Document:

Exhibit
10.18

 

 

CORPORATE
COMPLIANCE PLAN

 

 

MedQuest Associates, Inc.

Alpharetta, Georgia

 

 

MedQuest Associates, Inc.

 

Corporate Compliance Plan

 

 

I.              Introduction

 

In February 1997, The
Honorable June Gibbs Brown, Inspector General for the U.S. Department of Health
and Human Services, issued an open letter to all healthcare providers.  Ms. Brown stated that the goal of all health
care providers should be to promote “a high level of ethical and lawful
corporate conduct.”  This goal is
important because Medicare, Medicaid, and Tri-Care represent taxpayer funds
that must be used wisely.  In addition,
the very act of providing health care services carries with it an obligation to
act in a trustworthy manner as we attempt to aid our patients and those who
support them.

 

MedQuest Associates, Inc.
(“MedQuest”) has long held these goals, and not just because of its continuing
status as a health care provider.  In
addition, as a diagnostic services company, we hold a special position of trust
within the communities we serve and with our patients.  As a result, our mission includes operating
under the highest ethical standards and, at times, the standard is higher than
that required by the applicable law. There
is no way to cover every potential challenge that employees will face, but a
rule of thumb is to feel comfortable enough with your actions so that you can
look yourself in the mirror and say “What I did was right based on the best interests of
the patient and MedQuest Associates and would not embarrass me or my fellow
employees”.

 

This
does not mean that we do not attempt to be prudent in all our financial
decisionmaking; after all, each of our employees expects a regular paycheck and
ongoing development of our community service activities requires a great deal of
capital.  However, financial
considerations are not our only goal and, as such, a high level of ethical and
lawful corporate conduct is important to our corporate credibility as we relate
to the communities we serve.  It is
imperative that we act in accordance with all laws that govern our corporate
activities to avoid such things as criminal prosecution, substantial monetary
fines and loss of reputation in the communities we serve.

 

Therefore,
effective January 1, 2000, MedQuest Associates, Inc. has decided to implement a
Corporate Compliance Plan.  This Plan
should not be seen as a type of corporate sword ready to swiftly execute anyone
who makes the smallest mistake.  While
there are necessarily consequences for those

 

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who violate the Plan’s
requirements, including termination and even possible criminal charges for the
most severe violations, this Corporate Compliance Plan also is a guide for
insuring that our conduct as a corporation is commendable.  The Plan accomplishes this goal by

 

•        establishing standards,

•        providing for regular
employee training concerning these standards,

•        auditing for standards
compliance, and

•        providing a mechanism by
which any employee can contact a senior MedQuest officer to discuss
interpretations of the policies in or report potential violations of the Plan.

 

This
Handbook is an evolving document that will be updated periodically as
needed.  If you have suggestions, please
submit them to the Corporate Compliance Officer, Chuck Self. In addition to the
Handbook, MedQuest will periodically distribute memoranda and policy statements
describing maters of interest or prohibiting specific activities by all or some
of MedQuest employees. When the memorandum or policy statements are distributed
they will be considered a part of this Handbook.

 

We ask
each of you to join with us to make this Plan a success.  In so doing, not only will we have
accomplished compliance with the laws which govern our corporate business, but
we will have made MedQuest a better organization through which to fulfill our
community mission.

 

II.            Mission
Statement

 

MedQuest
Associates, Inc. is dedicated to:

 

•      Providing quality diagnostic services to all
patients.

•      Providing quality diagnostic information to
referring physician

•      Pursuing the latest, state-of-the-art diagnostic
modalities.

•      Providing only the diagnostic services that are
needed in a community.

•      Being active in community affairs.

•      Supporting indigent care to the extent it does
not significantly affect any of our imaging centers.

 

III.           Value Statement

 

	
   

  	
  Quality

  	
   

  	
  MedQuest
  Associates, Inc. is committed to quality and  timely  care of our patients.

  

 

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  Excellence

  	
   

  	
  MedQuest
  Associates, Inc. believes in excellence  in patient care through assurance of
  well-trained employees and searching for the latest in efficient and
  effective diagnostic modalities.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Integrity

  	
   

  	
  MedQuest
  Associates, Inc. conducts its relationships with the people we serve with integrity  that
  is based on honesty, fairness and consistency.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Respect

  	
   

  	
  MedQuest
  Associates, Inc. treats all people we serve and with those we work, with respect, compassion and courtesy.

  

 

IV.           Policy Statements

 

4.1           Policy Summary.   It shall be the policy of
MedQuest Associates, Inc. to comply with all federal, state, and local laws and
regulations that govern the corporate activities of MedQuest.  The primary focus of this Corporate
Compliance Plan is the reimbursement laws that govern the Medicare and Medicaid
programs.

 

The most important of
these laws are the Medicare fraud-and-abuse laws. Provisions of the Social Security Act prohibit, among other things, any
person from offering or paying remuneration to a referral source of Medicare or
Medicaid patients or for making or recommending referrals of patients. It also
prohibits the submission of false claims for Medicare or Medicaid
reimbursement. There are, however, a number of “safe harbors” that permit
transactions that are expressly stated and do not violate the fraud and abuse
limitations if the intent or actual purpose of the transaction is appropriate.
Employees should never solicit or receive or offer to pay or pay, any
remuneration of any type (including kickbacks, bribes, or rebates) in return
for referring, or recommending the referral of, an individual to another
person, physician, hospital or medical entity for services.

 

Violation of these laws
carry severe criminal and civil penalties, including monetary fines and triple
fines, federal imprisonment, and exclusion from Medicare and Medicaid Program
participation.  An administrative or
judicial finding that such violations occurred would have a substantially
detrimental

 

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effect on MedQuest’s ability to continue its
operation.  Therefore, MedQuest expects
rigorous adherence to the standards established as part of this Plan.  If there are questions as to how these
standards should be or have been applied, each employee shall have the
affirmative duty to ask/report such questions to their supervisor,
administrator, or the Corporate Compliance Officer.  A failure to make such a report will result in the imposition of
one of the penalties outlined in Section 13.5.

 

4.2           Adherence
to all Laws.       Though the
federal reimbursement laws are this Plan’s primary focus, there are other laws
that also require adherence.  Such laws
and regulations promulgated by the Food and Drug Administration, Occupational
Safety and Health Agency, and the Equal Employment Opportunity Commission, as
well as other laws prescribed by the various states in which MedQuest has
operations.  As such, standards,
education, and follow-up may be developed in these areas as well, but our
greatest concern is the compliance with the federal Medicare and Medicaid laws
and regulations.

 

4.3           Ethical Practices.  The public has a
right to expect that the business of MedQuest Associates, Inc. will be
conducted ethically and competently by our management and employees. It is
expected that each employee should adhere to the spirit, as well as the
language of the Corporate Compliance Plan and strive for excellence in
performing his/her duties. Each employee must maintain a high level of
integrity in business conduct and avoid any conduct that could be reasonably
expected to reflect adversely upon the integrity and business reputation of
MedQuest Associates, Inc., its officers, or other employees. Furthermore, each
employee should encourage other employees to do likewise.

 

4.4           Employee
Conduct. It is expected that
each employee will perform his/her duties in good faith and in a manner that
s/he reasonably believes to be in the best interest of MedQuest Associates,
Inc., and with the due care that a reasonably prudent person in the same
position would use under similar circumstances.

 

Employees must avoid all
illegal conduct in both personal and business matters. This
includes, but is not limited to efforts to circumvent the law by devious means
or questionable

 

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interpretations. No
employee shall take any actions that s/he believes may be or could be in
violation of any Federal or State Statute, Rule, or Regulation.

 

Employees must be open and
honest in his/her business relationships with the owners, officers, other
employees of MedQuest Associates, Inc., and its lawyers, accountants and other
professionals retained by MedQuest Associates, Inc.. Failure to provide
information that is known or thought to be necessary, or the provision of
information that is known or thought to be inaccurate, misleading or
incomplete, is unacceptable.  This
unacceptable behavior will lead to disciplinary action.

 

4.5           Improper Payments.             No employee shall engage, either
directly or indirectly, in any corrupt business practice, including bribery,
kickbacks or payoffs, intended to induce, influence, or reward favorable
decisions of any government personnel or representative, any customer,
contractor or vendor in a commercial transaction, or any person in a position
to benefit MedQuest Associates, Inc. or the employee in any way. No employee
shall make or offer to make any payment or provide any other thing of value to
another person with the understanding or interaction that such payment is to be
used for an unlawful or improper purpose.

 

4.6           Business Entertainment and Gifts.    MedQuest
Associates, Inc. personnel may provide ordinary and reasonable business
entertainment and gifts of nominal value (i.e., sporting event or concert
tickets, meals and similar gift items), provided that such entertainment and
gifts do not violate the laws of the locale in which the business is transacted
and are
not given for the purpose of influencing the business behavior of the
recipient.  Again, business
entertainment is not taboo.  There are
legitimate purposes for such entertainment, such as the discussion of business
problems or issues, improved communications, or to improve our corporate image
in the community. However, cash gifts
to referring physicians or any other referral sources are absolutely prohibited.  Non-cash gifts (i.e., anything of value)
to physicians or any other referral source that exceed reasonable personal
entertainment or have a value exceeding $50.00 per

 

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incident
or $300.00 in annual aggregate are prohibited.

 

4.7           Transactions
Involving Any Government Employee.
There is a public trust associated with transactions between the private sector
and government entities and its employees. It is expected that MedQuest
employees will conduct themselves to the same high standard expected of
government employees. All employees must exercise care in any written or oral
statement made to any government agency or other payor. MedQuest Associates,
Inc. will not tolerate false statements by employees to a government agency or
other payors. Deliberate misstatements to government agencies or other payors
will expose the employee involved to criminal penalties and swift termination.

 

MedQuest Associates, Inc.
employees or representatives shall take no actions that would cause a
government employee to violate, to appear to violate any law or regulation, or
that would be otherwise inconsistent with their ethical standards of conduct.
Specifically, except as otherwise described, no employee or representative may
offer or give anything of monetary value, including gifts, gratuities, favors,
entertainment or loans, to an employee or representative of a government agency
with which MedQuest Associates, Inc. has or is seeking to obtain contractual or
other business or financial relations or that regulates any of MedQuest’s
activities or operations. An employee may pay for the reasonable costs of meals
of government employees and members of legislative bodies in connection with
lawful lobbying efforts, if such activities are permitted by law and undertaken
with the knowledge and prior approval of the appropriate administrative person.

 

4.8           Integrity of
Financial Reporting.       It is management’s responsibility to ensure that
assets and liabilities are accounted for properly in compliance with all tax
and accounting reporting requirements, generally accepted accounting
principles, and established accounting and financial policies, to ensure that
no false or artificial records are made, and that there are no unrecorded
assets or liabilities.  All items of
income and expense and all assets and liabilities will be entered in the
financial records; all reports submitted to governmental authorities shall be
accurately made; all transactions shall be executed in accordance with
management’s authorizations; and access to assets shall be permitted only in
accordance with authorization from MedQuest Associates, Inc.

 

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Any
MedQuest Associates’ employee who knows or has reason to believe that a
transaction is not recorded in compliance with the above requirements shall
promptly report such matter to the Chief Financial Officer, Compliance Officer,
and/or Administrator.

 

4.9           Control
of Corporate Funds.              Each Center Manager must monitor the expenditures
under his/her control.  To the best of
the Manager’s ability, they must ensure that expenditures are made for valid
business purposes, appropriately and honestly documented, made pursuant to authority
in published guidelines and policy statements, and is actually received by the
recipient indicated in the records.

 

4.10         Discounts
with Payors and Providers.
Discounts with payors and providers are a common practice, and are appropriate
if based upon:

 

a.             An account being established where payment is
guaranteed;

 

b.             Documented
competitive market factors, such as pricing and discounts offered by another
provider of diagnostic services (except for the routine waiver of co-payments
or deductibles); or

 

c.             Contracted monthly volume of service
requirements; however discounts should never be based on the volume or value of
Medicare or Medicaid patient referrals.

 

V.            Policy on Patient
Referrals

 

5.1           MedQuest
does not pay for patient referrals. MedQuest Associates, Inc. does not pay anyone - employees,
physicians, or other health professionals, in any form, for referral of
patients.  MedQuest pays only people or entities for
services provided to MedQuest or its subsidiaries.  MedQuest Associates, Inc. does not make payments or provide
benefits to any physician or health professional.  All leases or contracts must be approved by MedQuest’s senior
management and General Counsel.MedQuest Associates, Inc. requires physicians
and health professionals to submit invoices outlining specific dates, hours, and
types of services performed prior to any

 

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legitimate
payment being made to them.

 

Physicians and health
professionals who are not employees of MedQuest Associates, Inc. are free to
refer patients to any person or entity they deem appropriate. Employees in a
position to make referrals to physicians, health professionals or other
healthcare entities must make such referrals solely based on what is best for
the individual seeking diagnostic services.

 

5.2           No Financial
Incentives to Patients.    MedQuest Associates, Inc. does not waive
insurance co-payments or deductibles, especially for Medicare and Medicaid
patients, or otherwise provide financial benefits to patients or physicians to
encourage referrals. Under certain limited circumstances, a MedQuest facility
may provide appropriate financial accommodation to patients based purely on the
financial need of the individual patient. 
Such accommodations must be cleared, in advance, with the Corporate
Compliance Officer.

 

5.3           No
Courtesy Discounts.     If a MedQuest Center Manager desires to provide a
courtesy discount to an employee, an employee’s family member, a person
affiliated with MedQuest, or a person under contract with a MedQuest facility,
the same discount must be passed on to that person’s insurer or other
third-party payor.  Under no
circumstances may a professional courtesy discount be provided to a referring
physician or other referral source.

 

VI.           Policy for Billing for
Services Provided

 

6.1           Billing.    
MedQuest Associates, Inc. bills only for services rendered based on a
written order, properly documented, 
from a licensed physician or doctor of osteopathy.  MedQuest Associates, Inc. complies with the
billing requirements for government-sponsored programs and other payors.  MedQuest Associates, Inc. is committed to
accurate and truthful billing to patients and/or third-party payors, and will
neither misrepresent, alter, nor fabricate charges to, or on behalf of, a
patient and/or third-party payor.

 

6.2           Waiver
of Co-Payment and Deductibles.         MedQuest Associates, Inc. will not routinely
waive co-payments and deductible payments, except for financial hardships.  Commercial insurers have long viewed waivers
of co-payment or

 

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deductible
obligations as inappropriate, and such practices are illegal under the laws of
many states.  However, if there is a
negotiated discount rate for MedQuest’s diagnostic services, and there is full
disclosure of the waiver of the coinsurance/deductible obligation, the waiver may
be acceptable.  If a Center Manager
wishes to provide such waiver for a sound business reason, other than to
encourage referrals, and such waiver is not part of a negotiated discount rate,
then the diagnostic service should be provided at no charge to that patient or
to the patient’s insurer.  The Corporate
Compliance Officer should be consulted when waivers are being considered,
except when those waivers are in strict conformity with written policies.

 

VII.         Policy on Conflicts of
Interest

 

7.1           Policy
Summary.   Conflicts of interest exist where an individual’s actions or activities,
on behalf of MedQuest Associates, Inc. or otherwise, involve the obtaining of
an improper personal gain or advantage, or an adverse effect upon the interest
of MedQuest Associates, Inc.. In other words, employees must avoid engaging in any
activity, practice or act which conflicts with the interests of MedQuest
Associates, Inc., its corporate entities, or those it serves.  Employees must avoid situations that would
create an actual or even an appearance of a conflict of interest, unless
approved in advance, in writing by the Center Manager or Corporate Compliance
Officer.  Appearances do count
when it comes to conflicts of interest, because those on whom the success of
MedQuest Associates, Inc. depends may judge the conduct of an employee by the
appearance of the conduct.  Each
employee also has a duty of loyalty to MedQuest Associates, Inc.  While it is not possible to describe all of
the situations and conditions which involve a conflict of interest or violate
the duty of loyalty, the following paragraphs indicate areas where conflicts of
interest or violations of the duty of loyalty may arise.

 

7.2           Personal
Benefit.  Each employee, while s/he remains an employee of MedQuest Associates,
Inc., is expected to conduct MedQuest’s business to the best of their ability
for the benefit and in the interests of MedQuest Associates, Inc.  No employee may become involved in any
manner with competitors, contractors, customers or suppliers of MedQuest
Associates, Inc. if such involvement might result in improper personal gain or
the appearance of improper personal gain. 
Such employee

 

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involvement
may include the purchase, sale or lease of any goods or services from or to any
customer or supplier of MedQuest Associates, Inc., or serving as an officer,
director or in any other management or consulting capacity with a competitor,
contractor, customer or supplier. An employee is not prohibited from purchasing
goods or services from a customer or supplier if those goods or services are
purchased on terms generally available to non-employees of MedQuest Associates,
Inc.

 

Employees are prohibited
from placing MedQuest business with any company or entity in which there is a
family or close personal relationship. 
Neither may an employee hire a family member or family relative or, (if
the hiring decision is made by someone else within MedQuest) supervise such a
person.  For purposes of this Policy,
such hiring or supervision would constitute a conflict of interest, and may be
waived only with the express written permission of John K. Luke, President.

 

7.3           Acceptance
of Gifts and Entertainment.          No employee, nor any member of any employee’s
family, may accept any personal gift or favor of any substantial value
(including complimentary business or personal trips) from any competitor,
contractor, customer or supplier, or anyone with whom the employee does business
on behalf of MedQuest Associates, Inc. Acceptance of perishable gifts, other
gifts of a nominal value, or reasonable personal entertainment may be ethically
accepted if the gift would not be judged as conducting MedQuest’s affairs with
the donor.  If the value of the gift is
over $50 or there is any question regarding whether the gift meets this
standard of reasonableness, the employee must either disclose the details of
the gift to the Corporate Compliance Officer and seek his/her approval to accept
the gift, refuse the gift, or promptly return the gift to the donor. Such
disclosure (or request for approval) should be made to the Corporate Compliance
Officer.

