Document:

Exhibit 10.2

 

SECURITY
AGREEMENT

 

This SECURITY AGREEMENT (this
“Agreement”) is dated as of October 8,
2008 and entered into by and among QUIDEL CORPORATION,
a Delaware corporation (“Borrower”),
each of THE UNDERSIGNED DIRECT AND INDIRECT
SUBSIDIARIES of Borrower (each of such undersigned Subsidiaries
being a “Subsidiary Grantor” and
collectively “Subsidiary Grantors”)
and each ADDITIONAL GRANTOR that may become a
party hereto after the date hereof in accordance with Section 21 hereof
(each of Borrower, each Subsidiary Grantor, and each Additional Grantor being a
“Grantor” and collectively the “Grantors”) and BANK OF
AMERICA, N.A., as Agent for and representative of (in such capacity
herein called “Secured Party”) the
Beneficiaries (as hereinafter defined).

 

PRELIMINARY
STATEMENTS

 

A.            Pursuant to the Credit
Agreement dated as of October 8, 2008 (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the “Credit Agreement;” the terms defined
therein and not otherwise defined in Section 31, the UCC or elsewhere
herein being used herein as therein defined), by and among Borrower, the
financial institutions listed therein as Lenders, U.S. Bank N.A., as
Syndication Agent, and Bank of America, N.A., as Agent (in such capacity, “Agent”),
Lenders have made certain commitments, subject to the terms and conditions set
forth in the Credit Agreement, to extend certain credit facilities to Borrower.

 

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

 

C.            Any Loan Party may
from time to time enter, or may from time to time have entered, into one or
more Secured Cash Management Agreements with one or more Cash Management Banks
in accordance with the terms of the Credit Agreement, and it is desired that
the obligations of Loan Parties under the Secured Cash Management Agreements,
together with all obligations of Borrower under the Credit Agreement and the
other Loan Documents, be secured hereunder.

 

D.            Subsidiary Grantors
have executed and delivered the Subsidiary Guaranty, in each case in favor of
Secured Party for the benefit of Lenders, any Hedge Banks and any Cash
Management Banks, pursuant to which each Subsidiary Grantor has guarantied the
prompt payment and performance when due of all obligations of Borrower under
the Credit Agreement and all obligations of Loan Parties under the Secured
Hedge Agreements and Secured Cash Management Agreements.

 

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

 

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

 

SECTION 1.         Grant of Security.

 

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

 

(a)           all Accounts;

 

(b)           all Chattel Paper;

 

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

 

(d)           all Documents;

 

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

 

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

 

(g)           all Instruments;

 

(h)           all Investment
Property;

 

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

 

(j)            all Records;

 

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

 

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

 

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

 

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Notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and no Grantor shall be deemed to have granted a security
interest in, any of such Grantor’s rights or interests in or under, any
license, contract, permit, Instrument, Security or franchise to which such
Grantor is a party or any of its rights or interests thereunder to the extent,
but only to the extent, that such a grant would, under the terms of such
license, contract, permit, Instrument, Security or franchise, result in a
breach of the terms of, or constitute a default under, such license, contract,
permit, Instrument, Security or franchise (other than to the extent that any
such term would be rendered ineffective pursuant to the UCC or any other
applicable law (including the Bankruptcy Code) or principles of equity); provided,
that immediately upon the ineffectiveness, lapse or termination of any such
provision the Collateral shall include, and such Grantor shall be deemed to
have granted a security interest in, all such rights and interests as if such
provision had never been in effect.

 

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

 

SECTION 2.         Security for Obligations.

 

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

 

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

 

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

 

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in each case together with all extensions or renewals thereof, whether
for principal, interest, reimbursement of amounts drawn under Letters of
Credit, payments for early termination of Secured Hedge Agreements, fees,
expenses, indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion
of such obligations or liabilities that are paid, to the extent all or any part
of such payment is avoided or recovered directly or indirectly from Secured
Party or any Lender or Hedge Bank or Cash Management Bank as a preference,
fraudulent transfer or otherwise, and all obligations of every nature of
Grantors now or hereafter existing under this Agreement (including, without
limitation, interest and other amounts that, but for the filing of a petition
in bankruptcy with respect to Borrower or any other Grantor, would accrue on
such obligations, whether or not a claim is allowed against Borrower or such
Grantor for such amounts in the related bankruptcy proceeding).

 

SECTION 3.         Grantors Remain Liable.

 

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

 

SECTION 4.         Representations and Warranties.

 

Each Grantor represents and warrants as follows:

 

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

 

(b)           Perfection. 
The security interests in the Collateral granted to Secured Party for
the ratable benefit of Lenders, Hedge Banks and Cash Management Banks hereunder
constitute valid security interests in the Collateral, securing the payment of
the Secured Obligations.  Upon (i) the
filing of UCC financing statements naming each Grantor as “debtor”, naming
Secured Party as “secured party” and describing the Collateral in the filing
offices with respect to such Grantor set forth on Schedule 2 annexed
hereto, (ii) in the case of the Securities Collateral consisting of
certificated Securities or evidenced by Instruments, in addition to filing of
such UCC financing statements, delivery of the certificates representing such
certificated Securities and delivery of such Instruments to Secured Party, and
in the case of Securities Collateral issued by a foreign issuer, any actions
required under foreign law to perfect a security interest in such Securities
Collateral), in each case duly endorsed or accompanied by duly

 

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executed instruments of assignment or transfer in
blank, (iii) in the case of the Intellectual Property Collateral described
in clause (a) of the definition thereof, in addition to the filing of such
UCC financing statements, the recordation of a Grant with the applicable IP
Filing Office, (iv) in the case of Equipment that is covered by a
certificate of title, the filing with the registrar of motor vehicles or other
appropriate authority in the applicable jurisdiction of an application
requesting the notation of the security interest created hereunder on such
certificate of title, (v), in the case of any Deposit Account and any
Investment Property constituting a Security Entitlement, Securities Account,
Commodity Contract or Commodity Account, the execution and delivery to Secured
Party of an agreement providing for control by Secured Party thereof, (vi) in
the case of Letter-of-Credit Rights (other than Letter-of-Credit Rights
consisting of Supporting Obligations for Collateral as to which Secured Party
otherwise has a perfected security interest), the issuer of the applicable
letter of credit has consented to the assignment of proceeds thereof under Section 5114(c) of
the UCC, and (vii) in the case of commercial tort claims, the sufficient
identification thereof in filed UCC financing statements, the security
interests in the Collateral (except for security interests in Collateral that
cannot be perfected by the filing of financing statements and are not material
to the Company) granted to Secured Party for the ratable benefit of Lenders,
Hedge Banks and Cash Management Banks will constitute perfected security
interests therein prior to all other Liens (except for Liens permitted by
clauses (b) through (i) of subsection 7.1 of the Credit Agreement),
and all filings and other actions required under this Agreement and necessary
or desirable to perfect and protect such security interests have been duly made
or taken.

 

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

 

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

 

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

 

(f)            Securities Collateral.  All of the Pledged Subsidiary Equity set
forth on Schedule 6 annexed hereto has been duly authorized and validly
issued and is fully paid and

 

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

 

(g)           Intellectual Property Collateral.  A true and complete list of all Trademark
Registrations and applications for any Trademark owned, held or used by such
Grantor, in whole or in part (other than those held or used pursuant to a
license and those not yet required to be set forth on an update to Schedule
5.17(a) to the Credit Agreement pursuant to Section 6.2(g) of
the Credit Agreement), is set forth on Schedule 8 annexed hereto; a true
and complete list of all Patents owned, held or used by such Grantor, in whole
or in part (other than those held or used pursuant to a license and those not
yet required to be set forth on an update to Schedule 5.17(a) to
the Credit Agreement pursuant to Section 6.2(g) of the Credit
Agreement), is set forth on Schedule 9 annexed hereto; a true and
complete list of all Copyright Registrations and applications for Copyright
Registrations held by such Grantor, in whole or in part (other than those held
pursuant to a license and those not yet required to be set forth on an update to
Schedule 5.17(a) to the Credit Agreement pursuant to Section 6.2(g) of
the Credit Agreement), is set forth on Schedule 10 annexed hereto; and
such Grantor is not aware of any material pending or threatened claim by any
third party that any of the Intellectual Property Collateral owned, held or
used by such Grantor is invalid or unenforceable.

 

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

 

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

 

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

 

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

 

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

 

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SECTION 5.         Further Assurances.

