counsel in connection
with the preparation, negotiation and closing of the Loan Documents shall have
been paid.

 

5.13.        Other Documents

 

The Bank shall have received such other documents,
each in form and substance reasonably satisfactory to the Bank, as the Bank
shall reasonably require in connection with the making of the first Loans.

 

6.             CONDITIONS OF LENDING

 

The obligation of the Bank to make any Loan or issue
any Letter of Credit on each Borrowing Date is subject to the satisfaction of
the following conditions precedent as of such Borrowing Date:

 

6.1.          Compliance

 

On each Borrowing Date and after giving effect to the
Loans to be made thereon (i) there shall exist no Default or Event of Default
and (ii) the representations and warranties contained in the Loan Documents
shall be true and correct with the same effect as though such representations
and warranties had been made on such Borrowing Date, except to the extent such
representations and warranties specifically relate to an earlier date, in which
case such representa­tions and warranties shall have been true and correct on
and as of such earlier date.  Each
borrowing by the Borrower shall constitute a certification by the Borrower as
of such Borrowing Date to the foregoing effect.

 

37

 

6.2.          Borrowing Request / Letter of Credit
Agreement

 

(i) With respect to each Loan, the Bank shall have
received a Borrowing Request, and (ii) with respect to each Letter of Credit,
the Bank shall have received a Letter of Credit Agreement, in each case duly
executed by an Authorized Signatory of the Borrower.

 

6.3.          Loan Closings

 

All documents required by the provisions of the Loan
Documents to be executed or delivered to the Bank on or before the applicable
Borrowing Date shall have been executed and shall have been delivered at the
office of the Bank set forth in Section 10.2 on or before such Borrowing Date.

 

6.4.          Other Documents

 

The Bank shall have received such other documents as
the Bank shall reasonably request.

 

7.             AFFIRMATIVE COVENANTS

 

The Borrower agrees that, so long as this Agreement is
in effect, any Loan remains outstanding and unpaid, any Letter of Credit
remains outstanding, or any other amount is owing under any Loan Document to
the Bank:

 

7.1.          Financial Statements and Information

 

The Borrower shall maintain, and cause each of its
Subsidiaries to maintain, a standard system of accounting in accordance with
GAAP, and furnish or cause to be furnished to the Bank:

 

(a)           As
soon as available, but in any event within 90 days after the end of each fiscal
year, a copy of an audited consolidated and consolidating balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year, together with
the related consolidated and consolidating statements of operations,
stockholder’s equity and cash flows as of and for such fiscal year, setting
forth in comparative form the figures for the preceding fiscal year, together
with an unqualified report thereon of the Accountants.

 

(b)           As
soon as available, but in any event within 60 days after the end of each of the
first three fiscal quarters of each fiscal year, a copy of an unaudited
consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as at the end of each such quarterly period, together with the
related consolidated and consolidating statements of operations and cash flows
for such period and for the elapsed portion of the fiscal year through such
date, setting forth in comparative form the figures for the corresponding
periods of the preceding fiscal year, certified by a Financial Officer of the
Borrower as being complete and

 

38

 

correct in all material respects and as presenting fairly the financial
condition and the results of operations of the Borrower and its Subsidiaries
(subject to normal year-end adjustments).

 

(c)           Concurrently
with the delivery of the financial statements specified in paragraphs (a) and
(b) of this section, a Compliance Certificate, signed by a Financial Officer of
the Borrower.

 

(d)           As
soon as available, but in any event within 45 days after the end of each month,
an accounts receivable aging as of the end of such month, in form and substance
reasonably satisfactory to the Bank.

 

(e)           Within
15 days after the end of each month, a Borrowing Base Certificate, signed by a
Financial Officer of the Borrower.

 

(f)            Such
other information as the Bank may reasonably request from time to time.

 

7.2.          Certificates;
Other Information

 

The Borrower shall furnish to the Bank:

 

(a)           Prompt
written notice if there shall occur and be continuing a Default or an Event of
Default; and

 

(b)           Prompt
written notice of: (i) any citation, summons, subpoena, order to show cause or
other document naming the Borrower or any of its Subsidiaries a party to any
proceeding before any Governmental Authority which could reasonably be expected
to have a Material Adverse Effect or which calls into question the validity or
enforceability of any of the Loan Documents, and include with such notice a
copy of such citation, summons, subpoena, order to show cause or other
document, (ii) any lapse or other termination of any material license, permit,
franchise or other authorization issued to the Borrower or any of its
Subsidiaries by any Person or Governmental Authority, and (iii) any refusal by
any Person or Governmental Authority to renew or extend any such material
license, permit, franchise or other authorization, which lapse, termination,
refusal or dispute could reasonably be expected to have a Material Adverse
Effect.

 

7.3.          Legal Existence

 

Except as may otherwise be permitted by Sections 8.3
and 8.4, the Borrower shall maintain, and cause each of its Subsidiaries to
maintain, its corporate, partnership or analogous existence, as the case may
be, in good standing in the jurisdiction of its incorporation or formation and
in each other jurisdiction in which the failure so to do could reasonably be
expected to have a Material Adverse Effect.