 

7.4           Outside
Business Activities.             Employees who have been hired on a full-time or
permanent basis are expected to devote their entire working time to the
performance of their duties for MedQuest Associates, Inc.  All outside business or consulting
activities that would divert time, interest or talents from MedQuest
Associates, Inc. business must be avoided. 
Employees are encouraged to engage in charitable activities; however, if
such activities require that an employee spend a substantial number of work
hours, then s/he should seek the

 

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prior
consent of their supervisor.

 

7.5           Confidentiality of Business Information.         MedQuest
Associates, Inc. is a competitive company and, as such, no information
concerning its finances or operations is to be distributed by anyone other than
MedQuest’s owners absent express permission from Executive Management.  In keeping with the Confidentiality
Agreement signed upon employment, MedQuest employees may not use for their
personal benefit or their family’s benefit any information about MedQuest
Associates, Inc. or proprietary or non-public information acquired as a result
of the employee’s relationship with MedQuest Associates, Inc.  Employees should not under any circumstances
use or share “inside information” which is not otherwise available to the
general public for any manner of direct or indirect personal gain on or other
improper use.

 

Employees
possessing patient or provider information must ensure that such information,
in whatever form it exists, is handled in a manner so as to protect its
confidentiality and against improper access or use by individuals not entitled
to it.  Violation of this policy may
result in personal liability to the employee for any benefit gained or any
damages sustained by MedQuest as a result of improper disclosure of such
information in addition to termination of such employee’s employment.

 

7.6           Disclosure
of Possible Conflicts of Interest.   Employees must disclose possible conflicts of
interest involving themselves or their immediate families’ (spouse, parents,
brothers, sisters, and children) in writing to their supervisor.  The supervisor will present the information
to the Corporate Compliance Officer who will investigate and report possible
conflicts to the MedQuest Associates, Inc. General Counsel.  General Counsel will evaluate potential
conflicts of interest and determine whether significant conflicts of interest
have occurred or might occur and take the necessary steps to protect MedQuest
Associates, Inc.. If an employee believes a conflict of interest exists, the
employee must treat the situation as if a conflict definitely exists until the
employee and other appropriate officials have resolved the potential conflict.

 

VIII.        Policy on MedQuest
Marketing Activities

 

8.1           Policy
Summary.   MedQuest Associates, Inc. will not make any

 

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payments
to anyone to induce the use of its services. 
An employee should never make a payment which, if it were publicly
disclosed, would embarrass the employee or MedQuest Associates, Inc.  To avoid the appearance of impropriety, MedQuest
Associates, Inc. will not provide any payment or reimbursement for expenses
incurred by any governmental or public representative or employee.  MedQuest Associates, Inc. also will not
tolerate the making of such payments, and will comply with all laws regarding
political contributions and the participation of employees in political
campaigns. Employees should contact the Corporate Compliance Officer
immediately if they have information concerning such unethical or illegal
payments being requested, offered or made.

 

8.2           Any
Advertising/Marketing Material Must Be Truthful.  MedQuest Associates, Inc. does not use advertisements or
marketing programs that might cause confusion between our services and those of
our competitors. MedQuest Associates, Inc. does not publicly criticize the
service or business of a competitor using false or misleading representations.
Specific claims about the quality of services must be supported by evidence to
substantiate the claims made. All price advertising must accurately reflect the
true charge for services provided.

 

Employees must submit all advertising and marketing
materials to the Chief Operating Officer for approval before use.

 

IX.           Policy on
Compliance with Environmental Laws.

 

MedQuest
Associates, Inc. has a primary concern for the maintenance of the safety and
well-being of its patients and employees. Supervisors are charged with the
responsibility to develop and adhere to programs to eliminate, or minimize to
the extent reasonably feasible, any hazards to the health and safety of
employees and patients, in accordance with applicable laws and regulations.

 

MedQuest
Associates, Inc. is committed to promoting sound corporate environmental
practices that will prevent and eliminate damage to the environment, enhance
human and community resources, and reduce or avoid exposure to environmental
liabilities.

 

Employees
are expected to exercise good judgement concerning environmental aspects of the
use of buildings, equipment, property,

 

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and
medical products. Employees must comply with all applicable laws and apply due
diligence and care to minimize the generation, discharge and disposal of
medical waste or other hazardous materials. Employees who are uncertain of the
correct procedures for disposing of any such material should consult their
supervisor for assistance.

 

Any
employee who detects an existing or potential condition hazardous to human
health or the environment or in violation of environmental practices should
report the condition immediately to their supervisor. Prompt disclosure of such
events is critical to effective remedial action and to MedQuest Associates,
Inc.’s effort to ensure that such events do not reoccur. Employees with responsibility
for the proper handling and disposal of hazardous substances and infectious
waste must ensure that contractors hired to dispose of such material do so in a
proper manner.

 

X.            Policy on Compliance with Antitrust Laws

 

MedQuest
Associates, Inc. was founded on and is committed to the principles of free and
fair competition within the free enterprise system. The basic purpose of the
antitrust laws is to protect and preserve competition from unreasonable
restraints.

 

10.1         Relationship
with Competitors.  Under
federal antitrust law, certain agreements with competitors are unlawful per se;
in other words, without regard to their reasonableness from a commercial or
business viewpoint.  Such unlawful
agreements generally involve understandings or arrangements, which affect
prices or output (i.e., bid-rigging, price-fixing, and market or customer
allocations).  These per se
violations are punishable by severe personal and institutional criminal fines
and penalties. In no event should any MedQuest Associates, Inc. employee
engage in discussions, agreements, or understandings (explicit or implicit)
with any competitor concerning prices, or about services, territory, or
customer allocation.

 

In addition to the per se
violations, other agreements with competitors or customers may constitute
punishable crimes and result in civil damages (including triple damages) if
they produce an unreasonable restraint of trade or a substantial lessening of
competition.  Examples of conduct that
may be anti-competitive include exclusive buying or selling arrangements. The
facts of a particular course of conduct are important to an evaluation of the
anti-competitive consequences of such conduct,

 

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and require expert legal
guidance. MedQuest Associates, Inc. recognizes that routine communications with
competitors are appropriate and reasonable in many instances, but communication
with competitors about matters that could be perceived to have the effect of
lessening competition should take place only after consultation with the
Corporate Compliance Officer.

 

10.2         Obtaining
Information About Competitors.    General business information about competitors is
important to MedQuest Associates, Inc.’s efforts to maintain and improve its
competitive position in the markets where we have diagnostic centers.  However, only legal and ethical means should
be used to gather information about existing and potential competitors.
Agreements to exchange such information is improper.  For example, personnel should not:

 

a.             Respond
to any inquiry or survey from a competitor that requests information on prices,
wages, marketing activity, development plans, or any other competitive
information;

 

b.             Request
from a competitor information on prices the competitor charges or pays for any
goods or services; or

 

c.             Knowingly
share with a competitor directly or through a third party information regarding
pay scales, wages, salary ranges, or compensation formulas, or any other
financial or operating information.

 

Competitive
information should be collected only from generally available industry sources
or from information within the public domain. 
It may be appropriate in some circumstances to respond to
requests for competitive information when the information is being gathered
confidentially by a third party (i.e., a government entity or an industry
association), and will be made available to others only in summary form so that
no individual competitor is identifiable. 
Such requests from governmental agencies may be routinely processed by
MedQuest Associates, Inc. personnel. 
Such requests from a third party should be reviewed with the Corporate
Compliance Officer before any response is forwarded.

 

Employees should not
induce, through social relationships or otherwise, present or former employees
of competitors to disclose

 

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any proprietary or
confidential information.  New employees
should be advised against disclosing or using confidential information of their
former employer; however, all employees are expected otherwise to make full use
of the skills, experience and general knowledge learned in their previous
employment.

 

XI.           Policy on Compliance with the Copyright
Laws.

 

Photocopying and
dissemination of material contained in books, newsletters and other periodicals
and computer software can result in substantial corporate and personal
liability for copyright infringement. However, the “fair use” doctrine
potentially can justify some copying of written material and there are certain
alternatives available to avoid or minimize exposure for copyright
infringement.

 

11.1         Copyright Liability for Photocopying Newsletters
and Other Periodicals. Copying
periodicals, even for internal distribution, can lead to substantial corporate
and personal liability for copyright infringement. Copyright law provides harsh
penalties against those who infringe registered copyrights, including recovery
of costs and attorney’s fees, as well as statutory damages.  Statutory damages can range up to $100,000
per infringement, if intentional copying is shown.  Individuals actively involved in copying can be personally
liable, even if the copying was done solely within the scope of their
employment and solely for the employer’s benefit.

 

11.2         The
“Fair Use” Defense.     The Copyright Act does allow the “fair use” of a
copyrighted work, including such use for purposes such as criticism, comment,
news reporting, teaching, scholarship or research.

 

An important
factor to consider when determining whether there has been “fair use” is the
amount and substantiality of the portion used in relation to the copyrighted
work as a whole. Copying an entire newsletter is qualitatively different from
copying a single page. Making a hundred copies of one page to disseminate to
employees or use in promotional packets is different from making one copy of an
entire newsletter for personal use.

 

The most important
factor in determining whether there has been a “fair use” is the effect of the
use upon the potential market for or value of the copyrighted work. For
instances, the systematic copying on a cover-to-cover basis of a newsletter

 

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arguably deprives
the newsletter publisher of predictable subscription revenue.

 

Any questions about the availability of the “fair use” doctrine should
be addressed in advance with the Corporate Compliance Officer.

 

11.3.        Purchasing Subscriptions or Copies.               Photocopying newsletters on a systemic and
cover-to-cover basis, even for internal use, creates a high risk of ultimately
losing a copyright infringement lawsuit. Rather than engaging in such wholesale
copying, and if purchasing a license is not deemed appropriate, MedQuest
Associates, Inc. employees should purchase an additional subscription, route
existing subscriptions, and/or purchase back issues or reprints.

 

11.4         Computer
Software.             Unless specially allowed in the license agreement
form the computer software company, the policy is that employees should never
copy computer software. Such copying is always infringement. There is no “fair
use” doctrine with respect to copying software. Failure to observe this policy
can result in serious consequences to the employee, such as termination or suit
against the employee by the software company.

 

If the license
specifically allows copying the software, the employees may do so but only
after first checking with the Corporate Compliance Officer about the actual
license agreement:

 

a.             To
confirm the ability to copy the software lawfully; and

 

b.             To
determine whether an additional license fee is due the owner because of the
copying.

 

XII.         Appointment of Corporate Compliance Officer and
Committee

 

12.1         Corporate
Compliance Officer.           Charles
H. “Chuck” Self, Jr. has accepted the responsibility as Corporate Compliance
Officer.  Our Board has decided that
this position and responsibility merits a dedicated, experienced and full-time
individual.  All employees who are unable
or unwilling to contact their supervisor or department head concerning matters
of corporate compliance may call Mr. Self 24 hours a day, seven days a week

 

17

 

at the Corporate
Compliance Hotline number (1-877-272-5163) or at the Corporate Office number
(1-678-992-7301), or may write him at:

 

Charles H. “Chuck” Self, Jr.Corporate
Compliance Officer

MedQuest
Associates, Inc.

4300 North Point Parkway

Alpharetta, GA 30022

 

12.2         Corporate
Compliance Committee.    MedQuest
Associates has appointed two persons to serve with Mr. Self collectively as the
MedQuest Corporate Compliance Committee. 
These persons shall be:

 

Gene
Venesky, Chief Executive Officer

Nancy-Ann
DeParle, Board Member

 

12.3         Committee
Meetings.          The MedQuest Corporate
Compliance Committee shall meet not less than twice nor more than four times
each calendar year, unless the Corporate Compliance Officer or two Committee
members deem an additional meeting necessary. 
The Corporate Compliance Officer may call meetings also.  An agenda for each meeting will be developed
and distributed in advance to each member where possible.  The purpose of these meetings shall be to
review reports received by the Corporate Compliance Officer of possible
legal/regulatory problems, to review reports generated by corporate audit
activities related to this Plan, and to develop recommendation for MedQuest as
the Committee deems appropriate.

 

12.4         Corporate
Compliance Audits.          The
Corporate Compliance Officer shall be responsible for assuring that internal
non-financial and financial audits are performed to promote compliance with
applicable laws, regulations and standards of conduct relating to non-financial
and financial matters.  MedQuest’s
General Counsel also will be responsible for engaging outside, independent
auditors to promote compliance with applicable laws, regulations, and standards
of conduct.  The reports by the outside
auditors will be made to the General Counsel who will review the findings and
recommended operational changes with the Corporate Compliance Committee.

 

18

 

XIII.        Employee-Related Activities

 

13.1         Background
Checks.           All employees who
supervise employees or are in any way involved in the billing, collection,
coding, or other reimbursement functions of MedQuest shall have a background
check performed by the Director of Human Resources or her designee.  Each employee will be asked to sign a
release permitting this background check. 
Failure to sign this release could result in the employee’s demotion or
termination.

 

The purpose of this
background check is to determine whether the employee has been convicted of a
crime (except for minor traffic violations) or been involved in the use of
false or misleading information.  If the
Director of Human Resources finds such an incident, the Director will consult
with the Corporate Compliance Officer to determine the appropriate action.  However, in no case may this employee
continue in a supervisory role with MedQuest nor be involved in the reimbursement
functions of the corporation.

 

13.2         Pre-employment
Background Checks.              The
Director of Human Resources will conduct a background check on all prospective
employees who supervise employees or are in any way involved in the billing,
collection, coding, or other reimbursement functions of MedQuest prior to
extending a job offer to that individual. 
The purpose of the background check and the consequences of finding
incidents of criminal violations or the use of false or misleading information
shall be the same as that outlined in Section 13.1.

 

13.3         Employee
Plan and Training.             Each
MedQuest employee shall be given a synopsis of this Corporate Compliance Plan
and may have a copy of the entire Plan if so desired.  Employees also shall receive training from MedQuest
representatives concerning the Plan’s principles, standards, and information
concerning how the Plan will be implemented. 
These information sessions concerning the Plan will be mandatory.  In addition, there will be annual
information sessions for employees that will provide an update on federal and
state laws and how these laws impact the business functions of MedQuest.

 

13.3.1.     During
these information sessions, employees will be given the opportunity to ask
questions concerning the Plan and its implementation.  Employees will be encouraged to ask questions of their supervisor
or the 

 

19

 

Corporate Compliance
Officer as issues arise which may be covered by the Plan.

 

13.3.2.     After
the information session has concluded, every employee will be required to sign
a statement certifying that they have read the Plan, that they have received
training concerning the Plan’s principles, standards and implementation, and
that they will question or report any suspected violations of the Plan.

 

13.3.3.     New
employees will receive a copy of the Corporate Compliance Plan and will receive
instruction concerning the Plan’s standards, principles, and methods of
implementation within thirty days of beginning employment with MedQuest or one
of its subsidiaries.  After attending
this information session, the new employee will sign a statement as described
in Section 13.3.2.

 

13.3.4.     The
Corporate Compliance Officer shall certify to the Corporate Compliance
Committee that, at least annually, every employee involved in an activity
related to the Corporate Compliance Plan has received annual training
concerning updated corporate compliance issues and will certify in writing that
s/he has reviewed and understands the Corporate Compliance Plan.  The Corporate Compliance Officer shall have
the responsibility to maintain the documentation that supports this
certification.

 

13.4         Affirmative
Obligation to Report. After signing the
certifying statements described in Sections 13.3.2 and 13.3.3, every employee
shall have the affirmative responsibility and duty to report any violation or
suspected violation of this Corporate Compliance Plan that the employee
observes relative to the actions of another employee, or a supplier, vendor, or
agent of MedQuest.  The failure of any employee to report a violation or
suspected violation shall itself be a violation of this Corporate Compliance
Plan.

 

13.4.1.     Employees wishing to ask
about or report a potential violation of the Corporate Compliance Plan should
follow these three steps:

 

20

 

a.             Discuss
the issue(s) with your Supervisor. Your immediate supervisor knows you and the
issues in your workplace better than anyone else. Give your supervisor a chance
to solve the problems. Supervisors have access to a variety of resources to
address a problem.

 

b.             Discuss
the issue(s) with the Administrator if you feel that your concern did not
receive appropriate attention.

 

c.             If
still believe your problem is not receiving adequate attention, call the Corporate
Compliance Officer at the number listed in Section 12.1 at any time 24-hours a
day.

 

13.4.2.     The confidentiality of the
employee reporting a suspected incident will be protected.  The reporting employee’s identity shall not
be revealed to the person suspected of the Corporate Compliance Plan
violation.  Under no circumstances will
the reporting employee be subject to any punishment or retribution for making a
report of a suspected violation of the Corporate Compliance Plan when that
report is made in good faith.

 

13.4.3.     MedQuest managers who are
told of a potential violation of this Corporate Compliance Plan, and fail to
transmit that report to the Corporate Compliance Officer, shall be in violation
of this Plan and subject to the discipline outlined below.

 

13.5         Violation
of this Corporate Compliance Plan shall result in discipline.  That discipline may range from an

 

•              oral
warning

•              written
warning

•              probation

•              suspension

•              termination

 

13.5.1      There shall be no
requirement that the discipline be progressive.  The Corporate Compliance Officer shall be empowered to determine
the appropriate discipline for an identified violation, but may choose to
consult with the

 

21

 

employee’s supervisor
and Corporate Compliance Committee as appropriate. Willful violations of the
Corporate Compliance Plan will result in termination.