 

(a)           Generally. 
Each Grantor agrees that from time to time, at the expense of Grantors,
such Grantor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Secured Party may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable
Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.  Without
limiting the generality of the foregoing, each Grantor will:  (i) notify Secured Party in writing of
receipt by such Grantor of any interest in Chattel Paper having a value or face
amount in excess of $25,000 and at the request of Secured Party, mark
conspicuously each item of Chattel Paper and each of its records pertaining to
the Collateral, with a legend, in form and substance satisfactory to Secured
Party, indicating that such Collateral is subject to the security interest
granted hereby, (ii) deliver to Secured Party all promissory notes and
other Instruments having a value or face amount in excess of $25,000 and, at
the request of Secured Party, all original counterparts of Chattel Paper, duly
endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to Secured Party, (iii) (A) execute
(if necessary) and file such financing or continuation statements, or
amendments thereto, (B) execute and deliver, and cause to be executed and
delivered, agreements establishing that Secured Party has control of Deposit
Accounts other than Excluded Accounts and Investment Property of such Grantor, (C) deliver
such documents, instruments, notices, records and consents, and take such other
actions, necessary to establish that secured party has control over electronic
Chattel Paper and Letter-of-Credit Rights of such Grantor and (D) deliver
such other instruments or notices, in each case, as may be necessary or
desirable, or as Secured Party may request, in order to perfect and preserve
the security interests granted or purported to be granted hereby, (iv) furnish
to Secured Party from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as Secured Party may reasonably request, all in reasonable detail, (v) at
any reasonable time, upon request by Secured Party, exhibit the Collateral to
and allow inspection of the Collateral by Secured Party, or persons designated
by Secured Party, (vi) at Secured Party’s request, appear in and defend
any action or proceeding that may affect such Grantor’s title to or Secured
Party’s security interest in all or any part of the Collateral, and (vii) use
commercially reasonable efforts to obtain any necessary consents of third
parties to the creation and perfection of a security interest in favor of
Secured Party with respect to any Collateral. 
Each Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all
or any part of the Collateral (including any financing statement indicating
that it covers “all assets” or “all personal property” of such Grantor) without
the signature of any Grantor.

 

(b)           Securities Collateral.  Without limiting the generality of the
foregoing Section 5(a), each Grantor agrees that (i) all certificates
or Instruments representing or evidencing the Securities Collateral having a
value or face amount in excess of $25,000 shall be delivered to and held by or
on behalf of Secured Party pursuant hereto and shall be in suitable form for
transfer by delivery or, as applicable, shall be accompanied by such Grantor’s
endorsement, where necessary, or duly executed instruments of transfer or
assignments in blank, all in form and substance satisfactory to Secured Party
and (ii) it will, upon obtaining any additional Equity Interests or
Indebtedness having a value or face amount in excess of $25,000, promptly (and
in any event within five Business Days) deliver to Secured Party a Pledge
Supplement, duly executed by such Grantor, in respect of such additional
Pledged Equity or Pledged Debt; provided, that the failure of any
Grantor to execute a Pledge Supplement with

 

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respect to any additional Pledged Equity or Pledged
Debt shall not impair the security interest of Secured Party therein or
otherwise adversely affect the rights and remedies of Secured Party hereunder
with respect thereto.  Upon each such
acquisition, the representations and warranties contained in Section 4(f) hereof
shall be deemed to have been made by such Grantor as to such Pledged Equity or
Pledged Debt, whether or not such Pledge Supplement is delivered.

 

(c)           Intellectual Property Collateral.  As soon as available but in any event within
30 days after the end of each fiscal year, Borrower shall deliver any update to
Schedule 5.17(a) to the Credit Agreement required by Section 6.2(g) of
the Credit Agreement and, together therewith, with respect to any registered
Intellectual Property Collateral acquired by a Grantor during the fiscal year
covered by such update, such Grantor shall execute and deliver to Secured Party
an IP Supplement, and submit a Grant for recordation with respect thereto in
the applicable IP Filing Office; provided, the failure of any Grantor to
execute an IP Supplement or submit a Grant for recordation with respect to any
additional Intellectual Property Collateral shall not impair the security
interest of Secured Party therein or otherwise adversely affect the rights and
remedies of Secured Party hereunder with respect thereto.  Upon delivery to Secured Party of an IP
Supplement, Schedules 8, 9 and 10 annexed hereto and Schedule A
to each Grant, as applicable, shall be deemed modified to include a reference
to any right, title or interest in any existing Intellectual Property
Collateral or any Intellectual Property Collateral set forth on Schedule A
to such IP Supplement.  Upon each such
acquisition, the representations and warranties contained in Section 4(g) hereof
shall be deemed to have been made by such Grantor as to such Intellectual
Property Collateral.

 

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

 

SECTION 6.         Certain Covenants of Grantors.

 

Each Grantor shall:

 

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

 

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

 

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

 

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

 

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

 

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

 

Each Grantor shall:

 

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

 

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

 

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

 

SECTION 8.         Special
Covenants with respect to Accounts.

 

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

 

(b)           Except as otherwise provided in this
subsection (b), each Grantor shall continue to collect, at its own expense, all
amounts due or to become due to such Grantor under the Accounts.  In connection with such collections, each
Grantor may take (and, upon the occurrence and during the continuance of an
Event of Default at Secured Party’s direction, shall take) such action as such
Grantor or Secured Party may deem necessary or advisable to enforce collection
of amounts due or to become due under the Accounts; provided, however,
that Secured Party shall have the right at any time, upon the occurrence and
during the continuation of an Event of Default and upon written notice to such
Grantor of its intention to do so, to (i) notify the account debtors or
obligors under any Accounts of the assignment of such Accounts to Secured Party
and to direct such account debtors or obligors to make payment of all amounts
due or to become due to such Grantor thereunder directly to Secured Party, (ii) notify
each Person maintaining a lockbox or similar arrangement to which account
debtors or obligors under any Accounts have been directed to make payment to
remit all amounts representing collections on checks and other payment items
from time to time sent to or deposited in such lockbox or other arrangement
directly to Secured Party, (iii) enforce collection of any such Accounts
at the expense of Grantors, and (iv) adjust, settle or compromise the
amount or payment thereof, in the

 

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same manner and to the same extent as such Grantor
might have done.  After receipt by such
Grantor of the notice from Secured Party referred to in the proviso to the
preceding sentence, (A) all amounts and proceeds (including checks and
other Instruments) received by such Grantor in respect of the Accounts shall be
received in trust for the benefit of Secured Party hereunder, shall be
segregated from other funds of such Grantor and shall be forthwith paid over or
delivered to Secured Party in the same form as so received (with any necessary
endorsement) to be held as cash Collateral and applied as provided by Section 17
hereof, and (B) such Grantor shall not, without the written consent of Secured
Party, adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.

 

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

 

(a)           Form of Securities
Collateral.  Secured Party shall have the right at any
time to exchange certificates or instruments representing or evidencing
Securities Collateral for certificates or instruments of smaller or larger
denominations.  If any Securities
Collateral is not a security pursuant to Section 8-103 of the UCC, no
Grantor shall take any action that, under such Section, converts such
Securities Collateral into a security without causing the issuer thereof to
issue to it certificates or instruments evidencing such Securities Collateral,
which it shall promptly deliver to Secured Party as provided in this Section 9(a).

 

(b)           Covenants. 
Each Grantor shall (i) not, except as expressly permitted by the
Credit Agreement, permit any issuer of Pledged Subsidiary Equity to merge or
consolidate unless all the outstanding Equity Interests of the surviving or
resulting Person are, upon such merger or consolidation, subject to the
provisions of the last paragraph of Section 1 pledged and become Collateral
hereunder and no cash, securities or other property is distributed in respect
of the outstanding Equity Interests of any other constituent corporation; (ii) cause
each issuer of Pledged Subsidiary Equity not to issue Equity Interests in
addition to or in substitution for the Pledged Subsidiary Equity issued by such
issuer, except to such Grantor; (iii) immediately upon its acquisition
(directly or indirectly) of any Equity Interests, including additional Equity
Interests in each issuer of Pledged Equity, comply with Section 5(b) subject
to the provisions of the last paragraph of Section 1; (iv) immediately
upon issuance of any and all Instruments or other evidences of additional
Indebtedness from time to time owed to such Grantor by any obligor on the Pledged
Debt, comply with Section 5; (v) promptly deliver to Secured Party
all written notices received by it with respect to the Securities Collateral; (vi) at
its expense (A) perform and comply in all material respects with all terms
and provisions of any agreement related to the Securities Collateral required
to be performed or complied with by it, (B) maintain all such agreements
in full force and effect and (C) enforce all such agreements in accordance
with their terms; and (vii) at the request of Secured Party, promptly
execute and deliver to Secured Party an agreement providing for control by
Secured Party of all Securities Entitlements, Securities Accounts, Commodity
Contracts and Commodity Accounts of such Grantor.

 

(c)           Voting and Distributions. 
So long as no Event of Default shall have occurred and be continuing, (i) each
Grantor shall be entitled to exercise any and all voting and other consensual
rights pertaining to the Securities Collateral or any part thereof for any
purpose not prohibited by the terms of this Agreement or the Credit Agreement; provided,
no Grantor shall exercise or refrain from exercising any such right if Secured
Party shall have notified such

 

10

 

Grantor that, in Secured Party’s judgment, such action
would have a material adverse effect on the value of the Securities Collateral
or any part thereof; and (ii) each Grantor shall be entitled to receive
and retain any and all dividends, other distributions, principal and interest
paid in respect of the Securities Collateral.