 

39

 

7.4.          Taxes

 

The Borrower shall pay and discharge when due, and
cause each of its Subsidiaries so to do, all Taxes upon or with respect to the
Borrower or such Subsidiary and all Taxes upon the income, profits and property
of the Borrower and its Subsidiaries, which if unpaid, could reasonably be
expected to have a Material Adverse Effect or become a Lien on property of the
Borrower or such Subsidiary (other than a Lien described in clause (ii) of
Section 8.2), unless and to the extent only that such Taxes shall be contested
in good faith and by appropriate proceedings diligently conducted by the
Borrower or such Subsidiary and provided that any such contested Tax, shall not
constitute, or create, a Lien on any property of the Borrower or such
Subsidiary senior to the Liens, if any, granted to the Bank by the Collateral
Documents on such property, and, provided further, that the Borrower shall give
the Bank prompt notice of such contest and that such reserve or other
appropriate provision as shall be required in accordance with GAAP shall have
been made therefor.

 

7.5.          Insurance

 

The Borrower shall maintain, and cause each of its
Subsidiaries to maintain, with financially sound and reputable insurance
companies insurance in at least such amounts and against at least such risks
(but including in any event public liability, product liability and business
interruption coverage) as are usually insured against in the same general area
by companies engaged in the same or a similar business; and furnish to the
Bank, upon written request, full information as to the insurance carried.

 

7.6.          Performance of Obligations

 

The Borrower shall pay and discharge when due, and
cause each of its Subsidiaries so to do, all lawful Indebtedness, obligations
and claims for labor, materials and supplies or otherwise which, if unpaid,
might (i) have a Material Adverse Effect, or (ii) become a Lien upon property
of the Borrower or any of its Subsidiaries other than a Permitted Lien, unless
and to the extent only that the validity of such Indebtedness, obligation or
claim shall be contested in good faith and by appropriate proceedings
diligently conducted and that any such contested Indebtedness, obligations or
claims shall not constitute, or create, a Lien on any property of the Borrower
or any of its Subsidiaries senior to the Lien, if any, granted to the Bank
under the Collateral Documents on such property, and provided that the Borrower
shall give the Bank prompt notice of any such contest and that such reserve or
other appropriate provision as shall be required in accordance with GAAP shall
have been made therefor.

 

7.7.          Condition of Property

 

The Borrower shall at all times, maintain, protect and
keep in good repair, working order and condition (ordinary wear and tear
excepted), and cause each of its Subsidiaries so to do, all property necessary
to the operation of the Borrower’s or such Subsidiary’s business.

 

40

 

7.8.          Observance of Legal Requirements

 

The Borrower shall observe and comply in all respects,
and cause each of its Subsidiaries so to do, with all laws, ordinances, orders,
judgments, rules, regulations, certifications, franchises, permits, licenses,
directions and requirements of all Governmental Authorities, which now or at
any time hereafter may be applicable to it, a violation of which could
reasonably be expected to have a Material Adverse Effect, except such thereof
as shall be contested in good faith and by appropriate proceedings diligently
conducted by it, provided that the Borrower shall give the Bank prompt notice
of such contest and that such reserve or other appropriate provision as shall
be required in accordance with GAAP shall have been made therefor.

 

7.9.          Inspection of Property; Books and
Records; Discussions

 

Upon reasonable prior notice, the Borrower shall
permit representatives of the Bank to visit the offices of the Borrower and
each of its Subsidiaries during normal business hours, to examine the books and
records thereof and the reports of independent accountants relating thereto,
and to make copies or extracts therefrom, to discuss the affairs of the
Borrower and each such Subsidiary with the respective officers thereof, and to
examine and inspect the property of the Borrower and each such Subsidiary and
to meet and discuss the affairs of the Borrower and each such Subsidiary with
the Accountants.

 

7.10.        Authorizations

 

The Borrower shall maintain, and cause each of its
Subsidiaries to maintain, in full force and effect, all material licenses,
franchises, permits, licenses, authorizations and other rights as are necessary
for the conduct of its business.

 

7.11.        Financial Covenants

 

(a)           Leverage
Ratio. The Borrower shall maintain as of the last day of each fiscal
quarter ending during the periods set forth below, a Leverage Ratio of not more
than the ratios set forth below:

 

41

 

	
  Period

  	
   

  	
  Ratio

  
	
  December 31, 2001

  	
   

  	
  *

  
	
   

  	
   

  	
   

  
	
  March 31, 2002

  	
   

  	
  *

  
	
   

  	
   

  	
   

  
	
  June 30, 2002

  	
   

  	
  *

  
	
   

  	
   

  	
   

  
	
  September 30, 2002

  	
   

  	
  *

  
	
   

  	
   

  	
   

  
	
  December 31, 2002 and each fiscal quarter end
  thereafter

  	
   

  	
  *

  

 

(b)           Fixed
Charge Coverage Ratio. The Borrower shall maintain as of the last day of
each fiscal quarter ending during the periods set forth below, a Fixed Charge
Coverage Ratio of not less than the ratios set forth below:

 

	
  Period

  	
   

  	
  Ratio

  
	
  December 31, 2001

  	
   

  	
  *

  
	
   

  	
   

  	
   

  
	
  March 31, 2002

  	
   

  	
  *

  
	