 

13.5.2      The appropriate discipline
shall be based on the severity of the Corporate Compliance Plan violation, the
employee’s work record to date, and the employee’s previous disciplinary
record.  If, after having been notified
of the discipline to be imposed, the affected employee believes that no Plan
violation occurred or the proposed discipline is unjust, that employee may use
the Complaint Resolution Procedure for review of the matter.

 

XIV.        Handling of Corporate Compliance Reports

 

14.1         Forwarding
Corporate Compliance Reports.   All
corporate compliance reports shall be forwarded to the Corporate Compliance
Officer.  The Corporate Compliance
Officer shall maintain a log which shows the date the report was received, the
name of the individual making the report, a summary of the report’s substance,
a summary of the Corporate Compliance Officer’s findings, and a statement
concerning the disposition of the report including whether any action was
taken. This log shall be maintained in a safe and secure place. This log and
related documentation shall be maintained according to the MedQuest document
retention policy, but in no case shall these materials be disposed of in
less than five years from the date of a Report’s disposition.

 

14.2.        Handling
Corporate Compliance Reports.       Upon
receipt of a corporate compliance report, the Corporate Compliance Officer will
make an initial determination of whether there a potential violation of the
Corporate Compliance Plan may have occurred. 
The Corporate Compliance Officer may involve General Counsel and other
persons within or outside MedQuest in making this determination.

 

14.2.1.     If the Corporate Compliance
Officer determines that it is unlikely that a violation of the Plan has
occurred, the Corporate Compliance Officer shall report this to the person
making the report (unless the report was anonymous) along with an explanation
of why no violation exists.

 

22

 

14.2.2.     If the Corporate Compliance
Officer determines that it is possible that a violation of the Plan has
occurred, the Corporate Compliance Officer or his designee shall refer the
matter to General Counsel to conduct the necessary investigation to determine
whether a violation has occurred. The report and all materials and information
gathered as part of this investigation shall become the property of General
Counsel. The General Counsel and the Corporate Compliance Officer may involve
persons within or outside MedQuest as they deem appropriate.

 

14.2.3.     If an investigation is begun
and General Counsel believes the integrity of the investigation may be
compromised because of the presence of employees under investigation, those
individuals shall be removed from their current work activity until the
investigation is complete.

 

14.2.4.     If an investigation is begun,
the Corporate Compliance Officer shall take appropriate steps to secure or
prevent the destruction of documents or other evidence relevant to the
investigation.

 

14.2.5.     Records of the investigation
shall contain documentation of the alleged violation, a description of the
investigative process, copies of interview notes and key documents, a log of
the witnesses interviewed, the documents reviewed, and the results of the
investigation.

 

14.3.        Discipline
Determination.   After completing
their investigation, if there is sufficient certainty that a violation of the
Corporate Compliance Plan occurred, the Corporate Compliance Officer shall
determine what discipline is to be imposed based on the criteria described in
Section 13.6.2.

 

14.4         Corrective Action
Plans.     If a violation is found to
exist, the Corporate Compliance Officer shall be responsible for the
development of a Corrective Action Plan in an effort to prevent a violation of
this nature from occurring in the future. Corrective Action Plans will be
designed to address not only the specific issue, but also to prevent similar
problems in other areas or departments. Corrective Action Plans my require that
billing be handled in a designated way, that training take place, and that

 

23

 

restrictions may
be imposed on particular staff.  If it
appears that certain individuals continue to exhibit a propensity to engage in
practices that raise compliance concerns, additional disciplinary actions,
including termination, may be taken. 
These Corrective Action Plans may:

 

•              Be included as an element of the overall Compliance
Plan.

•              Be included as a revision/update of the Corporate
Compliance Handbook.

•              Become a part of the training received by new
and/or existing employees.

 

14.5.        Consulting with Counsel.   If the Corporate Compliance
Officer determines that a violation of the Corporate Compliance Plan has
occurred and is sufficiently severe that termination of one or more employees
may be warranted, General Counsel shall be consulted prior to the imposition of
the termination.

 

XV.         Policy for Relating to
Non-MedQuest Investigators

 

15.1         Policy
Summary.   It
shall be the policy of MedQuest Associates, Inc.

 

15.1.1      to provide full cooperation
to properly authorized investigators, whether these investigators represent the
federal or state governments or third-party payors, but to assert all
protections afforded the Company by law in any such investigation or audit;

 

15.1.2      refer all non-Company
investigators and any requests for information from such investigators to the
Corporate Compliance Officer or General Counsel so that their identity and
authorization may be verified and a coordinated response to the investigator’s
request can be organized;

 

15.1.3.     to
provide every employee of MedQuest Associates with an attorney to accompany
them and assist them in any interviews conducted by a non-Company investigator.

 

15.2         Background on
Non-Company Investigations. Governmental investigators have become
increasingly aggressive.  Some federal
agency heads have promised Congress that they would collect $23.00 in fines and
settlements for every $1.00 appropriated for enforcement activities.  We also know from FBI training materials
obtained

 

24

 

through the Freedom of
Information Act that investigators do not “play fair.”  Some government agents have been shown to
use half-truths and intimidation to force information from individuals they
have targeted for questioning.

 

The problem is worsened
by the fact that, outside senior management, most employees don’t have the full
picture of an organization’s activities. As a result, it often takes tens of
thousands of dollars and countless wasted man-hours educating these
investigators who start off with a poor understanding of the full story.

 

MedQuest Associates
accepts Medicare and Medicaid patients. 
Our acceptance of tax dollars in return for medical services to the
elderly and poor requires us to be truthful and above-board in all that we say
and do.  Government investigators are
not bound to those same principles. 
This policy will aid you in dealing with investigators who may approach
you at home or at work.

 

15.3         Purpose
of the Policy on Relating to Non-Company Investigators.

 

The purpose of this
Policy is to provide direction to all employees about how they should deal with
all investigators outside the Company. 
This policy will inform employees about their rights if an investigator
contacts them.  Such contacts naturally
are anxiety-producing, but if our employees understand their rights in such
situations, it will help them to be more at ease.

 

This policy is not intended as a means to cover-up
anything. 
MedQuest has implemented a Corporate Compliance Program that requires
our employees to report anything that is or might seem to be improper.  As a result of this Program, we expect that
there is nothing an employee would say to an investigator that hasn’t already
been reported through the Corporate Compliance Program and appropriately
handled.

 

The purpose of this
Policy also is to provide for a coordinated response by MedQuest.  Investigators generally know little more
than what they are told, so it is important that they hear from those persons
within the Company who know the whole story. 
It also is important for the Company to provide these investigators with
documents that verify the actions we have taken and the reason behind those
actions.  MedQuest employs several law
firms that specialize in various aspects of our activities to assist us in
assuring that our activities meet the necessary legal standards.  However, our efforts to demonstrate our
legal

 

25

 

compliance will be
greatly hindered if everyone does not work together to provide the necessary
information to those inquiring about our Company.

 

15.4         Request
for Interview

 

When the investigator arrives, every employee should
be polite.  The Center Manager should
obtain the following information:

 

(a)           the investigator’s
name, agency affiliation, address, and business telephone number;

 

(b)           the reason for the
visit;

 

(c)           if the investigator has
a subpoena or warrant to serve (request a copy);

 

15.4.1      No MedQuest employee is obligated to consent
to the interview, although the investigator may try to convince them
otherwise.  A MedQuest employee may
agree to the interview, but may require the interview be conducted during
normal business hours and at MedQuest offices or another location.

 

15.4.2        The
interview may be stopped at any time. 
The employee can request that the investigator return when counsel can
be present.  Counsel should be present
for every interview when at all possible. 
MedQuest will be represented by its corporate counsel, and MedQuest
corporate counsel will assist any employee, if the employee requests.  However, if a legal conflict-of-interest
arises, employees will be advised that they have the right to their own legal
counsel.

 

15.4.3      If an employee chooses not to respond to the
investigator’s questions, the investigator may have the authority to subpoena
the employee to appear before a grand jury.

 

15.4.4      Any MedQuest employee contacted by an
investigator should immediately notify his or her supervisor.  The employee should provide their supervisor
with as much information and documentation about the investigation as is known.  The request for an interview should be
immediately reported to the Corporate Compliance Officer or to the General
Counsel.

 

26

 

15.5.        Search of
MedQuest Property

 

If the
investigators present a search warrant, they have authority to enter MedQuest
offices, search for evidence of criminal activity, and seize those documents
listed in the warrant.  No staff member
has to speak to the investigators, but must provide the documents requested in
the warrant and should in no way impede or obstruct the

investigator(s)’ activities.

 

15.5.1      The Center Manager should request copies of the
warrant and the affidavit supporting the warrant. When documents are seized,
the investigators are required to provide a copy of the warrant.

 

15.5.2      The Center Manager should request the
investigator to wait until the President, Corporate Compliance Officer
(800-849-3713) or General Counsel arrives.

 

15.5.3      If the General Counsel or Chief Compliance
Officer is unavailable, the Center Manager or other corporate officer may
contact the appropriate prosecutor immediately and request that the search be
stopped.  It is possible to negotiate
alternatives to the search and seizure, including provisions to ensure that all
existing evidence will be preserved undisturbed.  If the prosecutor refuses to stop the search, request agreement
to delay the search to enable MedQuest to obtain a hearing on the warrant.

 

15.5.4      MedQuest employees must not alter, remove, or
destroy MedQuest documents or records, except in accordance with the MedQuest
policy on document retention.  Once an
investigation has begun, the destruction of any documents that would have
destroyed in the normal course of business must be suspended.

 

15.5.5      All MedQuest employees should request an
opportunity to consult with MedQuest’s General Counsel before the search
commences.  Provide counsel with a copy
of the warrant immediately.  If General
Counsel can be reached by telephone, put General Counsel directly in touch with
the lead investigator.

 

15.5.6      Cooperate with the investigators, but do not
consent to the search.

 

(a)   The
Center Manager should instruct the lead investigator that:

 

27

 

(1)      MedQuest objects to the
search;

 

(2)      The search is unjustified
because MedQuest is willing to voluntarily cooperate with the government; and

 

(3)      The search will violate the
rights of MedQuest and its employees.

 

(b)   Under
no circumstances should MedQuest employees obstruct or interfere with the
search.  Although they should cooperate,
all employees should clearly state that their cooperation does not constitute
consent to the search.

 

(c)   Whenever
possible, keep track of all documents and what information the documents
contain given to the investigators.

 

15.5.7      The Center Manager should attempt to negotiate an
acceptable methodology with the investigators to minimize disruptions and keep
track of the process.  Considerations
include the sequence of the search; whether investigators are willing to accept
copies in place of originals; and if so, who will make the copies and how;
whether MedQuest will be permitted to make its own set of copies; and
arrangements for access to records seized.

 

15.5.8      The Center Manager should point out limitations
on the premises to be searched and on the property to be seized.

 

(a)           Never
consent to an expansion of the search.

 

(b)           Disputes
regarding the scope of the search must be brought to the attention of the
prosecutor or the court to be settled. 
MedQuest staff should not prevent the investigators from searching areas
they claim to have the right to search.

(c)           Investigators generally
have the right to seize evidence of crimes that is in their “plain view” during
a search regardless of whether such evidence is described in the warrant.

 

15.5.9                      The Center Manager should take
appropriate steps to protect other MedQuest employees.

 

(a)           The
Center Manager should send all non-essential personnel home, or temporarily
reassign them to other areas when a warrant is served.

 

28

 

(b)           Selected
employees should remain along with the Center Manager or MedQuest counsel to
monitor the search.

 

(c)           Investigators
should never be left alone on MedQuest premises, and no employee should be left
alone with the investigators.

 

15.5.10                    Object to any search of privileged
documents.

 

(a)           If
there is any possibility that the search will compromise information that is
marked as “Attorney-Client Privilege” or should be protected under patient
privacy laws, MedQuest should object on that basis, and raise the issue with
the court if necessary.

 

(b)           Negotiate
a methodology to protect the confidentiality of any privileged or protected
information pending a resolution of these objections. For example, segregate
the privileged documents from other files and investigators will not read the
documents until the court had made a decision or the investigators will seize
the document, but place them unread in sealed envelopes until the matter is
resolved.

 

15.5.11                    The Center Manager should keep a record
regarding the search.

 

(a)           Ask
each investigator for proper identification, including their business cards.

 

(b)           List the names and
positions of all the investigators with the date and time.  Verify the list with the lead agent and
request he or she sign it.

 

(c)           Monitor
and record the manner in which the search is conducted.  Note in detail the precise areas and files
searched, the time periods when each of them was searched, the manner in which
the search was conducted, the agents who participated, and which files were
seized.

 

(d)         Several individuals will
be probably be needed to monitor the different areas being searched
simultaneously.

 

29

 

(e)           If the monitor is
ordered to leave, contact the lead investigator.  A person should only be ordered to move if they are in the way,
not to avoid being observed.  Never
provoke a confrontation with an agent.

 

	
  15.5.12

  	
   

  	
  If possible, do not
  release a document to the investigators unless the General Counsel has reviewed
  it.  Note: this is not possible if the
  agents have a search warrant.

  

 

15.5.13                    If possible, the Center Manager
should make a record and a copy of all records seized.

 

(a)           If this is not
possible, before the agents leave MedQuest premises, request an inventory of
the documents seized.

 

(b)           Request the lead agent
to note the date and time the search was completed as well as sign the
inventory with the agent’s full title, address, and telephone number.

 

(c)           Copies of the seized
documents should be requested as well, especially medical records, as this is
the most efficient way to inventory the documents seized.

 

(d)           Download copies of
files from hard drives of computers, and copy diskettes, especially if the
material is essential to the ongoing operations of MedQuest.

 

30Exhibit 10.30

 

 

REVOLVING CREDIT AND
SECURITY AGREEMENT

 

THIS
REVOLVING CREDIT AND SECURITY AGREEMENT (the “Agreement”)
dated as of February 5, 2004, is entered into by and among BOSTON BIOMEDICA, INC., a
Massachusetts  corporation (“Biomedica”),
BBI
BIOTECH RESEARCH LABORATORIES, INC. a Massachusetts corporation (“Biotech”),
BBI
SOURCE SCIENTIFIC, INC. a Massachusetts corporation (“Source”),
and BBI
BIOSEQ, INC. a Massachusetts corporation (“Bioseq”; individually and
collectively, the “Borrower”), and CAPITALSOURCE FINANCE LLC, a
Delaware limited liability company (the “Lender”).

 

WHEREAS,
Borrower has requested that Lender make available to Borrower a revolving
credit facility (the “Revolving Facility”) in a maximum
principal amount at any time outstanding of up to Two Million Five Hundred Thousand Dollars  ($2,500,000) (the “Facility Cap”), the proceeds of which
shall be used by Borrower to finance leasehold improvements at its Frederick and Gaithersburg,
Maryland facilities, lab improvements for its West Bridgewater, Massachusetts
location and for its working capital needs; and

 

WHEREAS,
Lender is willing to make the Revolving Facility available to Borrower upon the
terms and subject to the conditions set forth herein.

 

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

 

I.             DEFINITIONS

 

1.1          General Terms

 

For purposes
of this Agreement, in addition to the definitions above and elsewhere in this
Agreement, the terms listed in Appendix A hereto shall have the meanings
given such terms in Appendix A, which is incorporated herein and made a
part hereof.  All capitalized terms used
which are not specifically defined shall have meanings provided in
Article 9 of the UCC in effect on the date hereof to the extent the same
are used or defined therein.  Unless
otherwise specified herein or in Appendix A, any agreement or contract
referred to herein or in Appendix A shall mean such agreement as
modified, amended or supplemented from time to time.  Unless otherwise specified, as used in the Loan Documents or in
any certificate, report, instrument or other document made or delivered pursuant
to any of the Loan Documents, all accounting terms not defined in Appendix A
or elsewhere in this Agreement shall have the meanings given to such terms in
and shall be interpreted in accordance with GAAP.

 

II.            ADVANCES,
PAYMENT AND INTEREST

 

2.1          The Revolving Facility

 

(a)           Subject to the provisions of this
Agreement, Lender shall make Advances to Borrower under the Revolving Facility
from time to time during the Term, provided
that, notwithstanding any other provision of this Agreement, the aggregate
amount of all Advances at any one time outstanding under the Revolving Facility
shall not exceed either of (a)

 

 

the
Facility Cap, and (b) the Availability. 
The Revolving Facility is a revolving credit facility, which may be
drawn, repaid and redrawn, from time to time as permitted under this Agreement.  Any determination as to whether there is
Availability for Advances shall be made by Lender in its Permitted Discretion
and is final and binding upon Borrower. 
Unless otherwise permitted by Lender, each Advance shall be in an amount
of at least $1,000.  Subject to the
provisions of this Agreement, Borrower may request Advances under the Revolving
Facility up to and including the value, in U.S. Dollars, of Eighty-Five percent
(85%) of the Borrowing Base minus, if applicable, amounts reserved pursuant to
this Agreement (such calculated amount being referred to herein as the “Availability”).  Advances under the Revolving Facility automatically shall be made
for the payment of interest on the Note and other Obligations on the date when
due to the extent available and as provided for herein.