 

Upon the occurrence and during the continuation of an Event of Default,
(x) upon written notice from Secured Party to any Grantor, all rights of
such Grantor to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant hereto shall cease, and all such
rights shall thereupon become vested in Secured Party who shall thereupon have
the sole right to exercise such voting and other consensual rights; (y) except
as otherwise specified in the Credit Agreement, upon written notice from
Secured Party to any Grantor of any exercise of remedies under Section 8.2
of the Credit Agreement, all rights of such Grantor to receive the dividends,
other distributions, principal and interest payments which it would otherwise
be authorized to receive and retain pursuant hereto shall cease, and all such
rights shall thereupon become vested in Secured Party who shall thereupon have
the sole right to receive and hold as Collateral such dividends, other
distributions, principal and interest payments; and (z) all dividends,
principal, interest payments and other distributions which are received by such
Grantor contrary to the provisions of clause (y) above shall be received
in trust for the benefit of Secured Party, shall be segregated from other funds
of such Grantor and shall forthwith be paid over to Secured Party as Collateral
in the same form as so received (with any necessary endorsements).

 

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

 

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

 

(a)           Each Grantor shall:

 

(i)            use reasonable efforts so as not to permit the inclusion
in any contract to which it hereafter becomes a party of any provision that
could or might in any way impair or prevent the creation of a security interest
in, or the assignment of, such

 

11

 

Grantor’s rights and interests in any property included within the
definitions of any Intellectual Property Collateral acquired under such
contracts;

 

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

 

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

 

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

 

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

 

(c)           Each Grantor shall have the duty
diligently, through counsel reasonably acceptable to Secured Party, to
prosecute, file and/or make, unless and until such Grantor, in its commercially
reasonable judgment, decides otherwise, (i) any application for
registration relating to any of the Intellectual Property Collateral owned,
held or used by such Grantor and set forth on Schedules 8, 9 or 10
annexed hereto, as applicable, that is pending as of the date of this
Agreement, (ii) any Copyright Registration on any existing or future
unregistered but

 

12

 

copyrightable works (except for works of nominal
commercial value or with respect to which such Grantor has determined in the
exercise of its commercially reasonable judgment that it shall not seek
registration), (iii) any application on any future patentable but
unpatented innovation or invention comprising Intellectual Property Collateral,
and (iv) any Trademark opposition and cancellation proceedings, renew
Trademark Registrations and Copyright Registrations and do any and all acts
which are necessary or desirable to preserve and maintain all rights in all
Intellectual Property Collateral.  Any
expenses incurred in connection therewith shall be borne solely by
Grantors.  Subject to the foregoing, each
Grantor shall give Secured Party prior written notice of any abandonment of any
material Intellectual Property Collateral.

 

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

 

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

 

SECTION 11.               Collateral Account.

 

(a)         Secured Party is hereby authorized to establish and
maintain as a blocked account under the sole dominion and control of Secured
Party, a restricted Deposit Account designated as “Quidel Corporation
Collateral Account”.  All amounts at any
time held in the Collateral Account shall be beneficially owned by Grantors but
shall be held in the name of Secured Party hereunder, for the benefit of
Beneficiaries, as collateral security for the Secured Obligations upon the
terms and conditions set forth herein. 
Grantors shall have no right to withdraw, transfer or, except as
expressly set forth herein or in the Credit Agreement, otherwise receive any
funds deposited into the Collateral Account. 
Anything contained herein to the contrary notwithstanding, the
Collateral Account shall be subject to such applicable laws, and such
applicable regulations of the Board of Governors of the Federal Reserve System
and of any

 

13

 

other appropriate banking
or Government Authority, as may now or hereafter be in effect.  All deposits of funds in the Collateral
Account shall be made by wire transfer (or, if applicable, by intra-bank
transfer from another account of a Grantor) of immediately available funds, in
each case addressed in accordance with instructions of Secured Party.  Each Grantor shall, promptly after initiating
a transfer of funds to the Collateral Account, give notice to Secured Party by
telefacsimile or E-mail (if and when confirmed by telephone) of the date,
amount and method of delivery of such deposit. 
Cash held by Secured Party in the Collateral Account shall not be
invested by Secured Party but instead shall be maintained as a cash deposit in
the Collateral Account pending application thereof as elsewhere provided in
this Agreement or in the Credit Agreement. 
To the extent permitted under Regulation Q of the Board of Governors of
the Federal Reserve System, any cash held in the Collateral Account shall bear
interest at the standard rate paid by Secured Party to its customers for deposits
of like amounts and terms.  Subject to
Secured Party’s rights hereunder, any interest earned on deposits of cash in
the Collateral Account shall be deposited directly in, and held in, the
Collateral Account.

 

(b)           In the event that Borrower is required to cash
collateralize any Letter of Credit or Letters of Credit pursuant to the Credit
Agreement, other than pursuant to Section 8 of the Credit Agreement, in
which case the provisions of Section 15(c) of this Agreement shall
apply, subject to the provisions of the Credit Agreement, such cash collateral
shall be retained by Secured Party until such time as such Letter of Credit or
Letters of Credit shall have expired or been surrendered and any drawings under
such Letter of Credit or Letters of Credit paid in full, whether by reason of
application of funds in the Collateral Account or otherwise.  Secured Party is authorized to apply any
amount in the Collateral Account to pay any drawing on a Letter of Credit.  Subject to the provisions of Section 15(c) of
this Agreement and the Credit Agreement, if any such cash collateral is no
longer required to be retained in the Collateral Account, it shall be paid by
Secured Party to Borrower or at Borrower’s direction.

 

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

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

SECTION 13.       Secured
Party May Perform.

 

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

 

SECTION 14.       Standard
of Care.

 

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

 

SECTION 15.       Remedies.

 

(a)           Generally. 
If any Event of Default shall have occurred and be continuing, Secured
Party may, subject to Section 20 hereof, 
exercise in respect of the Collateral, in addition to all other rights
and remedies provided for herein or otherwise available to it, all the rights
and

 

15

 

remedies of a secured party on default under the UCC
(whether or not the UCC applies to the affected Collateral), and also may (i) require
each Grantor to, and each Grantor hereby agrees that it will at its expense and
upon request of Secured Party forthwith, assemble all or part of the Collateral
as directed by Secured Party and make it available to Secured Party at a place
to be designated by Secured Party that is reasonably convenient to both
parties, (ii) enter onto the property where any Collateral is located and
take possession thereof with or without judicial process, (iii) prior to
the disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Secured Party deems appropriate, (iv) take possession of any
Grantor’s premises or place custodians in exclusive control thereof, remain on
such premises and use the same and any of such Grantor’s equipment for the
purpose of completing any work in process, taking any actions described in the
preceding clause (iii) and collecting any Secured Obligation, (v) without
notice except as specified below, sell the Collateral or any part thereof in
one or more parcels at public or private sale, at any of Secured Party’s
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as Secured Party
may deem commercially reasonable, (vi) exercise dominion and control over
and refuse to permit further withdrawals from any Deposit Account maintained
with Secured Party or any Lender and provide instructions directing the disposition
of funds in Deposit Accounts not maintained with Secured Party or any Lender
and (vii) provide entitlement orders with respect to Security Entitlements
and other Investment Property constituting a part of the Collateral and,
without notice to any Grantor, transfer to or register in the name of Secured
Party or any of its nominees any or all of the Securities Collateral.  Secured Party or any Lender, Hedge Bank or
Cash Management Bank may be the purchaser of any or all of the Collateral at
any such sale and Secured Party, as agent for and representative of Lenders,
Hedge Banks and Cash Management Banks (but not any Lender, Hedge Bank or Cash
Management Bank in its individual capacity unless Requisite Obligees shall
otherwise agree in writing), shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of
the Collateral sold at any such public sale, to use and apply any of the
Secured Obligations as a credit on account of the purchase price for any
Collateral payable by Secured Party at such sale.  Each purchaser at any such sale shall hold
the property sold absolutely free from any claim or right on the part of any
Grantor, and each Grantor hereby waives (to the extent permitted by applicable
law) all rights of redemption, stay and/or appraisal which it now has or may at
any time in the future have under any rule of law or statute now existing
or hereafter enacted.  Each Grantor
agrees that, to the extent notice of sale shall be required by law, at least
ten days’ notice to such Grantor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification.  Secured Party shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given.  Secured Party may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. 
Each Grantor hereby waives any claims against Secured Party arising by
reason of the fact that the price at which any Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale, even if Secured Party accepts the first offer received and does
not offer such Collateral to more than one offeree.  If the proceeds of any sale or other
disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantors shall be jointly and severally liable for the deficiency
and the fees of any attorneys employed by Secured Party to collect such
deficiency.  Each Grantor further agrees

 

16

 

that a breach of any of the covenants contained in
this Section 15 will cause irreparable injury to Secured Party, that
Secured Party has no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section shall
be specifically enforceable against such Grantor, and each Grantor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no default has occurred
giving rise to the Secured Obligations becoming due and payable prior to their
stated maturities.

 

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

 

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

 

17

 

SECTION 16.       Additional
Remedies for Intellectual Property Collateral.