   

  	
   

  	
   

  
	
  June 30, 2002

  	
   

  	
  *

  
	
   

  	
   

  	
   

  
	
  September 30, 2002

  	
   

  	
  *

  
	
   

  	
   

  	
   

  
	
  December 31, 2002 and each fiscal quarter end
  thereafter

  	
   

  	
  *

  

 

(c)           Minimum
EBITDA.  EBITDA for each four fiscal
quarter period of the Borrower ending during the periods set forth below shall
not be less than the amounts set forth below:

 

42

 

	
  Period

  	
   

  	
  Amount

  
	
  December 31, 2001

  	
   

  	
  *

  
	
   

  	
   

  	
   

  
	
  March 31, 2002

  	
   

  	
  *

  
	
   

  	
   

  	
   

  
	
  June 30, 2002

  	
   

  	
  *

  
	
   

  	
   

  	
   

  
	
  September 30, 2002

  	
   

  	
  *

  
	
   

  	
   

  	
   

  
	
  December 31, 2002 and each fiscal quarter end
  thereafter

  	
   

  	
  *

  

 

8.             NEGATIVE COVENANTS

 

The Borrower agrees that, so long as this Agreement is
in effect, any Loan remains outstanding and unpaid, any Letter of Credit
remains outstanding, or any other amount is owing under any Loan Document to
the Bank, the Borrower shall not, directly or indirectly:

 

8.1.          Indebtedness

 

Create, incur, assume or suffer to exist any liability
for Indebtedness, or permit any of its Subsidiaries so to do, except (i)
Indebtedness due under the Loan Documents, (ii) Indebtedness of the Borrower or
any of its Subsidiaries existing on the Effective Date as set forth on Schedule
8.1, (iii) Intercompany Indebtedness, and (iv) other Indebtedness not in excess
of $450,000 in the aggregate.

 

8.2.          Liens

 

Create, incur, assume or suffer to exist any Lien upon
any of its property (including, without limitation, Intellectual Property,
Licenses and Real Property), whether now owned or hereafter acquired, or permit
any of its Subsidiaries so to do, except (i) Liens in favor of the Bank under
the Loan Documents, (ii) Liens for Taxes in the ordinary course of business
which are not delinquent or which are being contested in accordance with
Section 7.4, provided  that enforcement of such Liens is stayed
pending such contest, (iii) Liens in connection with workers’ compensation,
unemployment insurance or other social security obligations, (iv) deposits or
pledges to secure bids, tenders, contracts (other than contracts for the
payment of money), leases, statutory obligations, surety and appeal bonds and
other obligations of like nature arising in the ordinary course of business,
(v) zoning ordinances, easements, rights of way, minor defects, irregularities,
and other similar restrictions affecting real property which do not adversely
affect the value of such real property or the financial condition of the
Borrower or such Subsidiary or impair its use for the operation of the business
of the Borrower or such Subsidiary, (vi) Liens arising by operation of law such
as mechanics’, materialmen’s, carriers’, warehousemen’s liens incurred in the
ordinary course of business which are not delinquent or which are being
contested in accordance with Section 7.6, provided that enforcement of such

 

43

 

Liens is stayed pending such contest, (vii) Liens arising out of
judgments or decrees which are being contested in accordance with Section 7.6, provided
that enforcement of such Liens is stayed pending such contest, and
(viii) Liens on property of the Borrower and its Subsidiaries existing on the
Effective Date as set forth on Schedule 8.2 as renewed from time to time, but
not any increases in the amounts secured thereby.

 

8.3.          Merger; Consolidations

 

Consolidate with, be acquired by, merge into or with
any Person or enter into any binding agreement to do any of the foregoing which
is not contingent on obtaining the consent of the Bank, or permit any of its Subsidiaries
so to do, except, provided  that (i) the Bank shall have received
ten days prior written notice and (ii) immediately before and after giving
effect thereto no Default or Event of Default shall exist, any direct or
indirect wholly-owned Subsidiary of the Borrower may merge or consolidate with
the Borrower or any other direct or indirect wholly-owned Subsidiary of the
Borrower, provided  that in the event of a merger of the Borrower
and such wholly-owned Subsidiary, the Borrower shall be the survivor and in the
event of a merger of a Subsidiary with a Subsidiary Guarantor, the Subsidiary
Guarantor shall be the survivor.

 

8.4.          Dispositions

 

Make any Disposition, or permit any of its
Subsidiaries so to do, except:

 

(a)           Dispositions
of any Investments permitted under Section 8.5;

 

(b)           Dispositions of
property which, in the reasonable opinion of the Borrower or such Subsidiary,
is obsolete or no longer useful in the conduct of its business; and

 

(c)           Dispositions as to
which the following conditions have been satisfied:

 

(i)       the Bank shall have consented thereto,

 

(ii)      no Default or Event of Default shall exist
immediately before or after giving effect thereto, and

 

(iii)     the total consideration received or to be
received therefor by the Borrower or any of its Subsidiaries shall be payable
in cash on or before the closing thereof and shall not be less than the fair
market value thereof as reasonably determined by the board of directors of the
Borrower or such Subsidiary.