 

(b)           Lender has established the
above-referenced advance rate for Availability and, in its sole credit
judgment, may further adjust the Availability and such advance rate by applying
percentages (known as “liquidity factors”) to Eligible Receivables by payor
class based upon Borrower’s actual recent collection history for each such
payor class (i.e., commercial contracts, government agency, etc.) in a manner
consistent with Lender’s underwriting practices and procedures, including
without limitation Lender’s review and analysis of, among other things,
Borrower’s historical returns, rebates, discounts, credits and allowances
(collectively, the “Dilution Items”).  Such liquidity factors and the advance rate
for Availability may be adjusted by Lender throughout the Term as warranted by
Lender’s underwriting practices and procedures in its sole credit
judgment.  Also, Lender shall have the
right to establish from time to time, in its sole credit judgment, reserves
against the Borrowing Base, which reserves shall have the effect of reducing
the amounts otherwise eligible to be disbursed to Borrower under the Revolving
Facility pursuant to this Agreement.  As
of the Closing Date, Lender’s review has determined the liquidity factors to be
the following:  Biomedica - 95%, Biotech
- 100%, and Source - 96%.

 

2.2          The Note; Maturity

 

(a) All Advances under the Revolving Facility
shall be evidenced by the Note, payable to the order of Lender, duly executed
and delivered by Borrower and dated the Closing Date, evidencing the aggregate
indebtedness of Borrower to Lender resulting from Advances under the Revolving
Facility, from time to time.  Lender
hereby is authorized, but is not obligated, to enter the amount of each Advance
under the Revolving Facility and the amount of each payment or prepayment of
principal or interest thereon in the appropriate spaces on the reverse of or on
an attachment to the Note.  Lender will
account to Borrower monthly with a statement of Advances under the Revolving
Facility and charges and payments made pursuant to this Agreement, and in the
absence of manifest error, such accounting rendered by Lender shall be deemed
final, binding and conclusive unless Lender is notified by Borrower in writing
to the contrary within 15 calendar days of Receipt of each accounting, which
notice shall be deemed an objection only to items specifically objected to
therein.

 

(b)  All amounts outstanding
under the Note and other Obligations shall be due and payable in full, if not
earlier in accordance with this Agreement, on the earlier of (i) the occurrence
of an Event of Default if required pursuant hereto or Lender’s demand upon an
Event of Default, and (ii) the last day of the Term (such earlier date being
the “Revolving Facility Maturity Date”).

 

2.3          Interest

 

Interest
on outstanding Advances under the Note shall be payable monthly in arrears on
the first day of each calendar month at an annual rate of Prime Rate plus
3.00%,

 

 

provided, however, that,
notwithstanding any provision of any Loan Document, the Prime Rate shall be not
less than 4.00%, in each case calculated on the basis of a 360-day year and for
the actual number of calendar days elapsed in each interest calculation
period.  Interest accrued on each
Advance under the Note shall be due and payable on the first day of each
calendar month, in accordance with the procedures provided for in Section
2.5 and Section 2.6, commencing March 1, 2004, and continuing
until the later of the expiration of the Term and the full performance and
irrevocable payment in full in cash of the Obligations and termination of this
Agreement.

 

2.4          Revolving Facility Disbursements;
Requirement to Deliver Borrowing Certificate

 

(a)           So long as no
Default or Event of Default shall have occurred and be continuing, Borrower may
give Lender irrevocable written notice requesting an Advance under the
Revolving Facility by delivering to Lender not later than 4:00 p.m. (Eastern
Standard Time) at least two (2) but not more than four (4) Business Days before
the proposed borrowing date of such requested Advance (the “Borrowing Date”), a
completed Borrowing Certificate and relevant supporting documentation listed on
Schedule 2.4 in a form reasonably satisfactory to Lender, which shall
(i) specify the proposed Borrowing Date of such Advance which shall be a
Business Day, (ii) specify the principal amount of such requested Advance,
and (iii) certify the matters contained in Section 4.2.

 

(b)           Each time a request
for an Advance is made, and, in any event and regardless of whether an Advance
is being requested, on the first and third Tuesday of each month during the Term (and more frequently if Lender shall so
request) until the Obligations are indefeasibly
paid in cash in full and this Agreement is terminated, Borrower shall
deliver to Lender a Borrowing Certificate accompanied by a separate detailed
aging and categorizing of Borrower’s accounts receivable and accounts payable
and such other supporting documentation with respect to the figures and
information in the Borrowing Certificate as Lender shall reasonably request
from a credit or security perspective or otherwise.

 

(c)           On each Borrowing Date, Borrower irrevocably authorizes
Lender to disburse the proceeds of the requested Advance to the appropriate Borrower’s
account(s) as set forth on Schedule 2.4, in all cases for credit to the
appropriate Borrower (or to such other account as to which the appropriate
Borrower shall instruct Lender) via Federal funds wire transfer no later than
4:00 p.m. (Eastern Standard Time).

 

2.5          Revolving Facility Collections;
Repayment; Borrowing Availability and Lockbox

 

Each Borrower
shall maintain one or more lockbox accounts (individually and collectively, the
“Lockbox
Account”) with one or more banks acceptable to Lender (each, a “Lockbox
Bank”), and shall execute with each Lockbox Bank one or more
agreements acceptable to Lender (individually and collectively, the “Lockbox
Agreement”), and such other agreements related thereto as Lender may
require.  Lender hereby acknowledges
that Fleet Bank is an acceptable Lockbox Bank as of the Closing Date.  Each Borrower shall ensure that all
collections of their respective Accounts are paid and delivered from Account
Debtors and other Persons into the appropriate Lockbox Account.  The Lockbox Agreements shall provide that
the Lockbox Banks immediately will transfer all funds paid into the Lockbox
Accounts into a depository account or accounts maintained by Lender or an
Affiliate of Lender at such bank as Lender may communicate to Borrower from
time to time (the “Concentration Account”).  Notwithstanding and without limiting any
other provision of any Loan Document, Lender shall apply, on a daily basis, all
funds transferred into the Concentration Account pursuant to the Lockbox
Agreement and this Section 2.5 in such order and manner as
determined by Lender

 

 

provided that such amounts
shall first be applied to pay any amounts then due.  To the extent that any Accounts are collected by any Borrower or
any other cash payments received by any Borrower are not sent directly to the
appropriate Lockbox Account but are received by any Borrower or any of their
Affiliates, such collections and proceeds shall be held in trust for the
benefit of Lender and immediately remitted (and in any event within two (2)
Business Days), in the form received, to the appropriate Lockbox Account for
immediate transfer to the Concentration Account.  Borrower acknowledges and agrees that compliance with the terms
of this Section 2.5 is an essential term of this Agreement.  All funds transferred to the Concentration
Account for application to the Obligations under the Revolving Facility shall
be applied to reduce the Obligations under the Revolving Facility, but, for
purposes of calculating interest hereunder, shall be subject to a five Business
Day clearance period.  If as the result
of collections of Accounts and/or any other cash payments received by any
Borrower pursuant to this Section 2.5 a credit balance exists with
respect to the Concentration Account, such credit balance shall not accrue
interest in favor of a Borrower, but shall be promptly transferred to the
appropriate Borrower upon such Borrower’s written request.  If applicable, at any time prior to the
execution of all or any of the Lockbox Agreements and operation of all or any
of the Lockbox Accounts, each Borrower and their Affiliates shall direct all
collections or proceeds it receives on Accounts or from other Collateral to the
accounts(s) and in the manner specified by Lender in its Permitted Discretion.

 

2.6          Promise to Pay; Manner of Payment

 

Borrower absolutely and unconditionally promises to pay principal,
interest and all other amounts payable hereunder, or under any other Loan
Document, without any right of rescission and without any deduction whatsoever,
including any deduction for any setoff, counterclaim or recoupment, and
notwithstanding any damage to, defects in or destruction of the Collateral or
any other event, including obsolescence of any property or improvements.  All payments made by Borrower (other than
payments automatically paid through Advances under the Revolving Facility as
provided herein), shall be made only by wire transfer on the date when due,
without offset or counterclaim, in U.S. Dollars, in immediately available funds
to such account as may be indicated in writing by Lender to Borrower from time
to time.  Any such payment received
after 5:00 p.m. (Eastern Standard Time) on the date when due shall be deemed
received on the following Business Day. 
Whenever any payment hereunder shall be stated to be due or shall become
due and payable on a day other than a Business Day, the due date thereof shall
be extended to, and such payment shall be made on, the next succeeding Business
Day, and such extension of time in such case shall be included in the
computation of payment of any interest (at the interest rate then in effect
during such extension) and/or fees, as the case may be.

 

2.7          Repayment of Excess Advances

 

Any balance of
Advances under the Revolving Facility outstanding at any time in excess of the
lesser of the Facility Cap or the Availability shall be immediately due and
payable by Borrower without the necessity of any demand, at the Payment Office,
whether or not a Default or Event of Default has occurred or is continuing and
shall be paid in the manner specified in Section 2.6.

 

2.8          Payments by Lender

 

Should any
amount required to be paid under any Loan Document be unpaid on the date due,
such amount may be paid by Lender, which payment shall be deemed a request for
an Advance under the Revolving Facility as of the date such payment is due, and
Borrower irrevocably authorizes disbursement of any such funds to Lender by way
of direct payment of the

 

 

relevant amount, interest or
Obligations.  No payment or prepayment
of any amount by Lender or any other Person shall entitle any Person to be
subrogated to the rights of Lender under any Loan Document unless and until the
Obligations have been fully performed and paid irrevocably in cash and this
Agreement has been terminated.  Any sums
actually expended by Lender as a result of any Borrower’s or any Guarantor’s
failure to pay, perform or comply with any Loan Document or any of the
Obligations may be charged to Borrower’s account as an Advance under the
Revolving Facility and added to the Obligations.

 

2.9          Grant of Security Interest; Collateral

 

(a)           To secure the payment and performance
of the Obligations, each Borrower hereby grants to Lender a continuing security
interest in and Lien upon, and pledges to Lender, all of its right, title and
interest in and to the following (collectively and each individually, the “Collateral”),
which security interest is intended to be a first priority security interest:

 

(i)            all
of such Borrower’s present and future Inventory, now owned or hereafter
acquired;

 

(ii)           all
of such Borrower’s present and future Accounts and all of the following solely
to the extent related to such Accounts: contract rights, Permits, General
Intangibles, Chattel Paper, Documents, Instruments, Deposit Accounts (which
shall include the Lockbox Accounts), Letter-of-Credit Rights, Supporting
Obligations, rights to the payment of money or other forms of consideration of
any kind, now owned or hereafter acquired;

 

(iii)          all
of such Borrower’s present and future Government Contracts and rights
thereunder and the related Government Accounts and proceeds thereof, now or
hereafter owned or acquired by such Borrower; provided, however,
that Lender shall not have a security interest in any rights under any
Government Contract of such Borrower or in the related Government Account where
the taking of such security interest would be a violation of an express
prohibition contained in the Government Contract (for purposes of this
limitation, the fact that a Government Contract is subject to, or otherwise
refers to, Title 31, § 203 or Title 41, § 15 of the United
States Code shall not be deemed an express prohibition against assignment
thereof) or is prohibited by applicable law;

 

(iv)          All
Books and Records, whether now owed or hereafter acquired; and

 

(v)           any
and all additions and accessions to any of the foregoing, and any and all
replacements, products and Proceeds (including insurance proceeds) of any of
the foregoing.

 

(b)           Notwithstanding the foregoing
provisions of this Section 2.9, such grant of a security interest
shall not extend to, and the term “Collateral” shall not include, any General
Intangibles of Borrower to the extent that (i) such General Intangible
does not directly relate to the Accounts; or (ii) (A) such General Intangibles
are not assignable or capable of being encumbered as a matter of law or under
the terms of any license or other agreement applicable thereto (but solely to
the extent that any such restriction shall be enforceable under applicable law)
without the consent of the licensor thereof or other applicable party thereto,
and (B) such consent has not been obtained; provided, however,
that the foregoing grant of a security interest shall extend to, and the term
“Collateral” shall include, each of the following: (a) any General

 

 

Intangible directly related to
the Accounts which is in the nature of an Account or a right to the payment of
money or a proceed of, or otherwise related to the enforcement or collection
of, any Account or right to the payment of money, or goods which are the
subject of any Account or right to the payment of money, (b) any and all
proceeds of any General Intangible which related to the Accounts that is
otherwise excluded pursuant to subsection (i) to the extent that the assignment,
pledge or encumbrance of such proceeds is not so restricted, and (c) upon
obtaining the consent of any such licensor or other applicable party with
respect to any such otherwise excluded General Intangible, such General
Intangible as well as any and all proceeds thereof that might theretofore have
been excluded from such grant of a security interest and from the term
“Collateral.”

 

(d)           Upon the execution and delivery of
this Agreement, and upon the proper filing of the necessary financing
statements, without any further action, Lender will have a good, valid and
perfected first priority Lien and security interest in the Collateral, subject
to no transfer or other restrictions or Liens of any kind in favor of any other
Person except for Permitted Liens.  No
financing statement relating to any of the Collateral is on file in any public
office except those (i) on behalf of Lender, and/or (ii) in connection with
Permitted Liens.

 

2.10        Collateral Administration

 

(a)           All Collateral (except Deposit
Accounts) will at all times be kept by Borrower at the locations set forth on Schedule 5.18B
hereto and shall not, without thirty (30) calendar days prior written notice to
Lender, be moved therefrom, and in any case shall not be moved outside the
continental United States.

 

(b)           Borrower shall keep accurate and
complete records of its Accounts and all payments and collections thereon and
shall submit such records to Lender on such periodic bases as Lender may
reasonably request.  In addition, if
Accounts of Borrower in an aggregate face amount in excess of $10,000 become
ineligible because they fall within one of the specified categories of
ineligibility set forth in the definition of Eligible Receivables, Borrower
shall notify Lender of such occurrence on the first Business Day following such
occurrence and the Borrowing Base shall thereupon be adjusted to reflect such
occurrence.  If requested by Lender,
Borrower shall execute and deliver to Lender formal written assignments of all
of its Accounts weekly or daily as Lender may reasonably request, including all
Accounts created since the date of the last assignment, together with copies of
claims, invoices and/or other information related thereto.  To the extent that collections from such
assigned accounts exceed the amount of the Obligations, such excess amount
shall not accrue interest in favor of Borrower, but shall be available to
Borrower upon Borrower’s written request.

 

(c)           Whether or not an Event of Default
has occurred, any of Lender’s officers, employees, representatives or agents
shall have the right, at any time during normal business hours, in the name of
Lender, any designee of Lender or Borrower, to verify the validity, amount or
any other matter relating to any Accounts of Borrower.  Borrower shall cooperate fully with Lender
in an effort to facilitate and promptly conclude such verification process.

 

(d)           To expedite collection, Borrower
shall endeavor in the first instance to make collection of its Accounts for
Lender.  Lender shall have the right at
all times after the occurrence and during the continuance of an Event of
Default to notify Account Debtors owing Accounts to Borrower that their
Accounts have been assigned to Lender and to collect such

 

 

Accounts directly in its own
name and to charge collection costs and expenses, including reasonable
attorney’s fees, to Borrower.

 

(e)           As and when determined by Lender in
its Permitted Discretion, Lender will perform the searches described in clauses
(i) and (ii) below against Borrower and Guarantors (the results of which are to
be consistent with Borrower’s representations and warranties under this
Agreement), all at Borrower’s expense: (i) UCC searches with the Secretary of
State of the jurisdiction of organization of each Borrower and Guarantor and
the Secretary of State and local filing offices of each jurisdiction where
Borrower and/or any Guarantors maintain their respective executive offices, a
place of business or assets; and (ii) judgment, federal tax lien and corporate
and partnership tax lien searches, in each jurisdiction searched under clause
(i) above.

 

(f)  Borrower (i) shall provide prompt written notice to its current bank to
transfer all items, collections and remittances to the Concentration Account,
(ii) shall direct each Account Debtor to make payments to the appropriate
Lockbox Account, and Borrower hereby authorizes Lender, upon any failure to
send such notices and directions within ten (10) calendar days after the date
of this Agreement (or ten (10) calendar days after the Person becomes an Account
Debtor), to send any and all similar notices and directions to such Account
Debtors, and (iii) shall do anything further that may be lawfully required by
Lender to create and perfect Lender’s lien on any collateral and effectuate the
intentions of the Loan Documents.  At
Lender’s request, Borrower shall immediately deliver to Lender all items for
which Lender must receive possession to obtain a perfected security interest
and all notes, certificates, and documents of title, Chattel Paper, warehouse
receipts, Instruments, and any other similar instruments constituting
Collateral.

 

2.11        Power of Attorney

 

Lender is
hereby irrevocably made, constituted and appointed the true and lawful attorney
for Borrower (without requiring any of them to act as such) with full power of
substitution to do the following: (i) endorse the name of Borrower upon any and
all checks, drafts, money orders, and other instruments for the payment of
money that are payable to Borrower and constitute collections on its or their
Accounts; (ii) execute in the name of Borrower any financing statements,
schedules, assignments, instruments, documents, and statements that it is or
they or are obligated to give Lender under any of the Loan Documents; and (iii)
do such other and further acts and deeds in the name of Borrower that Lender
may reasonably deem necessary or desirable to enforce any Account or other
Collateral or to perfect Lender’s security interest or lien in any
Collateral.  In addition, if any
Borrower breaches its obligation hereunder to direct payments of Accounts or
the proceeds of any other Collateral to the appropriate Lockbox Account,
Lender, as the irrevocably made, constituted and appointed true and lawful
attorney for Borrower pursuant to this paragraph, may, by the signature or
other act of any of Lender’s officers or authorized signatories (without
requiring any of them to do so), direct any federal, state or private payor or
fiscal intermediary to pay proceeds of Accounts or any other Collateral to the
appropriate Lockbox Account.

 

III.          FEES
AND OTHER CHARGES

 

3.1          Commitment Fee

 

On or before the Closing
Date, Borrower shall pay to Lender 1% of the Facility Cap as a nonrefundable
commitment fee.