 

(a)           Anything contained herein to the contrary
notwithstanding, upon the occurrence and during the continuation of an Event of
Default, (i) Secured Party shall have the right (but not the obligation)
to bring suit, in the name of any Grantor, Secured Party or otherwise, to
enforce any Intellectual Property Collateral, in which event each Grantor
shall, at the request of Secured Party, do any and all lawful acts and execute
any and all documents required by Secured Party in aid of such enforcement and
each Grantor shall promptly, upon demand, reimburse and indemnify Secured Party
as provided in subsections 10.4 and 10.5 of the Credit Agreement and Section 18
hereof, as applicable, in connection with the exercise of its rights under this
Section 16, and, to the extent that Secured Party shall elect not to bring
suit to enforce any Intellectual Property Collateral as provided in this
Section, each Grantor agrees to use all reasonable measures, whether by action,
suit, proceeding or otherwise, to prevent the infringement of any of the
material Intellectual Property Collateral by others and for that purpose agrees
to use its commercially reasonable judgment in maintaining any action, suit or
proceeding against any Person so infringing reasonably necessary to prevent
such infringement; (ii) upon written demand from Secured Party, each
Grantor shall execute and deliver to Secured Party an assignment or assignments
of the Intellectual Property Collateral and such other documents as are
necessary or appropriate to carry out the intent and purposes of this
Agreement; (iii) each Grantor agrees that such an assignment and/or
recording shall be applied to reduce the Secured Obligations outstanding only
to the extent that Secured Party (or any Lender) receives cash proceeds in
respect of the sale of, or other realization upon, the Intellectual Property
Collateral; and (iv) within five Business Days after written notice from
Secured Party, each Grantor shall make available to Secured Party, to the
extent within such Grantor’s power and authority, such personnel in such
Grantor’s employ as Secured Party may reasonably designate, by name, title or
job responsibility, to permit such Grantor to continue, directly or indirectly,
to produce, advertise and sell the products and services sold or delivered by
such Grantor under or in connection with the Trademarks, Trademark
Registrations and Trademark Rights, such persons to be available to perform
their prior functions on Secured Party’s behalf and to be compensated by
Secured Party at such Grantor’s expense on a per diem, pro-rata basis
consistent with the salary and benefit structure applicable to each as of the
date of such Event of Default.

 

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

 

18

 

SECTION 17.               Application of Proceeds.

 

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

 

SECTION 18.               Indemnity and Expenses.

 

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

 

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

 

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

 

SECTION 19.               Continuing Security Interest; Transfer of Loans; Termination and Release.

 

(a)        This Agreement shall create a continuing security
interest in the Collateral and shall (i) remain in full force and effect
until the payment in full of the Secured Obligations, the cancellation or
termination of the Commitments and the cancellation or expiration of all
outstanding Letters of Credit (or the securing of reimbursement Obligations in
respect thereof with cash collateral or letters of credit in a manner
satisfactory to Secured Party), (ii) be binding upon Grantors and their
respective successors and assigns, and (iii) inure, together with the
rights and remedies of Secured Party hereunder, to the benefit of Secured Party
and its successors, transferees and assigns. 
Without limiting the generality of the foregoing clause (iii), (A) but
subject to the provisions of subsection 10.6 of the Credit Agreement, any
Lender may assign or otherwise transfer any Loans held by it to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to Lenders herein or otherwise, (B) any
Hedge Bank may assign or otherwise transfer any Secured Hedge Agreement to
which it is a party to any other Person in accordance with the terms of such
Secured Hedge Agreement, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to Hedge Banks herein or
otherwise and (C) any Cash Management Bank may assign or otherwise transfer
any Secured Cash Management Agreement to which it is a party to any other
Person in accordance with the terms of such Secured Cash Management Agreement,
and such other Person shall thereupon become vested with all the benefits in
respect thereof granted to Cash Management Banks herein or otherwise.

 

19

 

(b)        Upon the payment in full of all Secured Obligations,
the cancellation or termination of the Commitments and the cancellation or
expiration of all outstanding Letters of Credit (or the securing of
reimbursement Obligations in respect thereof with cash collateral or letters of
credit in a manner satisfactory to Secured Party), the security interest
granted hereby (other than with respect to any cash collateral in respect of
Letters of Credit) shall terminate and all rights to the Collateral shall
revert to the applicable Grantors.  Upon
any such termination Secured Party will, at Grantors’ expense, execute and
deliver to Grantors such documents as Grantors shall reasonably request to
evidence such termination.  In addition,
upon the proposed sale or other disposition of any Collateral by a Grantor in
accordance with the Credit Agreement for which such Grantor desires a security
interest release from Secured Party, such a release may be obtained pursuant to
the provisions of subsection 9.10 of the Credit Agreement.

 

SECTION 20.               Secured Party as Agent.

 

(a)        Secured Party has been appointed to act as Secured
Party hereunder by Lenders and, by their acceptance of the benefits hereof,
Hedge Banks and Cash Management Banks. 
Secured Party shall be obligated, and shall have the right hereunder, to
make demands, to give notices, to exercise or refrain from exercising any
rights, and to take or refrain from taking any action (including, without
limitation, the release or substitution of Collateral), solely in accordance
with this Agreement and the Credit Agreement; provided that Secured Party shall
exercise, or refrain from exercising, any remedies provided for in Section 15
hereof in accordance with the instructions of Requisite Obligees.  In furtherance of the foregoing provisions of
this Section 20(a), each Hedge Bank and each Cash Management Bank, by its
acceptance of the benefits hereof, agrees that it shall have no right
individually to realize upon any of the Collateral hereunder, it being
understood and agreed by such Hedge Bank that all rights and remedies hereunder
may be exercised solely by Secured Party for the benefit of Lenders, Hedge
Banks and Cash Management Banks in accordance with the terms of this Section 20(a).

 

(b)        Secured Party shall at all times be the same Person
that is Agent under the Credit Agreement. 
Written notice of resignation by Agent pursuant to subsection 9.6 of the
Credit Agreement shall also constitute notice of resignation as Secured Party
under this Agreement; and appointment of a successor Agent pursuant to
subsection 9.6 of the Credit Agreement shall also constitute appointment of a
successor Secured Party under this Agreement. 
Upon the acceptance of any appointment as Agent under subsection 9.6 of
the Credit Agreement by a successor Agent, that successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Secured Party under this Agreement, and the retiring Secured
Party under this Agreement shall promptly (i) transfer to such successor
Secured Party all sums, securities and other items of Collateral held
hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute (if necessary) and
deliver to such successor Secured Party such amendments to financing
statements, and take such other actions, as may be necessary or appropriate in
connection with the assignment to such successor Secured Party of the security
interests created hereunder, whereupon such retiring Secured Party shall be
discharged from its duties and obligations under this Agreement.  After any retiring Agent’s resignation
hereunder as Secured Party, the provisions of this Agreement

 

20

 

shall inure to its benefit as to any actions taken or
omitted to be taken by it under this Agreement while it was Secured Party
hereunder.

 

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

 

SECTION 21.               Additional Grantors.

 

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

 

SECTION 22.               Amendments; Etc.

 

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

 

SECTION 23.               Notices.

 

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

 

21

 

SECTION 24.               Failure or Indulgence Not Waiver; Remedies Cumulative.

 

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

 

SECTION 25.               Severability.

 

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

 

SECTION 26.               Headings.

 

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

 

SECTION 27.               Governing Law; Rules of Construction.

 

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

 

SECTION 28.               Consent to Jurisdiction and Service of Process.

 

ALL JUDICIAL PROCEEDINGS
BROUGHT AGAINST ANY GRANTOR ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR
ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE OF CALIFORNIA.  BY EXECUTING AND DELIVERING THIS AGREEMENT,
EACH GRANTOR, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS
GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH
COURTS; (II) WAIVES ANY DEFENSE OF FORUM
NON CONVENIENS;

 

22

 

(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY
SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, TO SUCH GRANTOR AT ITS ADDRESS PROVIDED IN
ACCORDANCE WITH SECTION 23 HEREOF; (IV) AGREES THAT SERVICE AS
PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL
JURISDICTION OVER SUCH GRANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND
OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES
THAT SECURED PARTY RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST SUCH GRANTOR IN THE COURTS OF
ANY OTHER JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 28
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE
FULLEST EXTENT PERMISSIBLE UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 410.40
OR OTHERWISE.

 

SECTION 29.               Waiver of Jury Trial.

 

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

 

SECTION 30.               Counterparts.

 

This Agreement may be
executed in one or more counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same

 

23

 

instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.

 

SECTION 31.               Definitions.

 

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

 

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

 

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

 

“Beneficiary” means Agent, each Lender, each Hedge
Bank and each Cash Management Bank.

 

“Cash Management Bank” means any Person that, at the time it enters
into a Cash Management Agreement, is a Lender or an Affiliate of a Lender, in
its capacity as a party to such Cash Management Agreement.

 

“Cash Management Agreement”
means any agreement to provide cash management services, including treasury,
depository, overdraft, credit or debit card, electronic funds transfer and
other cash management arrangements.