 

8.5.          Acquisitions, Investments, Loans, Etc.

 

At any time, directly or indirectly purchase, hold,
own or otherwise acquire or invest in any Capital Stock, evidence of
indebtedness or other obligation or security or any

 

44

 

interest whatsoever in any other Person, or make or permit to exist any
loans, advances or other extensions of credit to, or any investment (whether in
cash or other property) in, any other Person, or enter into any arrangement for
the purpose of providing funds or credit to any other Person, or make any
Acquisition, or become a partner or joint venturer in any partnership or joint
venture, or make any other investment, whether by way of capital contribution,
time deposit or otherwise, in or with any Person, or make any commitment or
otherwise to agree to do any of the foregoing (all of which are sometimes
referred to herein as “Investments”), or permit any of its Subsidiaries
so to do, or except:

 

(a)           Investments in
Liquid Investments;

 

(b)           Investments existing
on the Effective Date as set forth on Schedule 8.5;

 

(c)           Investments in
Subsidiaries permitted by Section 8.8, provided that the Bank has given its
prior written consent thereto;

 

(d)           Investments by the
Borrower or any Subsidiary in Intercompany Indebtedness, provided that the Bank
has given its prior written consent thereto; and

 

(e)           Acquisitions of the
assets of (i) independent sales representative offices of the Borrower existing
on the Effective Date, or (ii) other Persons engaged in the same line of
business as the Borrower or its independent sales representative offices,
provided that with respect to Acquisitions to be made after the Effective Date:

 

(i)       At
least 30 days prior to the date such Acquisition is to be consummated, the
Borrower shall deliver to the Bank a detailed description of the proposed
Acquisition;

 

(ii)      At
least 15  days
prior to the date such Acquisition is to be consummated, the Borrower shall
deliver to the Bank the following pro-forma information and projections: (1) a
pro-forma consolidated balance sheet and income statement of the Borrower and
its Subsidiaries demonstrating to the satisfaction of the Bank that no Event of
Default shall occur after giving effect to such Acquisition and (2) financial
projections of the Borrower and its consolidated Subsidiaries demonstrating to
the satisfaction of the Bank that immediately after giving effect so such
Acquisition, EBITDA of the Borrower and its Subsidiaries on a consolidated
basis shall increase in an amount commensurate with the cost of such Acquisition;
and

 

(iii)     The
aggregate consideration paid for all such Acquisitions shall not exceed
$7,500,000, and the actual cash consideration paid in the aggregate for all
such Acquisitions prior to the Maturity Date shall not exceed $2,000,000.

 

45

 

8.6.          Restricted Payments

 

Make any Restricted Payments payable in cash or
otherwise or apply any of its property thereto or set apart any sum therefor,
or permit any of its Subsidiaries so to do, except that a wholly–owned
Subsidiary may make Restricted Payments to the Borrower.

 

8.7.          Business and Name Changes

 

Materially change the nature of the business of the
Borrower and its Subsidiaries from that conducted on the Effective Date, or
alter or modify its name, structure or status, or change its fiscal year from
that in effect on the Effective Date, or permit any Subsidiary so to do.

 

8.8.          Subsidiaries

 

Create or acquire any other Subsidiary, or permit any
of its Subsidiaries so to do unless prior to or simultaneously with the
consummation of the creation or acquisition of (a) (i) a Domestic Subsidiary or
(ii) a Foreign Subsidiary which is not prevented, for tax reasons, from
guaranteeing the Borrower’s obligations hereunder, (x) such Subsidiary shall
have executed and delivered to the Bank a Subsidiary Guaranty or a supplement
to the Subsidiary Guaranty in accordance with the terms thereof and become a
Subsidiary Guarantor and (y) each Credit Party owning Capital Stock of such
Subsidiary shall deliver certificates evidencing 100% (in the case of a
Domestic Subsidiary) or 60% (in the case of a Foreign Subsidiary) of such
Capital Stock to the Bank as additional Collateral, together with appropriate
stock powers; or (b) a Foreign Subsidiary which is prevented, for tax reasons,
from guaranteeing the Borrower’s obligations hereunder, each Credit Party
owning Capital Stock of such Foreign Subsidiary shall deliver certificates
evidencing 60% of such Capital Stock to the Bank as additional Collateral,
together with appropriate stock powers; and in each case, the Bank shall have
received such other documents as the Bank shall have reasonably requested.

 

8.9.          Sale and Leaseback Transactions

 

Enter into any Sale and Leaseback Transaction or
permit any of its Subsidiaries so to do.

 

8.10.        Amendments, Etc. of Certain Agreements

 

Enter into or agree to any amendment, modification or
waiver of any term or condition of its Organizational Documents in any way
which would adversely affect the interests of the Bank under any of the Loan
Documents or permit any of its Subsidiaries so to do.

 

8.11.        Transactions with Affiliates

 

Become a party to any transaction with an Affiliate
unless the board of directors of the Borrower shall have determined that the
terms and conditions relating thereto are as favorable to the Borrower as those
which would be obtainable at the time in a comparable

 

46

 

arms-length transaction with a Person other than an Affiliate, or
permit any of its Subsidiaries so to do.