 

 

3.2          Unused Line Fee

 

Borrower shall
pay to Lender monthly an unused line fee (the “Unused Line Fee”) in an
amount equal to 0.042% (per month) of the difference derived by subtracting (i)
the daily average amount of the balances under the Revolving Facility
outstanding during the preceding month, from (ii) the Facility Cap.  The Unused Line Fee shall be payable monthly
in arrears on the first day of each successive calendar month (starting with
the month in which the Closing Date occurs).

 

3.3          Collateral Management Fee

 

Borrower shall
pay Lender as additional interest a monthly collateral management fee (the “Collateral
Management Fee”) equal to 0.083% per month calculated on the basis
of the daily average amount of the balances under the Revolving Facility
outstanding during the preceding month. 
The Collateral Management Fee shall be payable monthly in arrears on the
first day of each successive calendar month (starting with the month in which
the Closing Date occurs).

 

3.4          Computation of Fees; Lawful Limits

 

All fees
hereunder shall be computed on the basis of a year of 360 days and for the
actual number of days elapsed in each calculation period, as applicable.  In no contingency or event whatsoever,
whether by reason of acceleration or otherwise, shall the interest and other
charges paid or agreed to be paid to Lender for the use, forbearance or
detention of money hereunder exceed the maximum rate permissible under
applicable law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. 
If, due to any circumstance whatsoever, fulfillment of any provision
hereof, at the time performance of such provision shall be due, shall exceed
any such limit, then, the obligation to be so fulfilled shall be reduced to
such lawful limit, and, if Lender shall have received interest or any other
charges of any kind which might be deemed to be interest under applicable law
in excess of the maximum lawful rate, then such excess shall be applied first
to any unpaid fees and charges hereunder, then to unpaid principal balance owed
by Borrower hereunder, and if the then remaining excess interest is greater
than the previously unpaid principal balance, Lender shall promptly refund such
excess amount to Borrower and the provisions hereof shall be deemed amended to
provide for such permissible rate.  The
terms and provisions of this Section 3.4 shall control to the extent any
other provision of any Loan Document is inconsistent herewith.

 

3.5          Default Rate of Interest

 

Upon the occurrence and
during the continuation of an Event of Default, the Applicable Rate of interest
in effect at such time with respect to the Obligations shall be increased by
3.0% per annum (the “Default Rate”).

 

3.6          Acknowledgement of Joint and Several
Liability

 

Each Borrower
acknowledges that it is jointly and severally liable for all of the Obligations
under the Loan Documents.  Each Borrower
expressly understands, agrees and acknowledges that (i) Borrowers are all
Affiliated entities by common ownership, (ii) each Borrower desires to have the
availability of one common credit facility instead of separate credit
facilities, (iii) each Borrower has requested that Lender extend such a common
credit facility on the terms herein provided, (iv) Lender will be lending
against, and relying on a lien upon, all of Borrowers’ Collateral even though
the proceeds of any particular loan made hereunder may not be advanced directly
to a particular Borrower, (v) each Borrower will nonetheless benefit by the

 

 

making of all such loans by
Lender and the availability of a single credit facility of a size greater than
each could independently warrant, and (vi) all of the representations,
warranties, covenants, obligations, conditions, agreements and other terms
contained in the Loan Documents shall be applicable to and shall be binding
upon each Borrower.

 

IV.          CONDITIONS
PRECEDENT

 

4.1          Conditions to Initial Advance and
Closing

 

The
obligations of Lender to consummate the transactions contemplated herein and to
make the initial Advance under the Revolving Facility (the “Initial Advance”) are
subject to the satisfaction, in the reasonable judgment of Lender, of the
following:

 

(a)           (i) Borrower shall have delivered to
Lender (A) the Loan Documents to which it is a party, each duly executed by an
authorized officer of Borrower and the other parties thereto, (B) a
Borrowing Certificate for the Initial Advance under the Revolving Facility
executed by an authorized officer of Borrower;

 

(b)           all in form and substance
satisfactory to Lender in its Permitted Discretion, Lender shall have received
(i) a report of Uniform Commercial Code financing statement, tax and judgment
lien searches performed with respect to each Borrower in each jurisdiction
determined by Lender in its Permitted Discretion, and such report shall show no
Liens on the Collateral (other than Permitted Liens), (ii) each document
(including, without limitation, any Uniform Commercial Code financing
statement) required by any Loan Document or under law or requested by Lender to
be filed, registered or recorded to create in favor of Lender, a perfected first priority security interest upon
the Collateral, and (iii) evidence of each such filing, registration or
recordation and of the payment by Borrower of any necessary fee, tax or expense
relating thereto;

 

(c)           Lender shall have received (i) the
Charter and Good Standing Documents, all in form and substance acceptable to
Lender, (ii) a certificate of the corporate secretary or assistant secretary of
each Borrower dated the Closing Date, as to the incumbency and signature of the
Persons executing the Loan Documents, in form and substance acceptable to
Lender, and (iii) the written legal opinion of counsel for Borrower, in form
and substance satisfactory to Lender and its counsel;

 

(d)           Lender shall have received a
certificate of the chief financial officer (or, in the absence of a chief
financial officer, the chief executive officer) of each Borrower, in form and
substance satisfactory to Lender (each, a “Solvency Certificate”), certifying as to
such Person’s financial resources and ability to meet its obligations and liabilities
as they become due, to the effect that as of the Closing Date and the Borrowing
Date for the Initial Advance and after giving effect to such transactions and
Indebtedness: (A) the assets of such Person, at a Fair Valuation, exceed the
total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such Person, and (B) no unreasonably small capital
base with which to engage in its anticipated business exists with respect to
such Person;

 

(e)           Lender shall have completed
examinations, the results of which shall be satisfactory in form and substance
to Lender, of the Collateral, the financial statements and the books, records,
business, obligations, financial condition and operational state of each
Borrower, and each such Person shall have demonstrated to Lender’s satisfaction
that (i) its operations comply, in all respects deemed material by Lender,
in its reasonable judgment, with all applicable

 

 

federal, state,
foreign and local laws, statutes and regulations, (ii) its operations are
not the subject of any governmental investigation, evaluation or any remedial
action which could result in any expenditure or liability deemed material by
Lender, in its reasonable judgment, and (iii) it has no liability (whether
contingent or otherwise) that is deemed material by Lender, in its reasonable
judgment;

 

(f)            Lender shall have received all fees,
charges and expenses payable to Lender on or prior to the Closing Date pursuant
to the Loan Documents;

 

(g)           all in form and substance
satisfactory to Lender in its Permitted Discretion, Lender shall have received
such consents, approvals and agreements, including, without limitation, any
applicable Landlord Waivers and Consents with respect to any and all leases set
forth on Schedule 5.4, from such third parties as Lender and its counsel
shall determine are necessary or desirable with respect to (i) the Loan
Documents and/or the transactions contemplated thereby, and/or (ii) claims
against any Borrower or the Collateral;

 

(h)           Borrower shall be in compliance with Section
6.5, and Lender shall have received original certificates of all insurance
policies of Borrower confirming that they are in effect and that the premiums
due and owing with respect thereto have been paid in full and naming Lender as
an additional insured, as such insurance relates to the Collateral;

 

(i)            all corporate and other proceedings,
documents, instruments and other legal matters in connection with the
transactions contemplated by the Loan Documents (including, but not limited to,
those relating to corporate and capital structures of Borrower) shall be
satisfactory to Lender;

 

(j)            Lender shall have received, in form
and substance satisfactory to Lender, release and termination of any and all
Liens, security interest and/or Uniform Commercial Code financing statements
in, on, against or with respect to any of the Collateral (other than Permitted
Liens);

 

(k)           Borrower shall have executed and filed
IRS Form 8821 with the appropriate office of the Internal Revenue Service;

 

(l)            Borrower shall provide evidence that
it has engaged a nationally recognized independent certified public accounting
firm satisfactory to Lender in its Permitted Discretion; and

 

(m)          Lender shall have received such other
documents, certificates, information or legal opinions as Lender may reasonably
request, all in form and substance reasonably satisfactory to Lender.

 

4.2          Conditions to Each Advance 

 

The
obligations of Lender to make any Advance (including, without limitation, the
Initial Advance) are subject to the satisfaction, in the reasonable judgment of
Lender, of the following additional conditions precedent:

 

(a)           Borrower shall have delivered to
Lender a Borrowing Certificate for the Advance executed by an authorized
officer of Borrower, which shall constitute a representation

 

 

and warranty by Borrower as of
the Borrowing Date of such Advance that the conditions contained in this Section
4.2 have been satisfied;

 

(b)           each of the representations and
warranties made by Borrower in or pursuant to this Agreement (as updated from
time to time by Borrower) shall be accurate, before and after giving effect to
such Advance, and no Default or Event of Default shall have occurred or be
continuing or would exist after giving effect to the Advance under the
Revolving Facility on such date;

 

(c)           immediately after giving effect to
the requested Advance, the aggregate outstanding principal amount of Advances
under the Revolving Facility shall not exceed either the Availability or the
Facility Cap;

 

(d)           except as disclosed in the financial
statements provided to the Lender prior to the date of the requested Advance,
there shall be no liabilities or obligations with respect to Borrower of any
nature whatsoever which, either individually or in the aggregate, would
reasonably be likely to have a Material Adverse Effect; and

 

(e)           Lender shall have received all fees,
charges and expenses payable to Lender on or prior to such date pursuant to the
Loan Documents.

 

V.            REPRESENTATIONS
AND WARRANTIES

 

Each Borrower,
jointly and severally, represents and warrants as of the date hereof, the
Closing Date, and each Borrowing Date as follows:

 

5.1          Organization and Authority

 

Borrower is a corporationduly organized, validly existing and in good standing under
the laws of its state of formation. 
Borrower (i) has all requisite corporate power and authority to own
its properties and assets and to carry on its business as now being conducted
and as contemplated in the Loan Documents, (ii) is duly qualified to do
business in every jurisdiction in which failure so to qualify would reasonably
be likely to have a Material Adverse Effect, and (iii) has all requisite power
and authority (A) to execute, deliver and perform the Loan Documents to
which it is a party, (B) to borrow hereunder, (C) to consummate the
transactions contemplated under the Loan Documents, and (D) to grant the Liens
with regard to the Collateral pursuant to the Security Documents to which it is
a party.  No Borrower is an “investment
company” registered or required to be registered under the Investment Company
Act of 1940, as amended, or is controlled by such an “investment company.”

 

5.2          Loan Documents

 

The execution,
delivery and performance by Borrower of the Loan Documents to which it is a
party, and the consummation of the transactions contemplated thereby,
(i) have been duly authorized by all requisite action of each such Person
and have been duly executed and delivered by or on behalf of each such Person;
(ii) do not violate any provisions of (A) applicable law, statute, rule,
regulation, ordinance or tariff, (B) any order of any Governmental
Authority binding on any such Person or any of their respective properties, or
(C) the certificate of incorporation or bylaws (or any other equivalent
governing agreement or document) of any such Person, or any agreement between
any such Person and its respective stockholders, members, partners or equity
owners or among any such stockholders, members, partners or equity owners;
(iii) are not in conflict with, and do not result in a breach or default of or
constitute an event of

 

 

default, or an event, fact,
condition or circumstance which, with notice or passage of time, or both, would
constitute or result in a conflict, breach, default or event of default under,
any indenture, agreement or other instrument to which any such Person is a
party, or by which the properties or assets of such Person are bound;
(iv) except as set forth therein, will not result in the creation or
imposition of any Lien of any nature upon any of the properties or assets of
any such Person, and (v) except as set forth on Schedule 5.2, do
not require the consent, approval or authorization of, or filing, registration
or qualification with, any Governmental Authority or any other Person.  When executed and delivered, each of the
Loan Documents to which Borrower is a party will constitute the legal, valid
and binding obligation of Borrower, enforceable against Borrower in accordance
with its terms, subject to the effect of any applicable bankruptcy, moratorium,
insolvency, reorganization or other similar law affecting the enforceability of
creditors’ rights generally and to the effect of general principles of equity
which may limit the availability of equitable remedies (whether in a proceeding
at law or in equity).

 

5.3          Subsidiaries, Capitalization and
Ownership Interests

 

Except as
listed on Schedule 5.3, Borrower has no Subsidiaries.  Schedule 5.3 states the
authorized and issued capitalization of Borrower, the number and class of
equity securities and/or ownership, voting or partnership interests issued and
outstanding of Borrower and the record and beneficial owners thereof (including
options, warrants  and other rights to acquire any of the foregoing).   The outstanding equity securities and/or
ownership, voting or partnership interests of Borrower have been duly
authorized and validly issued and are fully paid and nonassessable, and each
Person listed on Schedule 5.3 owns beneficially and of record all
the equity securities and/or ownership, voting or partnership interests it is
listed as owning free and clear of any Liens other than Liens created by the
Security Documents.  Schedule 5.3
also lists the directors, members, managers and/or partners of Borrower.  Except as listed on Schedule 5.3,
Borrower does not own an interest in, participate in or engage in any joint
venture, partnership or similar arrangements with any Person.

 

5.4          Properties

 

Borrower (i)
(A) is the sole owner and has good, valid and marketable title to, or (B) has a
valid leasehold interest in or license to, all of its properties and assets,
including the Collateral, whether personal or real, subject to no transfer
restrictions or Liens of any kind except for Permitted Liens, and (ii) is in
compliance in all material respects with each material lease to which it is a
party or otherwise bound.  Schedule 5.4
lists all real properties (and their locations) owned or leased by or to, and
all other assets or property with a value in excess of $50,000 that are leased
or licensed by, Borrower and all leases (including leases of leased real
property) covering or with respect to such properties and assets.  Borrower enjoys peaceful and undisturbed
possession under all such leases and such leases are all the leases necessary
for the operation of such properties and assets, are valid and subsisting and
are in full force and effect.

 

5.5          Other Agreements

 

Borrower is not (i) a party to any
judgment, order or decree or any agreement, document or instrument, or subject
to any restriction, which would materially adversely affect its ability to
execute and deliver, or perform under, any Loan Document or to pay the
Obligations, (ii) in default in the performance, observance or fulfillment of
any obligation, covenant or condition contained in any agreement, document or
instrument to which it is a party or to which any of its properties or assets
are subject, which default, if not remedied within any applicable grace or cure
period would reasonably be likely to have a Material Adverse Effect, nor is
there

 

 

any
event, fact, condition or circumstance which, with notice or passage of time or
both, would constitute or result in a conflict, breach, default or event of
default under, any of the foregoing which, if not remedied within any
applicable grace or cure period would reasonably be likely to have a Material
Adverse Effect; or (iii) a party or subject to any agreement, document or
instrument with respect to, or obligation to pay any, service fee or management
fee with respect to, the ownership, operation, leasing or performance of any of
its business or any facility, nor is there any manager with respect to any such
facility.

 

5.6          Litigation

 

There is no action, suit, proceeding or investigation pending or, to
their knowledge, threatened against Borrower that (i) questions or could
prevent the validity of any of the Loan Documents or the right of Borrower to
enter into any Loan Document or to consummate the transactions contemplated
thereby, (ii) would reasonably be likely to be or have, either individually or
in the aggregate, any Material Adverse Change or Material Adverse Effect, or
(iii) would reasonably be likely to result in any Change of Control or
other change in the current ownership, control or management of Borrower.  Borrower is not aware that there is any
basis for the foregoing.  Borrower is
not a party or subject to any order, writ, injunction, judgment or decree of
any Governmental Authority.  There is no
action, suit, proceeding or investigation initiated by Borrower currently
pending.  Borrower has no existing
accrued and/or unpaid Indebtedness to any Governmental Authority or any other
governmental payor.

 

5.7          Hazardous Materials

 

Borrower is in
compliance in all material respects with all applicable Environmental
Laws.  Borrower has not been notified of
any action, suit, proceeding or investigation (i) relating in any way to
compliance by or liability of Borrower under any Environmental Laws, (ii) which
otherwise deals with any Hazardous Substance or any Environmental Law, or (iii)
which seeks to suspend, revoke or terminate any license, permit or approval
necessary for the generation, handling, storage, treatment or disposal of any
Hazardous Substance.

 

5.8          Potential Tax Liability; Tax Returns;
Governmental Reports

 

(a)  Except as disclosed in Schedule 5.8,
Borrower (i) has not received any oral or written communication from the
Internal Revenue Service with respect to any investigation or assessment
relating to the Borrower directly, or relating to any consolidated tax return
which was filed on behalf of Borrower, (ii) is not aware of any year which
remains open pending tax examination or audit by the IRS, and (iii) is not
aware of any information that could give rise to an IRS tax liability or
assessment.

 

(b)  Borrower (i) has filed all federal, state,
foreign (if applicable) and local tax returns and other reports which are
required by law to be filed by Borrower, and (ii) has paid all taxes,
assessments, fees and other governmental charges, including, without
limitation, payroll and other employment related taxes, in each case that are
due and payable, except only for items that Borrower is currently contesting in
good faith with adequate reserves under GAAP, which contested items are
described on Schedule 5.8.

 

 

5.9          Financial Statements and Reports

 

All financial
statements and financial information relating to Borrower that have been or may
hereafter be delivered to Lender by Borrower are accurate and complete and have
been prepared in accordance with GAAP consistently applied with prior periods; provided,
however, that such monthly and/or quarterly statements may not contain
footnotes and are subject to year-end adjustments.  Borrower has no material obligations or liabilities of any kind
not disclosed in such financial information or statements, and since the date
of the most recent financial statements submitted to Lender, there has not
occurred any Material Adverse Change, Material Adverse Effect or, to Borrower’s
knowledge, any other event or condition that would reasonably be likely to have
a Material Adverse Effect.