 

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

 

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

 

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

 

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

 

“Copyrights” means all items under copyright in
various published and unpublished works of authorship including, without
limitation, computer programs, computer data bases,

 

24

 

other computer software layouts, trade dress,
drawings, designs, writings, and formulas (including, without limitation, the
works set forth on Schedule 10 annexed hereto, as the same may be
amended pursuant hereto from time to time).

 

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

 

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

 

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

 

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

 

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

 

“Hedge Bank” means any
Person that, at the time it enters into a Swap Contract permitted under Article VII
of the Credit Agreement, is a Lender or an Affiliate of a Lender, in its
capacity as a party to such Swap Contract.

 

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

 

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

 

(b)           Patents;

 

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

 

25

 

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

 

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

 

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

 

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

 

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

 

“Pledged Equity” means all Equity Interests now or
hereafter owned by a Grantor, including all securities convertible into, and
rights, warrants, options and other rights to purchase or otherwise acquire, any
of the foregoing, including those owned on the date hereof and set forth on Schedule
6 annexed hereto, the certificates or other instruments representing any of
the foregoing and any interest of such Grantor in the entries on the books of
any securities intermediary pertaining thereto and all distributions, dividends
and other property received, receivable or otherwise distributed in respect of
or exchanged therefor but excluding any Equity Interests that would be excluded
from the Collateral on the basis of clause (a) of the last paragraph of Section 1
hereof.

 

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

 

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

 

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

 

“Requisite Obligees” means either (i) Required Lenders
or (ii), after payment in full of all Obligations under the Credit Agreement
and the other Loan Documents, the cancellation or

 

26

 

expiration of all Letters of Credit and the
termination of the Commitments, the holders of a majority of the aggregate
amount then due and payable (exclusive of expenses and similar payments but
including, with respect to Secured Hedge Agreements, any early termination
payments then due) under the Secured Hedge Agreements and Secured Cash
Management Agreements.

 

“Secured Cash Management
Agreement” means any Cash Management Agreement that is entered into
by and between any Loan Party and any Cash Management Bank.

 

“Secured Hedge Agreement” means any Swap Contract permitted under Article VII
of the Credit Agreement that is entered into by and between any Loan Party and
any Hedge Bank.

 

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

 

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

 

“Trademark Registrations” means all registrations that have been
or may hereafter be issued or applied for thereon in the United States and any
state thereof and in foreign countries (including, without limitation, the registrations
and applications set forth on Schedule 8 annexed hereto).

 

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

 

“Trademarks” means all trademarks, service marks,
designs, logos, indicia, tradenames, trade dress, corporate names, company
names, business names, fictitious business names, trade styles and/or other
source and/or business identifiers and applications pertaining thereto, owned
by a Grantor, or hereafter adopted and used, in its business (including,
without limitation, the trademarks specifically set forth on Schedule 8
annexed hereto).

 

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

 

27

 

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

 

	
   

  	
  QUIDEL CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Caren Mason

  
	
   

  	
   

  	
  Name: Caren Mason

  
	
   

  	
   

  	
  Title: President/CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PACIFIC BIOTECH,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Caren Mason

  
	
   

  	
   

  	
  Name: Caren Mason

  
	
   

  	
   

  	
  Title: President/CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  METRA BIOSYSTEMS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Caren Mason

  
	
   

  	
   

  	
  Name: Caren Mason

  
	
   

  	
   

  	
  Title: President/CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  OSTEO SCIENCES
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Caren Mason

  
	
   

  	
   

  	
  Name: Caren Mason

  
	
   

  	
   

  	
  Title: President/CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LITMUS CONCEPTS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Caren Mason

  
	
   

  	
   

  	
  Name: Caren Mason

  
	
   

  	
   

  	
  Title: President/CEO

  

 

S-1

 

Notice Address for each Grantor:

 

10165 McKellar Court

San Diego, CA 92121

Attention: Chief Financial
Officer

Telephone: (858) 552-1100

Facsimile:  (858) 646-8028

Electronic Mail:
jradak@quidel.com

 

with a copy to:

 

10165 McKellar Court

San Diego, CA 92121

Attention: Legal Department

Telephone: (858) 552-1100

Facsimile:  (858) 646-8028

Electronic Mail: rbujarski@quidel.com

 

S-2

 

	
   

  	
  BANK OF AMERICA,
  N.A.

  	
   

  
	
   

  	
  as Agent
  and Secured Party

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tiffany Shin

  
	
   

  	
   

  	
  Name: Tiffany Shin

  
	
   

  	
   

  	
  Title: Assistant Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Notice Address:

  
	
   

  	
   

  
	
   

  	
  Bank of America,
  N.A.

  
	
   

  	
  Agency Management

  
	
   

  	
  Global Product
  Solutions

  
	
   

  	
  WA1-501-17-32

  
	
   

  	
  800 Fifth Avenue,
  Floor 17

  
	
   

  	
  Seattle WA 98104

  
	
   

  	
  Attn: Tiffany Shin,
  Assistant Vice President

  
	
   

  	
  Telephone:
  206-358-0078

  
	
   

  	
  Telecopier:
  415-343-0561

  
	
   

  	
  Electronic Mail:
  tiffany.shin@bankofamerica.com

  
				

 

S-3

 

EXHIBIT I TO

SECURITY AGREEMENT

 

FORM OF
GRANT OF TRADEMARK SECURITY INTEREST

 

WHEREAS, [NAME OF GRANTOR],
a
                      
corporation (“Grantor”), owns and
uses in its business, and will in the future adopt and so use, various
intangible assets, including the Trademark Collateral (as defined below); and

 

WHEREAS, Quidel
Corporation, a Delaware corporation (“Borrower”),
has entered into a Credit Agreement dated as of October 8, 2008 (as
amended, restated, extended, supplemented or otherwise modified in writing from
time to time, being the “Credit Agreement”)
with the financial institutions named therein (collectively, together with
their respective successors and assigns party to the Credit Agreement from time
to time, the “Lenders”), U.S. Bank
N.A., as Syndication Agent, and Bank of America, N.A., as Agent for the Lenders
(in such capacity, “Secured Party”)
pursuant to which Lenders have made certain commitments, subject to the terms
and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Borrower; and

 

WHEREAS, any Loan
Party (as defined in the Credit Agreement) may from time to time enter, or may
from time to time have entered, into one or more swap agreements (collectively,
the “Secured Hedge Agreements”)
with one or more Persons that are Lenders or Affiliates of Lenders at the time
such Secured Hedge Agreements are entered into (in such capacity, collectively,
“Hedge Banks”);

 

WHEREAS, any Loan
Party (as defined in the Credit Agreement) may from time to time enter, or may
from time to time have entered, into one or more cash management agreement
(collectively, the “Secured Cash Management
Agreements”) with one or more Persons that are Lenders or Affiliates
of Lenders at the time such Secured Cash Management Agreements are entered into
(in such capacity, collectively, “Cash
Management Banks”); and

 

[Insert if Grantor is a Subsidiary:] [WHEREAS,
Grantor has executed and delivered that certain Subsidiary Guaranty dated as of
October 8, 2008 (said Subsidiary Guaranty, as it may heretofore have been
and as it may hereafter be further amended, restated, supplemented or otherwise
modified from time to time, being the “Guaranty”)
in favor of Secured Party for the benefit of Lenders, any Hedge Banks and any
Cash Management Banks, pursuant to which Grantor has guarantied the prompt
payment and performance when due of all obligations of Borrower under the
Credit Agreement and the other Loan Documents (as defined in the Credit
Agreement) and all obligations of Loan Parties (as defined in the Credit
Agreement) under the Secured Hedge Agreements and the Secured Cash Management
Agreements, including, without limitation, the obligation of Loan Parties to
make payments under the Secured Hedge Agreements in the event of early
termination thereof; and]

 

WHEREAS, pursuant
to the terms of a Security Agreement dated as of October 8, 2008 (said
Security Agreement, as it may heretofore have been and as it may hereafter be
further amended, restated, supplemented or otherwise modified from time to
time, being the “Security Agreement”),
among Grantor, Secured Party and the other grantors named therein, 

 

l-1

 

Grantor has created in favor of Secured Party a
security interest in, and Secured Party has become a secured creditor with
respect to, the Trademark Collateral;

 

NOW, THEREFORE, for
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, subject to the terms and conditions of the Security Agreement, to
evidence further the security interest granted by Grantor to Secured Party
pursuant to the Security Agreement, Grantor hereby grants to Secured Party a
security interest in all of Grantor’s right, title and interest in and to the
following, in each case whether now or hereafter existing or in which Grantor
now has or hereafter acquires an interest and wherever the same may be located
(the “Trademark Collateral”) to
secure the Secured Obligations (as defined in the Security Agreement):

 

(i)            all rights, title and interest
(including rights acquired pursuant to a license or otherwise but only to the
extent permitted by agreements governing such license or other use) in and to
all trademarks, service marks, designs, logos, indicia, tradenames, trade
dress, corporate names, company names, business names, fictitious business
names, trade styles and/or other source and/or business identifiers and
applications pertaining thereto, owned by such Grantor, or hereafter adopted
and used, in its business (including, without limitation, the trademarks set
forth on Schedule A annexed hereto) (collectively, the “Trademarks”), all registrations that have
been or may hereafter be issued or applied for thereon in the United States and
any state thereof and in foreign countries (including, without limitation, the
registrations and applications set forth on Schedule A annexed hereto),
all common law and other rights (but in no event any of the obligations) in and
to the Trademarks in the United States and any state thereof and in foreign
countries, and all goodwill of such Grantor’s business symbolized by the
Trademarks and associated therewith; and

 

(ii)           all proceeds, products, rents and
profits of or from any and all of the foregoing Trademark Collateral and, to
the extent not otherwise included, all payments under insurance (whether or not
Secured Party is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Trademark Collateral. 
For purposes of this Grant of Trademark Security Interest, the term “proceeds” includes whatever is receivable
or received when Trademark Collateral or proceeds are sold, licensed,
exchanged, collected or otherwise disposed of, whether such disposition is
voluntary or involuntary.