 

8.12.        Limitation on Dividend Restrictions

 

Permit or cause any of its Subsidiaries to enter into
or agree, or otherwise be or become subject, to any agreement, contract or
other arrangement (other than this Agreement) with any Person pursuant to the
terms of which such Subsidiary is or would be prohibited from declaring or
paying any cash dividends on any class of its Capital Stock owned directly or
indirectly by the Borrower or any other Subsidiary or from making any other
distribution on account of any class of any such Capital Stock.

 

8.13.        Limitation on Negative Pledges

 

Enter into any agreement, other than (i) this
Agreement and (ii) purchase money mortgages or capital leases permitted by this
Agreement (in which cases, any prohibition or limitation shall only be
effective against the assets financed thereby), or permit any of its
Subsidiaries so to do, which prohibits or limits the ability of the Borrower or
such Subsidiary to create, incur, assume or suffer to exist any Lien upon any
of its property or revenues, whether now owned or hereafter acquired.

 

9.             DEFAULT

 

9.1.          Events of Default

 

The following shall each constitute an “Event of
Default” hereunder:

 

(a)           The
failure of the Borrower to make any payment of principal on the Note, or in
respect of any Reimbursement Obligation, when due and payable; or

 

(b)           The
failure of the Borrower to make any payment of interest, fees, expenses or
other amounts payable under any Loan Document or otherwise, to the Bank within
five Business Days after the date when due and payable; or

 

(c)           The
failure of the Borrower to observe or perform any covenant or agreement
contained in Sections 21.9, 7.3 or 7.11, or Article 8; or

 

(d)           The
failure of any Credit Party to observe or perform any other term, covenant, or
agreement contained in any Loan Document and such failure shall have continued
unremedied for a period of 30 days after such Credit Party shall have obtained
knowledge thereof; or

 

(e)           Any
representation or warranty made by any Credit Party (or by an officer thereof
on its behalf) in any Loan Document or in any certificate, report, opinion
(other than an opinion of counsel) or other document delivered or to be
delivered pursuant thereto, shall

 

47

 

prove to have been
incorrect or misleading (whether because of misstatement or omission) in any
material respect when made; or

 

(f)            Liabilities
and/or other obligations of the Borrower (other than the obligations under the
Note and the Reimbursement Obligations), any of its Subsidiaries or any other
Credit Party, whether as principal, guarantor, surety or other obligor, for the
payment of any Indebtedness or operating leases (i) shall become or shall be
declared to be due and payable prior to the expressed maturity thereof, or (ii)
shall not be paid when due or within any grace period for the payment thereof,
(iii) any holder of any such obligation shall have the right to declare such
obligation due and payable prior to the expressed maturity thereof or (iv) as a
consequence of the occurrence or continuation of any event or condition, the
Borrower, any of its Subsidiaries or such other Credit Party has become
obligated to purchase or repay any Indebtedness before its regularly scheduled
maturity date; or

 

(g)           Any
Change of Control shall occur; or

 

(h)           The
Borrower, any of its Subsidiaries or any other Credit Party shall (i) suspend
or discontinue its business, (ii) make an assignment for the benefit of
creditors, (iii) generally not be paying its debts as such debts become due, (iv)
admit in writing its inability to pay its debts as they become due, (v) file a
voluntary petition in bankruptcy, (vi) become insolvent (however such
insolvency shall be evidenced), (vii) file any petition or answer seeking for
itself any reorganization, arrangement, composition, readjustment of debt,
liquidation or dissolution or similar relief under any present or future
statute, law or regulation of any jurisdiction, (viii) petition or apply to any
tribunal for any receiver, custodian or any trustee for any substantial part of
its property, (ix) be the subject of any such proceeding filed against it which
remains undismissed for a period of 60 days, (x) file any answer admitting or
not contesting the material allegations of any such petition filed against it
or any order, judgment or decree approving such petition in any such
proceeding, (xi) seek, approve, consent to, or acquiesce in any such
proceeding, or in the appointment of any trustee, receiver, sequestrator,
custodian, liquidator, or fiscal agent for it, or any substantial part of its
property, or an order is entered appointing any such trustee, receiver,
custodian, liquidator or fiscal agent and such order remains in effect for 60
days, or (xii) take any formal action for the purpose of effecting any of the
foregoing or looking to the liquidation or dissolution of the Borrower, such
Subsidiary or such other Credit Party; or

 

(i)            An
order for relief is entered under the United States bankruptcy laws or any
other decree or order is entered by a court having jurisdiction (i) adjudging
the Borrower, any of its Subsidiaries or any other Credit Party bankrupt or
insolvent, (ii) approving as properly filed a petition seeking reorganization,
liquidation, arrangement, adjustment or composition of or in respect of the
Borrower, any of its Subsidiaries or any other Credit Party under the United
States bankruptcy laws or any other applicable Federal or state law, (iii)
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other similar official) of the Borrower, any of its Subsidiaries or any
other Credit Party or of any substantial part of the property of any thereof,
or (iv) ordering the winding up or liquidation of the affairs of

 

48

 

the Borrower, any of its Subsidiaries or any other Credit Party, and
any such decree or order continues unstayed and in effect for a period of 60
days; or

 