 

5.10        Compliance with Law

 

Borrower (i)
is in compliance with all laws, statutes, rules, regulations, ordinances and
tariffs of any Governmental Authority applicable to Borrower and/or Borrower’s
business, assets or operations, including, without limitation, applicable requirements of the Standards for
Privacy of Individually Identifiable Health Information which were promulgated
pursuant to the Health Insurance Portability and Accountability Act of 1996
(“HIPAA”), ERISA and Healthcare Laws, and (ii) is not in violation of
any order of any Governmental Authority or other board or tribunal, except in
the case of (i) and (ii) above where noncompliance or violation could not
reasonably be expected to have a Material Adverse Effect.  There is no event, fact, condition or
circumstance which, with notice or passage of time, or both, would constitute
or result in any noncompliance with, or any violation of, any of the foregoing,
in each case except where noncompliance or violation could not reasonably be
expected to have a Material Adverse Effect. 
Borrower has not received any notice that Borrower is not in compliance
in any respect with any of the requirements of any of the foregoing.  Borrower has (a) not engaged in any
Prohibited Transactions as defined in Section 406 of ERISA and
Section 4975 of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder, (b) not failed to meet any
applicable minimum funding requirements under Section 302 of ERISA in
respect of its plans and no funding requirements have been postponed or
delayed, (c) no knowledge of any event or occurrence which would cause the
Pension Benefit Guaranty Corporation to institute proceedings under Title IV of
ERISA to terminate any of the employee benefit plans, (d) no fiduciary
responsibility under ERISA for investments with respect to any plan existing
for the benefit of Persons other than its employees or former employees, or (e)
not withdrawn, completely or partially, from any multi-employer pension plans
so as to incur liability under the MultiEmployer Pension Plan Amendments of
1980.  With respect to Borrower, there
exists no event described in Section 4043 of ERISA, excluding Subsections 4043(b)(2)
and 4043(b)(3) thereof, for which the thirty (30) day notice period contained
in 12 C.F.R. § 2615.3 has not been waived.  Borrower has maintained in all material respects all records
required to be maintained by the Joint Commission on Accreditation of
Healthcare Organizations, the Food and Drug Administration, Drug Enforcement
Agency and State Boards of Pharmacy, and, to the best knowledge of Borrower,
there are no presently existing circumstances which likely would result in
material violations of the Healthcare Laws.

 

5.11        Intellectual Property

 

Borrower owns
or has the rights to all patents, patent applications, trademarks, trademark
applications, service marks, registered copyrights, copyright applications,
copyrights, trade names, trade secrets, software or licenses (collectively, the
“Intellectual
Property”) necessary for its business.  Each Borrower’s patents and registered trademarks are listed on Schedule
5.11.

 

 

5.12        Licenses and Permits; Labor

 

Borrower is in
compliance with and has all Permits and rights to Intellectual Property
necessary or required by applicable law or Governmental Authority for the
operation of its businesses.  All of the
foregoing are in full force and effect and not in known conflict with the
rights of others.  Borrower is not (i)
in breach of or default under the provisions of any of the foregoing, nor is
there any event, fact, condition or circumstance which, with notice or passage
of time or both, would constitute or result in a conflict, breach, default or
event of default under, any of the foregoing which, if not remedied within any
applicable grace or cure period would reasonably be likely to have a Material
Adverse Effect  or (ii) has not been
involved in any labor dispute, strike, walkout or union organization which
would reasonably be likely to have a Material Adverse Effect.

 

5.13        No Default

 

There does not
exist any Default or Event of Default or any event, fact, condition or
circumstance which, with the giving of notice or passage of time or both, would
constitute or result in a Default or Event of Default.

 

5.14        Disclosure

 

No Loan
Document nor any other agreement, document, certificate, or statement furnished
to Lender by or on behalf of Borrower in connection with the transactions
contemplated by the Loan Documents, nor any representation or warranty made by
Borrower in any Loan Document, contains any untrue statement of material fact
or omits to state any fact necessary to make the statements therein not
materially misleading.  There is no fact
known to Borrower which has not been disclosed to Lender in writing which would
reasonably be likely to have a Material Adverse Effect.

 

5.15        Existing Indebtedness; Investments,
Guarantees and Certain Contracts

 

Except as
contemplated by the Loan Documents or as otherwise set forth on Schedule 5.15,
Borrower (i) has no outstanding Indebtedness, (ii) is not subject or party to
any mortgage, note, indenture, indemnity or guarantee of, with respect to or
evidencing any Indebtedness of any other Person, or (iii) does not own or hold
any equity or long-term debt investments in, and does not have any outstanding
advances to or any outstanding guarantees for the obligations of, or any
outstanding borrowings from, any Person. 
Borrower has performed all material obligations required to be performed
by Borrower pursuant to or in connection with any items listed on Schedule 5.15
and there has occurred no breach, default or event of default under any
document evidencing any such items or any fact, circumstance, condition or
event which, with the giving of notice or passage of time or both, would
constitute or result in a breach, default or event of default thereunder.

 

5.16        Other Agreements

 

Except as set
forth on Schedule 5.16, (i) there are no existing or proposed
agreements,  arrangements,
understandings or transactions between Borrower and any of Borrower’s officers,
members, managers, directors, stockholders, partners, other interest holders,
employees or Affiliates or any members of their respective immediate families,
and (ii) none of the foregoing Persons are directly or indirectly, indebted to
or have any direct or indirect ownership, partnership or voting interest in, to
Borrower’s knowledge, any Affiliate of Borrower

 

 

or any Person that competes
with Borrower (except that any such Persons may own stock in (but not exceeding
two (2%) percent of the outstanding capital stock of) any publicly traded
company that may compete with Borrower.

 

5.17        Insurance

 

Borrower has
in full force and effect such insurance policies as are customary in its
industry and as may be required pursuant to Section 6.5 hereof.  All such insurance policies are listed and
described on Schedule 5.17.

 

5.18        Names; Location of Offices, Records and
Collateral

 

During the preceding five years, Borrower has not conducted business
under or used any name (whether corporate, partnership or assumed) other than
as shown on Schedule 5.18A. 
Borrower is the sole owner of all of its names listed on Schedule
5.18A, and any and all business done and invoices issued in such names are
Borrower’s sales, business and invoices. 
Each trade name of Borrower represents a division or trading style of
Borrower.  Borrower maintains its places
of business and chief executive offices only at the locations set forth on Schedule
5.18B, and all Accounts of Borrower arise, originate and are located, and
all of the Collateral and all books and records in connection therewith or in
any way relating thereto or evidencing the Collateral are located and shall
only be located, in and at such locations. 
All of the Collateral is located only in the continental United States.

 

5.19        Non-Subordination

 

The Obligations are not subordinated in any way to any other
obligations of Borrower or to the rights of any other Person.

 

5.20        Accounts

 

In determining
which Accounts are Eligible Receivables, Lender may rely on all statements and
representations made by Borrower with respect to any Account.  Unless otherwise indicated in writing to
Lender, (i) each Account of Borrower is genuine and in all respects what it
purports to be and is not evidenced by a judgment, (ii) each Account of
Borrower arises out of a completed, bona fide sale and delivery of goods or
rendering of services by Borrower in the ordinary course of business and in
accordance with the terms and conditions of all purchase orders, contracts,
certifications, participations, certificates of need and other documents
relating thereto or forming a part of the contract between Borrower and the
Account Debtor, (iii) each Account of Borrower is for a liquidated amount maturing
as stated in a claim or invoice covering such sale of goods or rendering of
services, a copy of which has been furnished or is available to Lender, (iv)
each Account of Borrower together with Lender’s security interest therein, is
not and will not be in the future (by voluntary act or omission by Borrower),
subject to any offset, lien, deduction, defense, dispute, counterclaim or other
adverse condition except as reserved against in the financial statements, is
absolutely owing to Borrower and is not contingent in any respect or for any
reason, (v) except as reserved against in the financial statements, there are
no facts, events or occurrences which in any way impair the validity or
enforceability of any Account of Borrower or tend to reduce the amount payable
thereunder from the face amount of the claim or invoice and statements
delivered to Lender with respect thereto, (vi) (A) with respect to contracts or
other documents generating more than $1000 in Accounts on an annual basis, (I)
the Account Debtor under each such Account of Borrower had the capacity to
contract at the time any such contract or other document giving rise thereto
was executed and (II) each such Account Debtor

 

 

thereunder is solvent, and (B)
with respect to contracts or other documents generating $1000 or less in
Accounts on an annual basis, to the best of Borrower’s knowledge (I) the
Account Debtor under each such Account of Borrower had the capacity to contract
at the time any such contract or other document giving rise thereto was
executed and (II) each such Account Debtor thereunder is solvent,
(vii) there are no proceedings or actions which are threatened or pending
against any Account Debtor under any Account of Borrower which might result in
any Material Adverse Change in such Account Debtor’s financial condition or the
collectability thereof, (viii) each Account of Borrower has been billed and
forwarded to the Account Debtor for payment in accordance with applicable laws
and is in compliance and conformance with any requisite procedures,
requirements and regulations governing payment by such Account Debtor with
respect to such Account, and (ix) Borrower has obtained and currently has all
Permits necessary in the generation of each Account of Borrower.

 

5.21        Regulatory Requirements

 

Without limiting or being limited by any other provision of any Loan
Document, Borrower has timely filed or caused to be filed all
cost and other reports of every kind required by law, agreement or
otherwise.  There are no claims, actions
or appeals pending (and Borrower has not filed any claims or reports which
could reasonably result in any such claims, actions or appeals) before any
commission, board or agency or other Governmental Authority.

 

5.22        Survival

 

Borrower makes
the representations and warranties contained herein with the knowledge and
intention that Lender is relying and will rely thereon.  All such representations and warranties will
survive the execution and delivery of this Agreement and the making of the
Advances under the Revolving Facility.

 

VI.          AFFIRMATIVE
COVENANTS

 

Each Borrower,
jointly and severally, covenants and agrees that, until full performance and
satisfaction, and indefeasible payment in full in cash, of all the Obligations
and termination of this Agreement:

 

6.1          Financial Statements, Borrowing
Certificate, Financial Reports and Other Information

 

(a)           Financial
Reports.  In addition to providing
the Borrowing Certificate in accordance with Section 2.4, Borrower shall
furnish to Lender (i) as soon as available and in any event within ninety (90)
calendar days after the end of each fiscal year of Borrower, audited annual
consolidated financial statements of Borrower, including the notes thereto,
consisting of a consolidated balance sheet at the end of such completed fiscal year
and the related consolidated statement of income, retained earnings, cash flows
and owners’ equity for such completed fiscal year, which financial statements
shall be prepared and certified without qualification by an independent
certified public accounting firm reasonably satisfactory to Lender and
accompanied by related management letters, if available, and (ii) as soon as
available and in any event within forty-five (45) calendar days after the end
of each calendar month, unaudited consolidated and consolidating financial
statement of Borrower consisting of a balance sheet and statements of income,
as of  the end of the immediately
preceding calendar month, and unaudited statements of retained earnings, cash
flows and owners’ equity as of the end of each calendar quarter.  All such financial statements shall be
prepared in accordance with GAAP consistently applied with prior

 

 

periods.  With each such financial statement, Borrower
shall also deliver a certificate of its chief financial officer stating that
(A) such person has reviewed the relevant terms of the Loan Documents and the
condition of Borrower, (B) no Default or Event of Default has occurred or is
continuing, or, if any of the foregoing has occurred or is continuing,
specifying the nature and status and period of existence thereof and the steps
taken or proposed to be taken with respect thereto, and (C) Borrower is in
compliance with all financial covenants attached as Annex I hereto.  Such certificate shall be accompanied by the
calculations necessary to show compliance with the financial covenants in a
form satisfactory to Lender.

 

(b)           Other Materials.  Borrower shall furnish to Lender as soon as
available, and in any event within ten (10) calendar days after the preparation
or issuance thereof or at such other time as set forth below:  (i) any reports, returns, information,
notices and other materials that Borrower shall send to its stockholders,
members, partners or other equity owners at any time, (ii) within fifteen (15)
calendar days after the end of each calendar month for such month, a sales and
collection report and accounts receivable and accounts payable aging schedule,
including a report of sales, credits issued and collections received, all such
reports showing a reconciliation to the amounts reported in the monthly
financial statements, (iii) promptly upon receipt thereof, copies of any
reports submitted to Borrower by its independent accountants in connection with
any interim audit of the books of such Person or any of its Affiliates and
copies of each management control letter provided by such independent
accountants, and (iv) such additional information, documents, statements,
reports and other materials as Lender may reasonably request from a credit or
security perspective or otherwise from time to time.

 

(c)           Notices.  Borrower shall promptly, and in any event
within two (2) calendar days after Borrower or any authorized officer of
Borrower obtains knowledge thereof, notify Lender in writing of (i) any pending
or threatened litigation, suit, investigation, arbitration, dispute resolution
proceeding or administrative proceeding brought or initiated by Borrower or
otherwise affecting or involving or relating to Borrower or any of its property
or assets to the extent (A) the amount in controversy exceeds $10,000, or (B)
to the extent any of the foregoing seeks injunctive or declarative relief, (ii)
any Default or Event of Default, which notice shall specify the nature and
status thereof, the period of existence thereof and what action is proposed to
be taken with respect thereto, (iii) any other development, event, fact,
circumstance or condition that would reasonably be likely to have a Material
Adverse Effect, in each case describing the nature and status thereof and the
action proposed to be taken with respect thereto, (iv) any notice received by
Borrower from any payor of a claim, suit or other action such payor has, claims
or has filed against Borrower, (v) any matter(s) affecting the value,
enforceability or collectability of any of the Collateral, including, without
limitation, claims or disputes in the amount of $50,000 or more, singly or in
the aggregate, in existence at any one time, (vi) any notice given by Borrower
to any other lender of Borrower, which notice to Lender shall be accompanied by
a copy of the applicable notice given to the other Lender, (vii) receipt of any
notice or request from any Governmental Authority or governmental payor
regarding any liability or claim of liability, (viii) receipt of any notice by
Borrower regarding termination of any manager of any facility owed, operated or
leased by Borrower, (ix) Borrower’s execution and delivery of a new contract
with a Governmental Authority, providing Lender with an executed copy of such
contract promptly thereafter, and/or (x) any Account becoming evidenced or
secured by an Instrument or Chattel Paper.

 

(d)           Consents.  Borrower shall obtain and deliver from time
to time all required consents, approvals and agreements from such third parties
as Lender shall determine are necessary or desirable in its Permitted
Discretion, each of which must be satisfactory to Lender in its Permitted
Discretion, with respect to (i) the Loan Documents and the transactions

 

 

contemplated
thereby, (ii) claims against Borrower or the Collateral, and/or (iii) any
agreements, consents, documents or instruments to which Borrower is a party or
by which any properties or assets of Borrower or any of the Collateral is or
are bound or subject, including, without limitation, Landlord Waivers and
Consents with respect to leases.

 

(e)           Operating Budget.  Borrower shall furnish to Lender on or prior
to the Closing Date and for each fiscal year of Borrower thereafter not less
than ten (10) calendar days prior to the commencement of such fiscal year, consolidated
and consolidating month by month projected operating budgets, annual
projections, profit and loss statements, balance sheets and cash flow reports
of and for Borrower for such upcoming fiscal year (including an income
statement for each month and a balance sheet as at the end of the last month in
each fiscal quarter), in each case prepared in accordance with GAAP
consistently applied with prior periods.

 

6.2          Payment of Obligations

 

Borrower shall
make full and timely indefeasible payment in cash of the principal of and
interest on the Loans, Advances and all other Obligations.

 

6.3          Conduct of Business and Maintenance of
Existence and Assets

 

Borrower
shall (i) conduct its business in accordance with good business practices
customary to the industry, (ii) engage principally in the same or similar lines
of business substantially as heretofore conducted, (iii) collect its Accounts
in the ordinary course of business, (iv) maintain all of its material
properties, assets and equipment used or useful in its business in good repair,
working order and condition (normal wear and tear excepted and except as may be
disposed of in the ordinary course of business and in accordance with the terms
of the Loan Documents and otherwise as determined by Borrower using
commercially reasonable business judgment), (v) from time to time to make all
necessary or desirable repairs, renewals and replacements thereof, as
determined by Borrower using commercially reasonable business judgment, (vi)
maintain and keep in full force and effect its existence and all material
Permits and qualifications to do business and good standing in each
jurisdiction in which the ownership or lease of property or the nature of its
business makes such Permits or qualification necessary and in which failure to
maintain such Permits or qualification could reasonably be likely to have a
Material Adverse Effect; and (vii) remain in good standing in all jurisdictions
in which its operations are located.

 

6.4          Compliance with Legal and Other
Obligations

 

Borrower
shall (i) comply with all laws, statutes, rules, regulations, ordinances
and tariffs of all Governmental Authorities applicable to it or its business,
assets or operations, including applicable
requirements of the Standards for Privacy of Individually Identifiable Health
Information which were promulgated pursuant to HIPAA; (ii) pay when due all
taxes, assessments, fees, governmental charges, claims for labor, supplies,
rent and all other obligations or liabilities of any kind, except liabilities being
contested in good faith and against which adequate reserves have been
established in accordance with GAAP, (iii) perform in accordance with its terms
each contract, agreement or other arrangement 
to which it is a party or by which it or any of the Collateral is bound,
except where the failure to comply, pay or perform could not reasonably be
expected to have a Material Adverse Effect, and (iv) maintain and comply with
all Permits necessary to conduct its business and comply with any new or
additional requirements that may be imposed on it or its business.