 

Grantor does hereby further acknowledge and affirm that the rights and
remedies of Secured Party with respect to the security interest in the
Trademark Collateral granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.

 

[The remainder of this page is
intentionally left blank.]

 

l-2

 

IN WITNESS WHEREOF,
Grantor has caused this Grant of Trademark Security Interest to be duly
executed and delivered by its officer thereunto duly authorized as of the
     day of
              ,
          .

 

	
   

  	
  [NAME OF GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

l-3

 

 

SCHEDULE A

TO

GRANT OF TRADEMARK SECURITY INTEREST

 

	
  Owner

  	
   

  	
  Trademark

  Description

  	
   

  	
  Registration/

  Appl. Number

  	
   

  	
  Registration/

  Appl. Date

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

I-A-1

 

EXHIBIT II TO

SECURITY AGREEMENT

 

FORM OF
GRANT OF PATENT SECURITY INTEREST

 

WHEREAS, [NAME OF GRANTOR], a
                      
corporation (“Grantor”), owns and
uses in its business, and will in the future adopt and so use, various
intangible assets, including the Patent Collateral (as defined below); and

 

WHEREAS, Quidel
Corporation, a Delaware corporation (“Borrower”),
has entered into a Credit Agreement dated as of October 8, 2008 (as
amended, restated, extended, supplemented or otherwise modified in writing from
time to time, the “Credit Agreement”)
with the financial institutions named therein (collectively, together with
their respective successors and assigns party to the Credit Agreement from time
to time, the “Lenders”), U.S. Bank
N.A., as Syndication Agent, and Bank of America, N.A., as Agent for the Lenders
(in such capacity, “Secured Party”),
pursuant to which Lenders have made certain commitments, subject to the terms
and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Borrower; and

 

WHEREAS, any Loan
Party (as defined in the Credit Agreement) may from time to time enter, or may
from time to time have entered, into one or more swap agreements (collectively,
the “Secured Hedge Agreements”)
with one or more Persons that are Lenders or Affiliates of Lenders at the time
such Secured Hedge Agreements are entered into (in such capacity, collectively,
“Hedge Banks”);

 

WHEREAS, any Loan
Party (as defined in the Credit Agreement) may from time to time enter, or may
from time to time have entered, into one or more cash management agreement
(collectively, the “Secured Cash Management
Agreements”) with one or more Persons that are Lenders or Affiliates
of Lenders at the time such Secured Cash Management Agreements are entered into
(in such capacity, collectively, “Cash
Management Banks”); and

 

[Insert if Grantor is a Subsidiary:] [WHEREAS,
Grantor has executed and delivered that certain Subsidiary Guaranty dated as of
October 8, 2008 (said Subsidiary Guaranty, as it may heretofore have been
and as it may hereafter be further amended, restated, supplemented or otherwise
modified from time to time, being the “Guaranty”)
in favor of Secured Party for the benefit of Lenders, any Hedge Banks and any
Cash Management Banks, pursuant to which Grantor has guarantied the prompt
payment and performance when due of all obligations of Borrower under the
Credit Agreement and the other Loan Documents (as defined in the Credit
Agreement) and all obligations of Loan Parties (as defined in the Credit
Agreement) under the Secured Hedge Agreements and Secured Cash Management
Agreements, including, without limitation, the obligation of Loan Parties to
make payments under the Secured Hedge Agreements in the event of early
termination thereof; and]

 

WHEREAS, pursuant
to the terms of a Security Agreement dated as of October 8, 2008 (said
Security Agreement, as it may heretofore have been and as it may hereafter be
further amended, restated, supplemented or otherwise modified from time to
time, being the “Security Agreement”),
among Grantor, Secured Party and the other grantors named therein, 

 

II-1

 

Grantor created in favor of Secured Party a security
interest in, and Secured Party has become a secured creditor with respect to,
the Patent Collateral;

 

NOW, THEREFORE, for
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, subject to the terms and conditions of the Security Agreement, to
evidence further the security interest granted by Grantor to Secured Party
pursuant to the Security Agreement, Grantor hereby grants to Secured Party a
security interest in all of Grantor’s right, title and interest in and to the
following, in each case whether now or hereafter existing or in which Grantor
now has or hereafter acquires an interest and wherever the same may be located
(the “Patent Collateral”) to
secure the Secured Obligations (as defined in the Security Agreement):

 

(i)            all rights, title and interest
(including rights acquired pursuant to a license or otherwise but only to the
extent permitted by agreements governing such license or other use) in and to
all patents and patent applications and rights and interests in patents and
patent applications under any domestic or foreign law that are presently, or in
the future may be, owned or held by such Grantor and all patents and patent
applications and rights, title and interests in patents and patent applications
under any domestic or foreign law that are presently, or in the future may be,
owned by such Grantor in whole or in part (including, without limitation, the
patents and patent applications set forth on Schedule A annexed hereto), all
rights (but not obligations) corresponding thereto to sue for past, present and
future infringements and all re-issues, divisions, continuations, renewals,
extensions and continuations-in-part thereof; and

 

(ii)           all proceeds, products, rents and
profits of or from any and all of the foregoing Patent Collateral and, to the
extent not otherwise included, all payments under insurance (whether or not
Secured Party is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Patent Collateral. 
For purposes of this Grant of Patent Security Interest, the term “proceeds” includes whatever is receivable
or received when Patent Collateral or proceeds are sold, licensed, exchanged,
collected or otherwise disposed of, whether such disposition is voluntary or
involuntary.

 

Grantor does hereby further acknowledge and affirm that the rights and
remedies of Secured Party with respect to the security interest in the Patent
Collateral granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which are incorporated by reference herein as if
fully set forth herein.

 

[The remainder of this page intentionally
left blank.]

 

II-2

 

IN WITNESS WHEREOF,
Grantor has caused this Grant of Patent Security Interest to be duly executed
and delivered by its officer thereunto duly authorized as of the
       day of
                        ,
          .

 

	
   

  	
  [NAME OF GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

II-3

 

SCHEDULE A

TO

GRANT OF PATENT SECURITY INTEREST

 

Patents Issued:

 

	
  Patent No.

  	
   

  	
  Issue Date

  	
   

  	
  Invention

  	
   

  	
  Inventor(s)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Patents Pending:

 

	
  Applicant’s

  Name

  	
   

  	
  Date

  Filed

  	
   

  	
  Application

  Number

  	
   

  	
  Invention

  	
   

  	
  Inventor(s)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

II-A-1

 

EXHIBIT III TO

SECURITY AGREEMENT

 

FORM OF
GRANT OF COPYRIGHT SECURITY INTEREST

 

WHEREAS, [NAME OF GRANTOR],
a
                      
corporation (“Grantor”), owns and
uses in its business, and will in the future adopt and so use, various
intangible assets, including the Copyright Collateral (as defined below); and

 

WHEREAS, Quidel
Corporation, a Delaware corporation (“Borrower”),
has entered into a Credit Agreement dated as of October 8, 2008 (as
amended, restated, extended, supplemented or otherwise modified in writing from
time to time, the “Credit Agreement”)
with the financial institutions named therein (collectively, together with
their respective successors and assigns party to the Credit Agreement from time
to time, the “Lenders”), U.S. Bank
N.A., as Syndication Agent, and Bank of America, N.A., as Agent for the Lenders
(in such capacity, “Secured Party”),
pursuant to which Lenders have made certain commitments, subject to the terms
and conditions set forth in the Credit Agreement, to extend certain credit
facilities to Borrower; and

 

WHEREAS, any Loan
Party (as defined in the Credit Agreement) may from time to time enter, or may
from time to time have entered, into one or more swap agreements (collectively,
the “Secured Hedge Agreements”)
with one or more Persons that are Lenders or Affiliates of Lenders at the time
such Secured Hedge Agreements are entered into (in such capacity, collectively,
“Hedge Banks”);

 