(j)            Judgments
or decrees against the Borrower, any of its Subsidiaries or any other Credit
Party aggregating in excess of $100,000 shall remain unpaid, unstayed on
appeal, undischarged, unbonded or undismissed for a period of 30 days; or

 

(k)           The
occurrence of an Event of Default (beyond any applicable notice or cure period)
as defined in any Collateral Document; or

 

(l)            Any
Loan Document shall cease, for any reason, to be in full force and effect, or
any Credit Party shall so assert in writing or shall disavow any of its
obligations thereunder; or

 

(m)          (i)
any Termination Event shall occur; (ii) any Accumulated Funding Deficiency,
whether waived, shall exist with respect to any Pension Plan; (iii) any Person
shall engage in any Prohibited Transaction involving any Employee Benefit Plan;
(iv) the Borrower, any of its Subsidiaries or any ERISA Affiliate shall fail to
pay when due an amount which is payable by it to the PBGC or to a Pension Plan
under Title IV of ERISA; (v) the imposition of any tax under Section 4980B(a)
of the Code; (vi) the assessment of a civil penalty with respect to any
Employee Benefit Plan under Section 502(c) of ERISA; or (vii) any other event
or condition shall occur or exist with respect to an Employee Benefit Plan
which in the case of clauses (i) through (vi) would, individually or in the
aggregate, have a Material Adverse Effect.

 

9.2.          Remedies

 

(a)           Upon
the occurrence of an Event of Default or at any time thereafter during the
continuance thereof, (i) if such event is an Event of Default specified in
clause (h) or (i) above, the Commitments shall immediately and automatically terminate
and the Loans, all accrued and unpaid interest thereon, any Reimbursement
Obligations owing in respect of all outstanding Letters of Credit and all other
amounts owing under the Loan Documents shall immediately become due and
payable, the Borrower shall forthwith deposit with the Bank an amount equal to
the Letter of Credit Exposure in a cash collateral account under the exclusive
control of the Bank, and the Bank may exercise any and all remedies and other
rights provided in the Loan Documents, and (ii) if such event is any other
Event of Default, any or all of the following actions may be taken: (A) the
Bank may, by notice to the Borrower, declare the Commitments terminated
forthwith, whereupon the Commitments shall immediately terminate, and (B) the
Bank may, by notice of default to the Borrower, declare the Loans, all accrued
and unpaid interest thereon, any Reimbursement Obligations owing in respect of
all outstanding Letters of Credit and all other amounts owing under the Loan
Documents to be due and payable forthwith, whereupon the same shall immediately
become due and payable, the Borrower shall forthwith deposit with the Bank an
amount equal to the Letter of Credit Exposure in a cash collateral account
under the exclusive control of the Bank, and the Bank may exercise any and all
remedies and other rights provided in the Loan Documents.  Except as otherwise provided in this
Section, presentment, demand, protest and all other notices of any kind are hereby
expressly

 

49

 

waived. The Borrower hereby further expressly waives and covenants not
to assert any appraisement, valuation, stay, extension, redemption or similar
laws, now or at any time hereafter in force which might delay, prevent or
otherwise impede the performance or enforcement of any Loan Document.

 

(b)           In
the event that the Commitments shall have been terminated or the Loans, all
accrued and unpaid interest thereon and all other amounts owing under the Loan
Documents shall have been declared due and payable pursuant to the provisions
of this section, any funds received by the Bank from or on behalf of the
Borrower shall be applied by the Bank in liquidation of the Loans, the
Reimbursement Obligations and the other obligations of the Borrower under the
Loan Documents in the following manner and order: (i) to the payment of
interest on the Loans; (ii) to the payment of the principal portion of any
Loans in such order as the Bank may determine in its absolute discretion; (iii)
to the payment of the Reimbursement Obligations; (iv) to the payment of any
fees or expenses due the Bank from the Borrower; (v) to reimburse the Bank for
any expenses (to the extent not paid pursuant to clause (iv) above) due from
the Borrower pursuant to the provisions of Section 10.5; and (vi) to the
payment of any other amounts owed to the Bank under any Loan Document.

 

10.           OTHER PROVISIONS

 

10.1.        Amendments and Waivers

 

No amendment or waiver of any provision of this
Agreement or any Loan Document shall in any event be effective unless the same
shall be in writing and signed by all parties, and such waiver or consent shall
be effective only in the spe­cific instance and for the specific purpose for
which given.

 

10.2.        Notices

 

All notices,
requests and demands to or upon the respective parties to the Loan Documents to
be effective shall be in writing and, unless otherwise expressly provided
therein, shall be deemed to have been duly given, made and received (i) when
delivered by hand, (ii) one Business Day after having been sent by overnight
courier service, (iii) five days after being deposited with the United States
Postal Service as certified or registered mail, with first-class postage and
fees prepaid, or, (iv) when sent by facsimile transmission upon electronic confirmation
of receipt, addressed as follows in the case of the Borrower or the Bank or
addressed to such other addresses as to which the Bank may be hereafter
notified by the respective parties thereto or any future holders of the Note:

 

50

 

The Borrower:

 

Meta Group Inc.

208 Harbor Drive

Stamford,
Connecticut   06912

Attention:   Bernard Denoyer

Telephone:   (203) 973-6813

Telecopy:   (203) 973-6921

 

with a copy to:

 

Valerie A. Seiling, Esq.