 

 

6.5          Insurance

 

Borrower
shall (i) keep all of its insurable properties and assets adequately insured in
all material respects against losses, damages and hazards as are customarily
insured against by businesses engaging in similar activities or owning similar
assets or properties and at least the minimum amount required by applicable
law, and maintain general public liability insurance at all times against
liability on account of damage to persons and property having such limits,
deductibles, exclusions and co-insurance and other provisions as are customary
for a business engaged in activities similar to those of Borrower; and (iii)
maintain insurance under all applicable workers’ compensation laws; all of the
foregoing insurance policies to (A) be reasonably satisfactory in form and
substance to Lender, (B) name Lender as additional insured under such insurance
as it relates to the Collateral, and (C) expressly provide that they cannot be
altered, amended, modified or canceled without thirty (30) Business
Days prior written notice to Lender and that they inure to the benefit of
Lender notwithstanding any action or omission or negligence of or by Borrower
or any insured thereunder.

 

6.6          True Books

 

Borrower shall
(i) keep true, complete and accurate books of record and account in accordance
with commercially reasonable business practices in which true and correct
entries are made of all of its and their dealings and transactions in all
material respects; and (ii) set up and maintain on its books such reserves as
may be required by GAAP with respect to doubtful accounts and all taxes,
assessments, charges, levies and claims and with respect to its business, and
include such reserves in its quarterly as well as year end financial
statements.

 

6.7          Inspection; Periodic Audits

 

Borrower shall
permit the representatives of Lender, at the expense of Borrower, from time to
time during normal business hours upon reasonable notice and in such a manner
so as not to unreasonably disrupt any Borrower’s operations, to (i) visit and
inspect any of its offices or properties or any other place where Collateral is
located to inspect the Collateral and/or to examine or audit all of its books
of account, records, reports and other papers, (ii) make copies and extracts
therefrom, and (iii) discuss its business, operations, prospects, properties,
assets, liabilities, condition and/or Accounts with its officers and
independent public accountants (and by this provision such officers and
accountants are authorized to discuss the foregoing).  Other than during the occurrence and continuance of a Default or
an Event of Default, not more than four (4) such inspections or audits related
to any 12-month period shall be at the expense of Borrower.  Lender may increase the frequency of
inspections or audits during the occurrence and continuance of a Default or an
Event of Default.

 

6.8          Further Assurances; Post Closing 

 

At Borrower’s
cost and expense, Borrower shall (i) take such further actions, obtain such
consents and approvals and duly execute and deliver such further agreements,
assignments, instructions or documents as Lender may reasonably request with
respect to the purposes, terms and conditions of the Loan Documents and the consummation
of the transactions contemplated thereby, and (ii) without limiting and
notwithstanding any other provision of any Loan Document, execute and deliver,
or cause to be executed and delivered, such agreements and documents, and take
or cause to be taken such actions, and otherwise perform, observe and comply
with such obligations, as are set forth on Schedule 6.8.

 

 

6.9          Payment of Indebtedness

 

Except as
otherwise prescribed in the Loan Documents, Borrower shall pay, discharge or
otherwise satisfy at or before maturity (subject to applicable grace periods
and, in the case of trade payables, to ordinary course payment practices) all
of its material obligations and liabilities, except when the amount or validity
thereof is being contested in good faith by appropriate proceedings and such
reserves as Lender may deem proper and necessary in its sole discretion shall
have been made.

 

6.10        Lien Searches

 

If Liens other than
Permitted Liens exist, Borrower immediately shall take, execute and deliver all
actions, documents and instruments necessary to release and terminate such
Liens.

 

6.11        Use of Proceeds

 

Borrower shall
use the proceeds from the Revolving Facility only for the purposes set forth in
the first “WHEREAS” clause of this Agreement.

 

6.12        Collateral Documents; Security Interest
in Collateral

 

Borrower shall
(i) execute, obtain, deliver, file, register and/or record any and all
financing statements, continuation statements, stock powers, instruments and
other documents, or cause the execution, filing, registration, recording or
delivery of any and all of the foregoing, that are necessary or required under
law or otherwise or reasonably requested by Lender to be executed, filed,
registered, obtained, delivered or recorded to create, maintain, perfect,
preserve, validate or otherwise protect the pledge of the Collateral to Lender
and Lender’s perfected first priority Lien on the Collateral (and Borrower
irrevocably grants Lender the right, at Lender’s option, to file any or all of
the foregoing), (ii) immediately upon learning thereof, report to Lender any
reclamation, return or repossession of goods in excess of $10,000.00
(individually or in the aggregate), and (iii) defend the Collateral and
Lender’s perfected first priority Lien thereon against all claims and demands
of all Persons at any time claiming the same or any interest therein adverse to
Lender, and pay all reasonable costs and expenses (including, without
limitation, in-house documentation and diligence fees and legal expenses and
reasonable attorneys’ fees and expenses) in connection with such defense, which
may at Lender’s discretion be added to the Obligations.

 

6.13        Intentionally Deleted

 

6.14        Taxes and Other Charges

 

(a)  All payments and reimbursements to Lender
made under any Loan Document shall be free and clear of and without deduction
for all taxes, levies, imposts, deductions, assessments, charges or
withholdings, and all liabilities with respect thereto of any nature
whatsoever, excluding taxes to the extent imposed on Lender’s net income.  If Borrower shall be required by law to
deduct any such amounts from or in respect of any sum payable under any Loan
Document to Lender, then the sum payable to Lender shall be increased as may be
necessary so that, after making all required deductions, Lender receives an
amount equal to the sum it would have received had no such deductions been
made.  Notwithstanding any other

 

 

provision of any Loan Document,
if at any time after the Closing (i) any change in any existing law,
regulation, treaty or directive or in the interpretation or application
thereof, (ii) any new law, regulation, treaty or directive enacted or any
interpretation or application thereof, or (iii) compliance by Lender with
any request or directive (whether or not having the force of law) from any
Governmental Authority:  (A) subjects
Lender to any tax, levy, impost, deduction, assessment, charge or withholding
of any kind whatsoever with respect to any Loan Document, or changes the basis
of taxation of payments to Lender of any amount payable thereunder (except for
net income taxes, or franchise taxes imposed in lieu of net income taxes,
imposed generally by federal, state or local taxing authorities with respect to
interest or commitment fees or other fees payable hereunder or changes in the
rate of tax on the overall net income of Lender), or (B) imposes on Lender any
other condition or increased cost in connection with the transactions
contemplated thereby or participations therein; and the result of any of the
foregoing is to increase the cost to Lender of making or continuing any Loan
hereunder or to reduce any amount receivable hereunder, then, in any such case,
Borrower shall promptly pay to Lender any additional amounts necessary to
compensate Lender, on an after-tax basis, for such additional cost or reduced
amount as determined by Lender.  If
Lender becomes entitled to claim any additional amounts pursuant to this Section
6.14 it shall promptly notify Borrower of the event by reason of which
Lender has become so entitled, and each such notice of additional amounts
payable pursuant to this Section 6.14 submitted by Lender to Borrower
shall, absent manifest error, be final, conclusive and binding for all
purposes.

 

(b)  Borrower shall promptly, and in any event
within five (5) Business Days after Borrower or any authorized officer of
Borrower obtains knowledge thereof, notify Lender in writing of any oral or
written communication from the Internal Revenue Service or otherwise with
respect to any (i) tax investigations, relating to the Borrower directly, or
relating to any consolidated tax return which was filed on behalf of Borrower,
(ii) notices of tax assessment or possible tax assessment, (iii) years that are
designated open pending tax examination or audit, and (iv) information that
could give rise to an IRS tax liability or assessment.

 

6.15        Payroll Taxes

 

Without
limiting or being limited by any other provision of any Loan Document, Borrower
at all times shall retain and use a Person reasonably acceptable to Lender to process,
manage and pay its payroll taxes and shall cause to be delivered to Lender
within ten (10) calendar days after the end of each calendar month a report of
its payroll taxes for the immediately preceding calendar month and evidence of
payment thereof.

 

VII.         NEGATIVE
COVENANTS

 

Each Borrower,
jointly and severally, covenants and agrees that, until full performance and
satisfaction, and indefeasible payment in full in cash, of all of the
Obligations and termination of this Agreement:

 

7.1                               Financial Covenants

 

Borrower shall
not violate the financial covenants set forth on Annex I to this
Agreement, which is incorporated herein and made a part hereof.

 

 

7.2                               Permitted Indebtedness

 

Borrower shall
not create, incur, assume or suffer to exist any Indebtedness, except the
following (collectively, “Permitted Indebtedness”): (i) Indebtedness
under the Loan Documents, (ii) any Indebtedness set forth on Schedule 7.2,
(iii) Capitalized Lease Obligations incurred after the Closing Date and
Indebtedness incurred pursuant to purchase money Liens permitted by Section 7.3(v),
provided that the aggregate amount of such Capitalized Lease Obligations and
purchase money indebtedness outstanding at any time shall not exceed $100,000, (iv) Indebtedness in connection
with advances made by a stockholder in order to cure any default of the
financial covenants set forth on Annex I; provided, however,
that such Indebtedness shall be on an unsecured basis or secured by assets
unrelated to the Collateral, subordinated in right of repayment and remedies to
all of the Obligations and to all of Lender’s rights pursuant to a
subordination agreement in form and substance satisfactory to Lender;
(v) accounts payable to trade creditors and current operating expenses
(other than for borrowed money) which are not aged more than 120 calendar days
from the billing date or more than 30 days from the due date, in each case
incurred in the ordinary course of business and paid within such time period,
unless the same are being contested in good faith and by appropriate and lawful
proceedings and such reserves, if any, with respect thereto as are required by
GAAP and deemed adequate by Borrower’s independent accountants shall have been
reserved; and (vi) borrowings incurred in the ordinary course of business and
not exceeding $100,000 individually or in the aggregate outstanding at any one
time, provided, however, that such Indebtedness shall be on an
unsecured basis or secured by assets other than the Collateral, subordinated in
right of repayment and remedies to all of the Obligations and to all of
Lender’s rights pursuant to a subordination agreement in form and substance
satisfactory to Lender.  Borrower shall
not make prepayments on any existing or future Indebtedness to any Person other
than to Lender or to the extent specifically permitted by this Agreement or any
subsequent agreement between Borrower and Lender).

 

7.3          Permitted Liens

 

Borrower shall
not create, incur, assume or suffer to exist any Lien upon, in or against, or
pledge of, any of the Collateral or any of its properties or assets or any of
its shares, securities or other equity or ownership or partnership interests,
whether now owned or hereafter acquired, except the following (collectively, “Permitted
Liens”): (i) Liens under the Loan Documents or otherwise arising in
favor of Lender, (ii) Liens imposed by law for taxes (other than payroll
taxes), assessments or charges of any Governmental Authority for claims not yet
due or which are being contested in good faith by appropriate proceedings and
with respect to which adequate reserves or other appropriate provisions are
being maintained by such Person in accordance with GAAP to the satisfaction of
Lender in its Permitted Discretion, (iii) (A) statutory Liens of landlords
(provided that any such landlord has executed a Landlord Waiver and Consent in
form and substance satisfactory to Lender) and of carriers, warehousemen,
mechanics, materialmen, and (B) other Liens imposed by law or that arise
by operation of law in the ordinary course of business from the date of
creation thereof, in each case only for amounts not yet due or which are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are being maintained by such
Person in accordance with GAAP to the satisfaction of Lender in its Permitted
Discretion, (iv) Liens (A) incurred or deposits made in the ordinary course of
business (including, without limitation, surety bonds and appeal bonds) in
connection with workers’ compensation, unemployment insurance and other types
of social security benefits or to secure the performance of tenders, bids,
leases, contracts (other than for the repayment of Indebtedness), statutory
obligations and other similar obligations, or (B) arising as a result of
progress payments under government contracts, (v) purchase money Liens (A)
securing Indebtedness permitted under Section 7.2(iii), or
(B) in connection with the purchase by such Person of equipment in the
normal course of business,

 

 

provided
that such payables shall not exceed any limits on Indebtedness provided for
herein and shall otherwise be Permitted Indebtedness hereunder, (vi) Liens
securing Permitted Mortgage Indebtedness, provided, that such
Liens shall not extend to any Collateral and Lender and the Mortgagee shall
have entered into a satisfactory intercreditor agreement, and (vii) Liens
disclosed on Schedule 7.3.

 

7.4          Investments; New Facilities or
Collateral; Subsidiaries

 

Except as
provided in Schedule 7.4, Borrower, directly or indirectly, shall not,
without Lender’s prior written consent (i) purchase, own, hold, invest in
or otherwise acquire obligations or stock or securities of, or any other
interest in, or all or substantially all of the assets of, any Person or any
joint venture, or (ii) make or permit to exist any loans, advances or
guarantees to or for the benefit of any Person or assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable for or upon or incur
any obligation of any Person (other than those created by the Loan Documents
and Permitted Indebtedness and other than (A) trade credit extended in the
ordinary course of business, (B) advances for business travel and similar
temporary advances made in the ordinary course of business to officers,
directors and employees, and (C) the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business).  Borrower, directly or
indirectly, shall not purchase, own, operate, hold, invest in or otherwise
acquire any facility, property or assets or any Collateral that is not located
at the locations set forth on Schedule 5.18B unless Borrower shall
provide to Lender at least thirty (30) Business Days prior written notice.  Borrower shall have no Subsidiaries other
than those Subsidiaries, if any, existing at Closing and set forth in Schedule
5.3.

 

7.5          Dividends; Redemptions

 

Borrower shall not
(i) declare, pay or make any dividend or distribution on any shares of
capital stock or other securities or interests (other than dividends or
distributions payable in its stock, or split-ups or reclassifications of its
stock), (ii) apply any of its funds, property or assets to the acquisition,
redemption or other retirement of any capital stock or other securities or
interests or of any options to purchase or acquire any of the foregoing
(provided, however, that Borrower may redeem its capital stock from terminated
employees pursuant to, but only to the extent required under, the terms of the
related employment agreements as long as no Default or Event of Default has
occurred and is continuing or would be caused by or result therefrom), (iii)
otherwise make any payments or Distributions to any stockholder, member,
partner or other equity owner in such Person’s capacity as such, or (iv) make
any payment of any management or service fee,  provided
that Borrower shall not make or suffer to exist any such payment described in
(i) through (iv) above if a Default of Event of Default has occurred and is continuing
or would result therefrom.

 

7.6          Transactions with Affiliates

 

Borrower shall
not enter into or consummate any transaction of any kind with any of its
Affiliates (for purposes of this Section 7.6, Affliliates shall specifically
exclude other Borrowers) or any Guarantor or any of their respective Affiliates
other than: (i) salary, bonus, employee stock option and other compensation and
employment arrangements with employees, directors or officers in the ordinary
course of business, provided, that no payment of any bonus shall be
permitted if a Default or Event of Default has occurred and remains in effect
or would be caused by or result from such payment, (ii) distributions and
dividends permitted pursuant to Section 7.4, (iii) transactions with Lender
or any Affiliate of Lender, and (iv) payments permitted under and pursuant to
written agreements entered into by and between Borrower and one or more

 

 

of its Affiliates that both
(A) reflect and constitute transactions on overall terms at least as favorable
to Borrower as would be the case in an arm’s-length transaction between
unrelated parties of equal bargaining power, and (B) are subject to such terms
and conditions as determined by Lender in its Permitted Discretion; provided,
that notwithstanding the foregoing but subject to the rights under Section
7.2, Borrower shall not (Y) enter into or consummate any transaction or
agreement pursuant to which it becomes a party to any mortgage, note, indenture
or guarantee evidencing any Indebtedness of any of its Affiliates or otherwise
to become responsible or liable, as a guarantor, surety or otherwise, pursuant to agreement for any
Indebtedness of any such Affiliate, or (Z) make any payment to any of its
Affiliates in excess of $10,000 without the prior written consent of Lender.

 

7.7          Charter Documents; Fiscal Year; Name;
Jurisdiction of Organization; Dissolution; Use of Proceeds

 

Borrower shall
not (i) amend, modify, restate or change its certificate of incorporation or
formation or bylaws or similar charter documents in a manner that would be
adverse to Lender, (ii) change its fiscal year unless Borrower
demonstrates to Lender’s satisfaction compliance with the covenants contained
herein for both the fiscal year in effect prior to any change and the new
fiscal year period by delivery to Lender of appropriate interim and annual pro
forma, historical and current compliance certificates for such periods and such
other information as Lender may reasonably request, (iii) without at least 20
days prior written notice to Lender, change it’s name or change its
jurisdiction of organization; (iv) amend, alter or suspend or terminate or make
provisional in any material way, any material Permit without the prior written
consent of Lender, which consent shall not be unreasonably withheld,
(v) wind up, liquidate or dissolve (voluntarily or involuntarily) or
commence or suffer any proceedings seeking or that would result in any of the
foregoing, or (vi) use any proceeds of any Advance for “purchasing” or
“carrying” “margin stock” as defined in Regulations U, T or X of the Board of
Governors of the Federal Reserve System.

 

7.8          Truth of Statements

 

Borrower shall
not furnish to Lender any certificate or other document that contains any
untrue statement of a material fact or that omits to state a material fact
necessary to make it not misleading in light of the circumstances under which
it was furnished.

 

7.9          IRS Form 8821

 

Borrower shall
not alter, amend, restate, or otherwise modify, or withdraw, terminate or
re-file the IRS Form 8821 required to be filed pursuant to the Conditions
Precedent in Section 4.1 hereof.