WHEREAS, any Loan
Party (as defined in the Credit Agreement) may from time to time enter, or may
from time to time have entered, into one or more cash management agreement
(collectively, the “Secured Cash Management
Agreements”) with one or more Persons that are Lenders or Affiliates
of Lenders at the time such Secured Cash Management Agreements are entered into
(in such capacity, collectively, “Cash
Management Banks”); and

 

[Insert if Grantor is a Subsidiary:] [WHEREAS,
Grantor has executed and delivered that certain Subsidiary Guaranty dated as of
October 8, 2008 (said Subsidiary Guaranty, as it may heretofore have been
and as it may hereafter be further amended, restated, supplemented or otherwise
modified from time to time, being the “Guaranty”)
in favor of Secured Party for the benefit of Lenders, any Hedge Banks and any
Cash Management Banks pursuant to which Grantor has guarantied the prompt
payment and performance when due of all obligations of Borrower under the
Credit Agreement and the other Loan Documents (as defined in the Credit
Agreement) and all obligations of Loan Parties (as defined in the Credit
Agreement) under the Secured Hedge Agreements and the Secured Cash Management
Agreements, including, without limitation, the obligation of Loan Parties to
make payments under the Secured Hedge Agreements in the event of early
termination thereof; and]

 

WHEREAS, pursuant
to the terms of a Security Agreement dated as of October 8, 2008 (said
Security Agreement, as it may heretofore have been and as it may hereafter be
further amended, restated, supplemented or otherwise modified from time to
time, being the “Security Agreement”),
among Grantor, Secured Party and the other grantors named therein, 

 

III-1

 

Grantor created in favor of Secured Party a security
interest in, and Secured Party has become a secured creditor with respect to,
the Copyright Collateral;

 

NOW, THEREFORE, for
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, subject to the terms and conditions of the Security Agreement, to
evidence further the security interest granted by Grantor to Secured Party
pursuant to the Security Agreement, Grantor hereby grants to Secured Party a
security interest in all of Grantor’s right, title and interest in and to the
following, in each case whether now or hereafter existing or in which Grantor
now has or hereafter acquires an interest and wherever the same may be located
(the “Copyright Collateral”) to
secure the Secured Obligations (as defined in the Security Agreement):

 

(i)            all rights, title and interest
(including rights acquired pursuant to a license or otherwise but only to the
extent permitted by agreements governing such license or other use) under
copyright in various published and unpublished works of authorship including,
without limitation, computer programs, computer data bases, other computer
software layouts, drawings, designs, writings, and formulas (including, without
limitation, the works set forth on Schedule A annexed hereto, as the
same may be amended pursuant hereto from time to time) (collectively, the “Copyrights”), all copyright registrations
issued to Grantor and applications for copyright registration that have been or
may hereafter be issued or applied for thereon in the United States and any
state thereof and in foreign countries (including, without limitation, the
registrations set forth on Schedule A annexed hereto, as the same may be
amended pursuant hereto from time to time) (collectively, the “Copyright Registrations”), all common law
and other rights in and to the Copyrights in the United States and any state
thereof and in foreign countries including all copyright licenses (but with
respect to such copyright licenses, only to the extent permitted by such
licensing arrangements) (the “Copyright
Rights”), including, without limitation, each of the Copyrights,
rights, titles and interests in and to the Copyrights, all derivative works and
other works protectable by copyright, which are presently, or in the future may
be, owned, created (as a work for hire for the benefit of Grantor), authored
(as a work for hire for the benefit of Grantor), or acquired by Grantor, in
whole or in part, and all Copyright Rights with respect thereto and all
Copyright Registrations therefor, heretofore or hereafter granted or applied
for, and all renewals and extensions thereof, throughout the world, including
all proceeds thereof (such as, by way of example and not by limitation, license
royalties and proceeds of infringement suits), the right (but not the
obligation) to renew and extend such Copyright Registrations and Copyright
Rights and to register works protectable by copyright and the right (but not
the obligation) to sue in the name of such Grantor or in the name of Secured
Party or Lenders for past, present and future infringements of the Copyrights
and Copyright Rights; and

 

(ii)           all proceeds, products, rents and
profits of or from any and all of the foregoing Copyright Collateral and, to
the extent not otherwise included, all payments under insurance (whether or not
Secured Party is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Copyright Collateral. 
For purposes of this Grant of Copyright Security Interest, the term “proceeds” includes whatever is receivable
or 

 

III-2

 

received when
Copyright Collateral or proceeds are sold, licensed, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary.

 

Grantor does hereby further acknowledge and affirm that the rights and
remedies of Secured Party with respect to the security interest in the
Copyright Collateral granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.

 

III-3

 

IN WITNESS WHEREOF,
Grantor has caused this Grant of Copyright Security Interest to be duly
executed and delivered by its officer thereunto duly authorized as of the
       day of
                      ,
          .

 

	
   

  	
  [NAME OF GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Name: 

  	
   

  
	
   

  	
   

  	
  Title: 

  	
   

  
					

 

III-4

 

SCHEDULE A

TO

GRANT OF COPYRIGHT SECURITY INTEREST

 

U.S. Copyright Registrations:

 

	
  Title

  	
   

  	
  Registration No.

  	
   

  	
  Date of Issue

  	
   

  	
  Registered Owner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Foreign Copyright Registrations:

 

	
  Country

  	
   

  	
  Title

  	
   

  	
  Registration No.

  	
   

  	
  Date of Issue

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Pending U.S. Copyright Registration Applications:

 

	
  Title

  	
   

  	
  Appl. No.

  	
   

  	
  Date of Application

  	
   

  	
  Copyright Claimant

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Pending Foreign Copyright Registration Applications:

 

	
  Country

  	
   

  	
  Title

  	
   

  	
  Appl. No.

  	
   

  	
  Date of Application

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

III-A-1

 

EXHIBIT IV TO

SECURITY AGREEMENT

 

PLEDGE
SUPPLEMENT

 

This Pledge Supplement, dated as of
                                    ,
is delivered pursuant to the Security Agreement, dated as of October 8,
2008 between
                                        ,
a
                              
(“Grantor”), the other Grantors
named therein, and Bank of America, N.A., as Secured Party (said Security
Agreement, as it may heretofore have been and as it may hereafter be further
amended, restated, supplemented or otherwise modified from time to time, being
the “Security Agreement”).  Capitalized terms used herein not otherwise
defined herein shall have the meanings ascribed thereto in the Security
Agreement.

 

Grantor hereby agrees that the [Pledged Equity] [Pledged Debt] set
forth on Schedule A annexed hereto shall be deemed to be part of the [Pledged
Equity] [Pledged Debt] and shall become part of the Securities Collateral and
shall secure all Secured Obligations.

 

IN WITNESS WHEREOF,
Grantor has caused this Pledge Supplement to be duly executed and delivered by
its duly authorized officer as of
                              .

 

	
   

  	
  [GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Title: 

  	
   

  

 

IV-1

 

SCHEDULE A

TO

PLEDGE SUPPLEMENT

 

IV-A-1

 

EXHIBIT V TO

SECURITY AGREEMENT

 

IP
SUPPLEMENT

 

This IP SUPPLEMENT, dated as of
              ,
is delivered pursuant to and supplements (i) the Security Agreement, dated
as of October 8, 2008 (said Security Agreement, as it may heretofore have
been and as it may hereafter be further amended, restated, supplemented or
otherwise modified from time to time, being the “Security Agreement”), among Quidel Corporation, [Insert Name
of Grantor] (“Grantor”), the other
grantors named therein, and Bank of America, N.A., as Secured Party, and (ii) the
[Grant of Trademark Security Interest] [Grant of Patent Security Interest]
[Grant of Copyright Security Interest] dated as of
                      ,
           (the “Grant”) executed by Grantor.  Capitalized terms used herein not otherwise
defined herein shall have the meanings ascribed thereto in the Grant.

 

Grantor grants to Secured Party a security interest in all of Grantor’s
right, title and interest in and to the [Trademark Collateral] [Patent
Collateral] [Copyright Collateral] set forth on Schedule A annexed hereto.  All such [Trademark Collateral] [Patent
Collateral] [Copyright Collateral] shall be deemed to be part of the [Trademark
Collateral] [Patent Collateral] [Copyright Collateral] and shall be hereafter
subject to each of the terms and conditions of the Security Agreement and the Grant.

 

IN WITNESS WHEREOF,
Grantor has caused this IP Supplement to be duly executed and delivered by its
duly authorized officer as of
                            .