Wiggin & Dana

One City Place

185 Asylum Street

Hartford,
Connecticut  06103-3402

 

The Bank:

 

The Bank of New
York

10 Mason Street

Greenwich,
Connecticut 06830

Attention:   Mark Sicinski,

Vice President

Telephone:    (203)
863-2794

Telecopy:      (203) 863-2610

 

except that any notice,
request or demand by the Borrower to or upon the Bank pursuant to Sections 2.5
or 3.3 and any notice by either party of a change of address shall not be
effective until received.  Any party to
a Loan Document may rely on signatures of the parties thereto which are
transmitted by facsimile or other electronic means as fully as if originally
signed.

 

10.3.        No Waiver; Cumulative Remedies

 

No failure to exercise and no delay in exercising, on
the part of the Bank, any right, remedy, power or privilege under any Loan
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege under any Loan Document
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.  The
rights, remedies, powers and privileges under the Loan Documents are cumulative
and not exclusive of any rights, remedies, powers and privileges provided by
law.

 

51

 

10.4.        Survival of Representations and
Warranties and Certain Obligations

 

(a)           All
representations and warranties made under the Loan Documents and in any
document, certificate or statement delivered pursuant thereto or in connection
therewith shall survive the execution and delivery of the Loan Documents.

 

(b)           The
obligations of the Borrower under Sections 3.4, 3.5, 3.6 (to the extent that
such obligations under Sections 3.5 and 3.6 arose prior to the termination of
the Revolving Credit Commitment and the payment of the Loans), 3.9 and 10.5
shall survive the termination of the Revolving Credit Commitment and the
payment of the Loans and all other amounts payable under the Loan Documents.

 

10.5.        Expenses

 

The Borrower agrees, promptly upon presentation of a
statement or invoice therefor, and whether or not any Loan is made or any
Letter of Credit is issued (i) to pay or reimburse the Bank for all its
out-of-pocket costs and expenses reasonably incurred in connection with the
development, preparation and execution of, the Loan Documents and any
amendment, supplement or modification thereto (whether or not executed or
effective), any documents prepared in connection therewith and the consummation
of the transactions contemplated thereby, including without limitation the
reasonable fees and disbursements of Special Counsel, (ii) to pay or reimburse
the Bank for the cost of all audits undertaken from time to time with respect
to any Collateral (provided that prior to the occurrence of an Event of Default
the Borrower shall not be obligated to pay for the cost of audits undertaken
more frequently than once per year), all costs incurred by the Bank to perfect
its Lien in the Collateral, and any costs or expenses incurred by the Bank in
protecting its interest in the Collateral, (iii) to pay or reimburse the Bank
for all of its costs and expenses, including, without limitation, reasonable
fees and disbursements of Special Counsel or any other counsel, incurred in
connection with (A) any Default or Event of Default and any enforcement or collection
proceedings resulting therefrom or in connection with the negotiation of any
restructuring or “work-out” (whether consummated or not) of the obligations of
any Credit Party under any of the Loan Documents and (B) the enforcement of
this section, and (iv) to pay, indemnify and hold the Bank and each of its
officers, directors and employees harmless from and against any and all other
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including, without limitation, reasonable counsel fees and
disbursements) with respect to the enforcement and performance of the Loan
Documents, the use of the proceeds of the Loans and the enforcement and
performance of the provisions of any subordination agreement involving the Bank
(all the foregoing in this clause (iv), collectively, the “Indemnified
Liabilities”) and, if and to the extent that the foregoing indemnity may be
unenforceable for any reason, the Borrower agrees to make the maximum payment
not prohibited under applicable law,provided, however, that the
Borrower shall have no obligation to pay Indemnified Liabilities to the Bank
arising from the finally adjudicated gross negligence or willful misconduct of
the Bank or claims between one indemnified party and another indemnified party.

 

52

 

10.6.        Successors and Assigns

 

This Agreement, the Note and the other Loan Documents
to which any Credit Party is a party shall be binding upon and inure to the
benefit of such Credit Party and the Bank, all future holders of the Note and
their respective successors and assigns, provided, however, that such Credit
Party may neither delegate its liabilities and obligations, nor assign its
rights and benefits, under any Loan Document to any Person.  Notwithstanding anything to the contrary
contained in this Section, the Bank may at any time or from time to time assign
all or any portion of its rights under the Loan Documents to a Federal Reserve
Bank, provided  that any such assignment shall not release such
assignor from its obligations thereunder.

 

10.7.        Counterparts

 

Each Loan Document (other than the Note) may be
executed by one or more of the parties thereto on any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same document. 
It shall not be necessary in making proof of any Loan Document to
produce or account for more than one counterpart signed by the party to be
charged.  A counterpart of any Loan
Document and of any an amendment, modification, consent or waiver to or of any
Loan Document transmitted by facsimile shall be deemed to be an originally
executed counterpart.

 

10.8.        Set-off

 

In addition to any rights and remedies of the Bank
provided by law, upon the occurrence of an Event of Default and the
acceleration of the obligations owing in connection with the Loan Documents, or
at any time upon the occurrence and during the continuance of an Event of Default
under Sections 9.1(a) or (b), the Bank shall have the right, without prior
notice to the Borrower or any other Credit Party, any such notice being
expressly waived by the Borrower and each other Credit Party to the extent not
prohibited by applicable law, to set-off and apply against any indebtedness,
whether matured or unmatured, of the Borrower or such other Credit Party, as
the case may be, to the Bank any amount owing from the Bank to the Borrower or
such other Credit Party, as the case may be, at, or at any time after, the
happening of any of the above–mentioned events.  To the extent not prohibited by applicable law, the aforesaid
right of set-off may be exercised by the Bank against the Borrower or such
other Credit Party, as the case may be, or against any trustee in bankruptcy,
custodian, debtor in possession, assignee for the benefit of creditors,
receiver, or execution, judgment or attachment creditor of the Borrower or such
other Credit Party, as the case may be, or against anyone else claiming through
or against the Borrower or such other Credit Party, as the case may be, or such
trustee in bankruptcy, custodian, debtor in possession, assignee for the
benefit of creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by the Bank prior to the making, filing or issuance, or service upon
the Bank of, or of notice of, any such petition, assignment for the benefit of
creditors, appointment or application for the appointment of a receiver, or
issuance of execution, subpoena, order or warrant.  The Bank agrees promptly to notify the Borrower after any such
set-off and 

 

53

 

application made by the Bank, provided that the failure to give such
notice shall not affect the validity of such set-off and application.

 

10.9.        Construction

 

Each party to a Loan Document represents that it has
been represented by counsel in connection with the Loan Documents and the transactions
contemplated thereby and that the principle that agreements are to be construed
against the party drafting the same shall be inapplicable.

 

10.10.      Governing Law

 

The Loan Documents and the rights and obligations of
the parties thereunder shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of New York, without regard to
principles of conflict of laws, but including Section 5-1401 of the General
Obligations Law.

 

10.11.      Headings Descriptive

 

Section headings have been inserted in the Loan
Documents for convenience only and shall not be construed to be a part thereof.

 

10.12.      Severability

 

Every provision of the Loan Documents is intended to
be severable, and if any term or provision thereof shall be invalid, illegal or
unenforceable for any reason, the validity, legality and enforceability of the
remaining provisions thereof shall not be affected or impaired thereby.

 

10.13.      Integration

 

All exhibits to a Loan Document shall be deemed to be
a part thereof.  Except for agreements
between the Bank and the Borrower with respect to certain fees, the Loan
Documents embody the entire agreement and understanding between the Borrower
and the Bank with respect to the subject matter thereof and supersede all prior
agreements and understandings between the Borrower and the Bank with respect to
the subject matter thereof.

 

10.14.      Consent to Jurisdiction

 

Each Credit Party hereby irrevocably submits to the
jurisdiction of any New York State or Federal court sitting in the City of New
York over any suit, action or proceeding arising out of or relating to the Loan
Documents.  Each Credit Party hereby
irrevocably waives, to the fullest extent permitted or not prohibited by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in such a court and any claim that any
such suit, action or proceeding brought in such a court has been brought in an
inconvenient forum.  Each Credit Party
hereby agrees that a final judgment in any such suit,

 

54

 

action or proceeding brought in such a court, after all appropriate
appeals, shall be conclusive and binding upon it.

 

10.15.      Service of Process

 

Each party to a Loan Document hereby irrevocably
consents to the service of process in any suit, action or proceeding by sending
the same by first class mail, return receipt requested or by overnight courier
service, to the address of such party set forth in Section 10.2 or in the
applicable Loan Document executed by such party.  Each party to a Loan Document hereby agrees that any such service
(i) shall be deemed in every respect effective service of process upon it in
any such suit, action, or proceeding, and (ii) shall to the fullest extent
enforceable by law, be taken and held to be valid personal service upon and
personal delivery to it.

 

10.16.      No Limitation on Service or Suit

 

Nothing in the Loan Documents or any modification,
waiver, consent or amendment thereto shall affect the right of the Bank to
serve process in any manner permitted by law or limit the right of the Bank to
bring proceedings against any Credit Party in the courts of any jurisdiction or
jurisdictions in which such Credit Party may be served.

 

10.17.      WAIVER OF TRIAL BY JURY

 

EACH OF THE BANK AND THE CREDIT PARTIES HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN
CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREIN.  FURTHER, EACH CREDIT PARTY
HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF THE BANK, OR COUNSEL TO THE
BANK, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD NOT, IN THE
EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
PROVISION.  EACH CREDIT PARTY
ACKNOWLEDGES THAT THE BANK HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, INTER
ALIA, THE PROVISIONS OF THIS SECTION.

 

[THE REMAINDER OF
THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK.]

 

55

 

IN WITNESS
WHEREOF, the parties hereto have caused this Amended and Restated Credit
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.

 

	
   

  	
  META GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John A. Piontkowski

  	
   

  
	
   

  	
  Name:

  	
  John A. Piontkowski

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President
  and Chief

  	
   

  
	
   

  	
  Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark J. Sicinski

  	
   

  
	
   

  	
   

  	
  Mark J. Sicinski,

  
	
   

  	
   

  	
  Vice President

  
					

 

56

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