 

	
   

  	
  [GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Title: 

  	
   

  

 

V-1

 

EXHIBIT VI TO

SECURITY AGREEMENT

 

FORM OF
COUNTERPART

 

COUNTERPART (this “Counterpart”),
dated as of
              ,
is delivered pursuant to Section 21 of the Security Agreement referred to
below.  The undersigned hereby agrees
that this Counterpart may be attached to the Security Agreement, dated as of October 8,
2008 (said Security Agreement, as it may heretofore have been and as it may
hereafter be further amended, restated, supplemented or otherwise modified from
time to time being the “Security Agreement”;
capitalized terms used herein not otherwise defined herein shall have the
meanings ascribed therein), among Quidel Corporation, the other Grantors named
therein, and Bank of America, N.A., as Secured Party.  The undersigned by executing and delivering
this Counterpart hereby becomes a Grantor under the Security Agreement in
accordance with Section 21 thereof and agrees to be bound by all of the
terms thereof.  Without limiting the
generality of the foregoing, the undersigned hereby:

 

(i)            authorizes the Secured Party to add
the information set forth on the Schedules to this Agreement to the correlative
Schedules attached to the Security Agreement;

 

(ii)           agrees that all Collateral of the
undersigned, including the items of property described on the Schedules hereto,
shall become part of the Collateral and shall secure all Secured Obligations;
and

 

(iii)          makes the representations and
warranties set forth in the Security Agreement, as amended hereby, to the
extent relating to the undersigned.

 

	
   

  	
  [NAME OF ADDITIONAL
  GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Name: 

  	
   

  
	
   

  	
   

  	
  Title: 

  	
   

  
					

 

VI-1Exhibit 10.7

 

THIRD AMENDMENT

 

THIRD AMENDMENT, dated as of September 26, 2008
(this “Amendment”), to the CREDIT AGREEMENT, dated as of June 12,
2006 (as amended on March 21, 2007 and July 2, 2008 and as further
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), by and among CELLU PAPER HOLDINGS, INC., CELLU TISSUE
HOLDINGS, INC. (the “Borrower”), INTERLAKE ACQUISITION CORPORATION
LIMITED, the Loan Guarantors party thereto, the lenders party thereto (the “Lenders”),
JPMORGAN CHASE BANK, N.A., as US Administrative Agent (in such capacity, the “Administrative
Agent”) and JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as Canadian
Administrative Agent (the “Canadian Administrative Agent”).

 

RECITALS

 

A.            WHEREAS, the
Borrower has requested that the Lenders increase the amount of the Canadian
Commitments by $2,000,000 and reduce the amount of the US Commitments by an
equal amount;

 

B.            WHEREAS, the
Lenders are willing to agree to such amendments and provide certain other
waivers and amendments, in each case
subject to the terms and conditions set
forth herein.

 

NOW, THEREFORE, in consideration of the foregoing
Recitals and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:

 

AGREEMENT

 

1.            Defined Terms. Terms defined in
the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.

 

2.            Amendments to
Section 1.01. Section 1.01 of the Credit Agreement is hereby amended by:

 

(a) in
the definition of “US Commitment”, deleting the amount “US$57,000,000”
and substituting therefor the amount “US$55,000,000”; and

 

(b) in
the definition of “Canadian Commitment”, deleting the amount
“US$3,000,000” and substituting therefor the amount “US$5,000,000”.

 

3.            Amendments to
Section 5.09. Section 5.09 of the Credit Agreement is hereby amended by deleting
the word “A+” in the second line thereof and substituting therefor the word
“A-”.

 

4.            Waiver. The Lenders
hereby waive for the purpose of Section 2 of this Amendment the
requirement under Section 2.10(c) of the Credit Agreement that each
reduction of the US Commitments be in a minimum amount equal to US$3,000,000.

 

5.            Condition to
Effectiveness. This Amendment shall become effective on the date on which the
Administrative Agent shall have received this Amendment, duly executed and
delivered by the Loan Parties and the Lender.

 

 

6.            Counterparts. This Amendment
may be executed in any number of counterparts, each of which when so executed
shall be deemed to be an  original and all of
which when taken together shall constitute one and the same agreement.

 

7.            Representations and
Warranties. The Borrower hereby represents and warrants to the Lenders and the
Administrative Agent as follows:

 

(a)           The Borrower has the corporate power and
authority and the legal right to execute, deliver and perform this Amendment
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Amendment. This Amendment has been duly
executed and delivered on behalf of the Borrower and constitutes the legal,
valid and binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally
and subject to general principles of equity, regardless of whether considered
in a proceeding in equity or at law.

 

(b)           The representations and warranties of the
Borrower set forth in Article III of the Credit Agreement as amended
hereby are true and correct in all material respects as of the date hereof.

 

8.            Fees, Costs and
Expenses. The Borrower agrees to (i) pay to the Administrative Agent any
amendment fees previously agreed in connection with this Amendment and
(ii) reimburse the Administrative Agent for all reasonable fees, costs and
expenses incurred by it in connection with this Amendment, including but not
limited to the reasonable fees, costs and expenses of counsel.

 

9.            Governing Law. This Amendment
and the rights and obligations of the parties hereunder shall be governed by,
and construed and interpreted in accordance with, the laws of the State of New
York.

 

[Signature
pages follow]

 

 

IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed by their respective authorized officers as
of the day and year first above written.

 

	
   

  	
  CELLU PAPER HOLDINGS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David J. Morris

  
	
   

  	
   

  	
  Name:
  David J. Morris

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Chief Financial

  Officer

  

 

 

	
   

  	
  CELLU
  TISSUE HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David J. Morris

  
	
   

  	
   

  	
  Name:
  David J. Morris

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Chief Financial

  Officer

  

 

 

	
   

  	
  INTERLAKE
  ACQUISITION CORPORATION

  
	
   

  	
  LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David J. Morris

  
	
   

  	
   

  	
  Name:
  David J. Morris

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Chief Financial

  Officer

  

 

 

	
   

  	
  CELLU
  TISSUE LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David J. Morris

  
	
   

  	
   

  	
  Name:
  David J. Morris

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Chief Financial

  Officer

  

 

 

	
   

  	
  CELLU
  TISSUE CORPORATION – NATURAL DAM

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David J. Morris

  
	
   

  	
   

  	
  Name:
  David J. Morris

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Chief Financial

  Officer

  

 

Signature Page to Third Amendment

 

 

	
   

  	
  CELLU
  TISSUE CORPORATION – NEENAH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David J. Morris

  
	
   

  	
   

  	
  Name:
  David J. Morris

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Chief Financial

  Officer

  

 

 

	
   

  	
  COASTAL
  PAPER COMPANY

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  Van
  Paper Company,

  
	
   

  	
   

  	
  its
  Managing Partner

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David J. Morris

  
	
   

  	
   

  	
  Name:
  David J. Morris

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Chief Financial

  Officer

  

 

 

	
   

  	
  VAN
  PAPER COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David J. Morris

  
	
   

  	
   

  	
  Name:
  David J. Morris

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Chief Financial

  Officer

  

 

 

	
   

  	
  VAN
  TIMBER COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David J. Morris

  
	
   

  	
   

  	
  Name:
  David J. Morris

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Chief Financial

  Officer

  

 

 

	
   

  	
  MENOMINEE
  ACQUISITION CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David J. Morris

  
	
   

  	
   

  	
  Name:
  David J. Morris

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Chief Financial

  Officer

  

 

 

	
   

  	
  CELLU
  TISSUE-CITYFOREST LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David J. Morris

  
	
   

  	
   

  	
  Name:
  David J. Morris

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Chief Financial

  Officer

  

 

Signature Page to Third Amendment

 

 

	
   

  	
  CELLU
  TISSUE - HAUPPAUGE, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David J. Morris

  
	
   

  	
   

  	
  Name:
  David J. Morris

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Chief Financial

  Officer

  

 

 

	
   

  	
  CELLU
  TISSUE - THOMASTON, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  David J. Morris

  
	
   

  	
   

  	
  Name:
  David J. Morris

  
	
   

  	
   

  	
  Title:
  Senior Vice President and Chief Financial

  Officer

  

 

Signature Page to Third Amendment

 

 

	
   

  	
  JPMORGAN
  CHASE BANK, N.A., individually, as US 

  
	
   

  	
  Administrative
  Agent, Issuing Bank, Swingline Lender

  
	
   

  	
  and
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  John M. Hariaczyi

  
	
   

  	
   

  	
  Name:
  John M. Hariaczyi

  
	
   

  	
   

  	
  Title:
  Vice President

  

 

 

	
   

  	
  JPMORGAN
  CHASE BANK, N.A., TORONTO

  
	
   

  	
  BRANCH,
  individually and as Canadian Administrative

  
	
   

  	
  Agent
  and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
   

  
	
   

  	
   

  	
  Name:
  

  
	
   

  	
   

  	
  Title:
  

  

 

Signature Page to Third Amendment

 

 

	
   

  	
  JPMORGAN
  CHASE BANK, N.A., individually, as US 

  
	
   

  	
  Administrative
  Agent, Issuing Bank, Swingline Lender

  
	
   

  	
  and
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
   

  
	
   

  	
   

  	
  Name:
  

  
	
   

  	
   

  	
  Title:
  

  

 

 

	
   

  	
  JPMORGAN
  CHASE BANK, N.A., TORONTO

  
	
   

  	
  BRANCH,
  individually and as Canadian Administrative

  
	
   

  	
  Agent
  and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  Michael N. Tam

  
	
   

  	
   

  	
  Name:
  Michael N. Tam

  
	
   

  	
   

  	
  Title:
  Senior Vice President

  

 

Signature Page to Third Amendment

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