 

7.11        Transfer of Assets

 

Notwithstanding any other provision of this Agreement or any other Loan
Document, Borrower shall not sell, lease, transfer, assign or otherwise dispose
of any interest in any properties or assets (other than obsolete equipment or
excess equipment no longer needed in the conduct of the business in the
ordinary course of business, Inventory, scrap, or licenses of General
Intangibles in the ordinary course of business), or agree to do any of the
foregoing at any future time, except that:

 

 

(a)           Borrower may lease
(as lessee) real or personal property or surrender all or a portion of a lease
of the same, in each case in the ordinary course of business (so long as such
lease does not create or result in and is not otherwise a Capitalized Lease
Obligation prohibited under this Agreement), provided that a Landlord
Waiver and Consent and such other consents as are required by Lender are signed
and delivered to Lender with respect to any lease of real or other property, as
applicable;

 

(b)           Borrower may
consummate such other sales or dispositions of property or assets (including
any sale or transfer or disposition of all or any part of its assets and thereupon
and within one year thereafter rent or lease the assets so sold or transferred)
only to the extent prior written notice has been given to Lender and to the
extent Lender has given its prior written consent thereto, subject in each case
to such conditions as may be set forth in such consent.

 

VIII.       EVENTS
OF DEFAULT

 

The occurrence
of any one or more of the following shall constitute an “Event of Default:”

 

(a)           Borrower shall fail to pay any amount
on the Obligations or provided for in any Loan Document when due (whether on
any payment date, at maturity, by reason of acceleration, by notice of
intention to prepay, by required prepayment or otherwise);

 

(b)           any representation, statement or
warranty made or deemed made by Borrower or any Guarantor in any Loan Document
or in any other certificate, document, report or opinion delivered in
conjunction with any Loan Document to which it is a party, shall not be true
and correct in all material respects or shall have been false or misleading in
any material respect on the date when made or deemed to have been made (except
to the extent already qualified by materiality, in which case it shall be true
and correct in all respects and shall not be false or misleading in any
respect);

 

(c)           Borrower or any Guarantor or other
party thereto other than Lender shall be in violation, breach or default of, or
shall fail to perform, observe or comply with any covenant, obligation or
agreement set forth in, any Loan Document and such violation, breach, default
or failure shall not be cured within the applicable period set forth in the
applicable Loan Document; provided that, with respect to the affirmative
covenants set forth in Article VI (other than Sections 6.1(c), 6.2,
6.3(i), (ii) and (iii), 6.5, 6.8, 6.9 and 6.11 for which
there shall be no cure period), there shall be a fifteen (15) calendar day cure
period commencing from the earlier of (i) Receipt by such Person of
written notice of such breach, default, violation or failure, and (ii) the
time at which such Person or any authorized officer thereof knew or became
aware of such failure, violation, breach or default but no Advances will be
made during the cure period;

 

(d)           (i) any of the Loan Documents ceases
to be in full force and effect except for a Termination as provided for herein,
or (ii) any Lien created thereunder ceases to constitute a valid perfected
first priority Lien on the Collateral in accordance with the terms thereof, or
Lender ceases to have a valid perfected first priority security interest in any
of the Collateral or any securities pledged to Lender pursuant to the Security
Documents;

 

(e)           one or more tax assessments,
judgments or decrees is rendered against any Borrower or Guarantor in an amount
in excess of $10,000 individually or $50,000 in the

 

 

aggregate, which
is/are not satisfied, stayed, vacated or discharged of record within thirty
(30) calendar days of being rendered but no Advances will be made before the
judgment is stayed, vacated or discharged;

 

(f)            (i) any default occurs, which
is not cured or waived, (x) in the payment of any amount with respect to
any Indebtedness (other than the Obligations) of any Borrower or Guarantor in
excess of $10,000, (y) in the performance, observance or fulfillment of
any provision contained in any agreement, contract, document or instrument to
which any Borrower or Guarantor is a party or to which any of their properties
or assets are subject or bound under or pursuant to which any Indebtedness was
issued, created, assumed, guaranteed or secured and such default continues for
more than any applicable grace period or permits the holder of any Indebtedness
to accelerate the maturity thereof, or (z) in the performance, observance or
fulfillment of any provision contained in any agreement, contract, document or instrument
between any Borrower or Guarantor and
Lender or any Affiliate of Lender (other than the Loan Documents), or
(ii) any Indebtedness in excess of $25,000 of any Borrower or Guarantor is
declared to be due and payable or is required to be prepaid (other than by a
regularly scheduled payment) prior to the stated maturity thereof, or any
obligation of such Person for the payment of Indebtedness (other than the
Obligations) is not paid when due or within any applicable grace period, or any
such obligation becomes or is declared to be due and payable before the
expressed maturity thereof, or there occurs an event which, with the giving of
notice or lapse of time, or both, would cause any such obligation to become, or
allow any such obligation to be declared to be, due and payable;

 

(g)           any Borrower or Guarantor shall (i)
be unable to pay its debts generally as they become due, (ii) have total
liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities) that exceed its assets, at a Fair Valuation, (iii) file a petition
under any insolvency statute, (iv) make a general assignment for the
benefit of its creditors, (v) commence a proceeding for the appointment of a
receiver, trustee, liquidator or conservator of itself or of the whole or any
substantial part of its property, or (vi) file a petition seeking
reorganization or liquidation or similar relief under any Debtor Relief Law or
any other applicable law or statute;

 

(h)           a court of competent jurisdiction
shall (A) enter an order, judgment or decree appointing a custodian, receiver,
trustee, liquidator or conservator of any Borrower or Guarantor or the whole or
any substantial part of any such Person’s properties, which shall continue
unstayed and in effect for a period of thirty (30) calendar days, (B) shall
approve a petition filed against any Borrower or Guarantor seeking
reorganization, liquidation or similar relief under the any Debtor Relief Law
or any other applicable law or statute, which is not dismissed within thirty
(30) calendar days or, (C) under the provisions of any Debtor Relief Law
or other applicable law or statute, assume custody or control of any Borrower
or Guarantor or of the whole or any substantial part of any such Person’s
properties, which is not irrevocably relinquished within thirty (30) calendar
days, or (ii) there is commenced against any Borrower or Guarantor any
proceeding or petition seeking reorganization, liquidation or similar relief
under any Debtor Relief Law or any other applicable law or statute and either
(A) any such proceeding or petition is not unconditionally dismissed within
thirty (30) calendar days after the date of commencement, or (B) any Borrower
or Guarantor takes any action to indicate its approval of or consent to any
such proceeding or petition, but no Advances will be made before any such
order, judgment or decree described above is stayed, vacated or discharged, any
such petition described above is dismissed, or any such custody or control
described above is relinquished;

 

(i)            (i) any Change of Control occurs or
any agreement or commitment to cause or that may result in any such Change of
Control is entered into, (ii) any Material Adverse Effect or Material Adverse
Change occurs or is reasonably expected to occur, or (iii) any Borrower or
Guarantor ceases a material portion of its business operations as currently
conducted;

 

 

(j)         Lender receives any evidence that any
Borrower or Guarantor may have directly or indirectly been engaged in any type
of activity which, in Lender’s reasonable judgment, is likely to result in
forfeiture of any property to any Governmental Authority which shall have
continued unremedied for a period of ten (10) calendar days after written
notice from Lender (but no Advances will be made before any such activity
ceases);

 

(k)           an Event of Default occurs under any other Loan Document;

 

(l)            uninsured damage to,
or loss, theft or destruction of, any portion of the Collateral occurs that
exceeds $10,000 in the aggregate;

 

(m)          any Borrower or Guarantor or any of their
respective directors or senior officers is criminally indicted or convicted
under any law that could lead to a forfeiture of any Collateral;

 

(n)           the issuance of any process for levy,
attachment or garnishment or execution upon or prior to any judgment against
any Borrower or Guarantor or any of their property or assets; or

 

(o)           any Borrower or Guarantor does, or
enters into or becomes a party to any agreement or commitment to do, or cause
to be done, any of the things described in this Article VIII or otherwise
prohibited by any Loan Document (subject to any cure periods set forth
therein);

 

then,
and in any such event, notwithstanding any other provision of any Loan
Document, Lender may, without notice or demand, do any of the following: (i)
terminate its obligations to make Advances hereunder, whereupon the same shall
immediately terminate and (ii) declare all or any of the Notes, all interest
thereon and all other Obligations to be due and payable immediately (except in
the case of an Event of Default under Section 8(d), (g), (h)
or (i)(iii), in which event all of the foregoing shall automatically and
without further act by Lender be due and payable, provided that, with
respect to non-material breaches or violations that constitute Events of
Default under clause (ii) of Section 8(d), there shall be a three (3)
Business Day cure period (but no Advances will be made during any such cure
period) commencing from the earlier of (A) Receipt by the applicable
Person of written notice of such breach or violation or of any event, fact or
circumstance constituting or resulting in any of the foregoing, and (B) the
time at which such Person or any authorized officer thereof knew or became
aware, or should have known or been aware, of such breach or violation and resulting
Event of Default or of any event, fact or circumstance constituting or
resulting in any of the foregoing), in each case without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by Borrower.

 

IX.          RIGHTS
AND REMEDIES AFTER DEFAULT

 

9.1          Rights and Remedies

 

(a)           In addition to the acceleration
provisions set forth in Article VIII above, upon the occurrence and
continuation of an Event of Default, Lender shall have the right to exercise
any and all rights, options and remedies provided for in the Loan Documents,
under the UCC or at law or in equity, including, without limitation, the right
to (i) apply any property of any Borrower held by Lender to reduce the
Obligations, (ii) foreclose the Liens created under the Security Documents,
(iii) realize upon, take possession of and/or sell any Collateral or
securities

 

 

pledged with or
without judicial process, (iv) exercise all rights and powers with respect
to the Collateral as any Borrower, as applicable, might exercise, (v) collect
and send notices regarding the Collateral, with or without judicial process,
(vi) by its own means or with judicial assistance, enter any premises at which
Collateral and/or pledged securities are located, or render any of the foregoing
unusable or dispose of the Collateral and/or pledged securities on such
premises without any liability for rent, storage, utilities, or other sums, and
no Borrower shall resist or interfere with such action, (vii) at Borrower’s
expense, require that all or any part of the Collateral be assembled and made
available to Lender at any place designated by Lender, (viii) reduce or
otherwise change the Facility Cap, and/or (ix) relinquish or abandon any
Collateral or securities pledged or any Lien thereon.  Notwithstanding any provision of any Loan Document, Lender, in
its sole discretion, shall have the right, at any time that Borrower fails to
do so, and from time to time, without prior notice, to: (i) obtain insurance
covering any of the Collateral to the extent required hereunder; (ii) pay for
the performance of any of the Obligations; (iii) discharge taxes or Liens on
any of the Collateral that are in violation of any Loan document unless
Borrower is in good faith with due diligence by appropriate proceedings
contesting those items; and (iv) pay for the maintenance and preservation of
the Collateral.  Such expenses and
advances shall be added to the Obligations until reimbursed to Lender and shall
be secured by the Collateral, and such payments by Lender shall not be
construed as a waiver by Lender of any Event of Default or any other rights or
remedies of Lender.

 

(b)           Borrower agrees that notice received
by it at least ten (10) calendar days before the time of any intended public
sale, or the time after which any private sale or other disposition of
Collateral is to be made, shall be deemed to be reasonable notice of such sale
or other disposition.  If permitted by
applicable law, any perishable Collateral which threatens to speedily decline
in value or which is sold on a recognized market may be sold immediately by
Lender without prior notice to Borrower. 
At any sale or disposition of Collateral or securities pledged, Lender
may (to the extent permitted by applicable law) purchase all or any part thereof
free from any right of redemption by any Borrower which right is hereby waived
and released.  Borrower covenants and
agrees not to, and not to permit or cause any of its Subsidiaries to, interfere
with or impose any obstacle to Lender’s exercise of its rights and remedies
with respect to the Collateral.  Lender,
in dealing with or disposing of the Collateral or any part thereof, shall not
be required to give priority or preference to any item of Collateral or otherwise
to marshal assets or to take possession or sell any Collateral with judicial
process.

 

9.2          Application of Proceeds

 

In addition to any other rights, options and remedies Lender has under
the Loan Documents, the UCC, at law or in equity, all dividends, interest,
rents, issues, profits, fees, revenues, income and other proceeds collected or
received from collecting, holding, managing, renting, selling, or otherwise
disposing of all or any part of the Collateral or any proceeds thereof upon
exercise of its remedies hereunder shall be applied in the following order of
priority:  (i) first, to the
payment of all costs and expenses of such collection, storage, lease, holding,
operation, management, sale, disposition or delivery and of conducting
Borrower’s business and of maintenance, repairs, replacements, alterations,
additions and improvements of or to the Collateral, and to the payment of all
sums which Lender may be required or may elect to pay, if any, for taxes,
assessments, insurance and other charges upon the Collateral or any part
thereof, and all other payments that Lender may be required or authorized to
make under any provision of this Agreement (including, without limitation, in
each such case, in-house documentation and diligence fees and legal expenses,
search, audit, recording, professional and filing fees and expenses and
reasonable attorneys’ fees and all expenses, liabilities and advances made or
incurred in connection therewith); (ii) second, to the payment of all
Obligations as provided

 

 

herein; (iii) third, to the satisfaction of Indebtedness secured
by any subordinate security interest of record in the Collateral if written
notification of demand therefor is received before distribution of the proceeds
is completed, provided, that, if requested by Lender, the holder of a
subordinate security interest shall furnish reasonable proof of its interest,
and unless it does so, Lender need not address its claims; and (iv) fourth,
to the payment of any surplus then remaining to Borrower, unless otherwise
provided by law or directed by a court of competent jurisdiction, provided
that Borrower shall be liable for any deficiency if such proceeds are
insufficient to satisfy the Obligations or any of the other items referred to
in this section.

 

9.3          Intentionally Deleted

 

9.4          Rights and Remedies not Exclusive

 

Lender shall have
the right in its sole discretion to determine which rights, Liens and/or
remedies Lender may at any time pursue, relinquish, subordinate or modify, and
such determination will not in any way modify or affect any of Lender’s rights,
Liens or remedies under any Loan Document, applicable law or equity.  The enumeration of any rights and remedies
in any Loan Document is not intended to be exhaustive, and all rights and
remedies of Lender described in any Loan Document are cumulative and are not
alternative to or exclusive of any other rights or remedies which Lender
otherwise may have.  The partial or
complete exercise of any right or remedy shall not preclude any other further
exercise of such or any other right or remedy.

 

X.            WAIVERS
AND JUDICIAL PROCEEDINGS

 

10.1        Waivers

 

Except as
expressly provided for herein, Borrower hereby waives setoff, counterclaim,
demand, presentment, protest, all defenses with respect to any and all
instruments and all notices and demands of any description, and the pleading of
any statute of limitations as a defense to any demand under any Loan
Document.  Borrower hereby waives any
and all defenses and counterclaims it may have or could interpose in any action
or procedure brought by Lender to obtain an order of court recognizing the
assignment of, or Lien of Lender in and to, any Collateral.  With respect to any action hereunder, Lender conclusively may rely
upon, and shall incur no liability to Borrower in acting upon, any request or
other communication that Lender reasonably believes to have been given or made
by a person authorized on Borrower’s behalf, whether or not such person is
listed on the incumbency certificate delivered pursuant to Section 4.1
hereof.  In each such case, Borrower hereby waives the right to dispute
Lender’s action based upon such request or other communication, absent manifest
error.

 

10.2        Delay; No Waiver of Defaults

 

No course of
action or dealing, renewal, release or extension of any provision of any Loan
Document, or single or partial exercise of any such provision, or delay,
failure or omission on Lender’s part in enforcing any such provision shall
affect the liability of any Borrower or Guarantor or operate as a waiver of
such provision or affect the liability of any Borrower or Guarantor or preclude
any other or further exercise of such provision.  No waiver by any party to any Loan Document of any one or more
defaults by any other party in the performance of any of the provisions of any
Loan Document shall operate or be construed as a waiver of any future default,
whether of a like or different nature, and each such waiver shall be limited
solely to the express terms and provisions of such waiver.  Notwithstanding any other

 

 

provision of any
Loan Document, by completing the Closing under this Agreement and/or by making
Advances, Lender does not waive any breach of any representation or warranty
under any Loan Document, and all of Lender’s claims and rights resulting from
any such breach or misrepresentation are specifically reserved.

 

10.3        Jury Waiver

 

EACH PARTY TO THIS
AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION ARISING UNDER THE LOAN DOCUMENTS OR IN ANY WAY CONNECTED WITH
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT TO THE LOAN DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED THEREBY, WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.  EACH PARTY HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF
THE PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.

 

10.4                        Cooperation in Discovery and Litigation

 

In any litigation,
arbitration or other dispute resolution proceeding relating to any Loan
Document, Borrower waives any and all defenses, objections and counterclaims it
may have or could interpose with respect to (i) any of its directors, officers,
employees or agents being deemed to be employees or managing agents of Borrower
for purposes of all applicable law or court rules regarding the production of
witnesses by notice for testimony (whether in a deposition, at trial or
otherwise), (ii) Lender’s counsel examining any such individuals as if under
cross-examination and using any discovery deposition of any of them as if it
were an evidence deposition, and/or (iii) using all commercially reasonable
efforts to produce in any such dispute resolution proceeding, at the time and
in the manner requested by Lender, all Persons, documents (whether in tangible,
electronic or other form) and/or other things under its control and relating to
the dispute.

 

XI.          EFFECTIVE
DATE AND TERMINATION

 

11.1        Termination and Effective Date Thereof

 

(a)           Subject to Lender’s right to
terminate and cease making Advances upon or after any Event of Default, this
Agreement shall continue in full force and effect until the full performance
and indefeasible payment in cash of all Obligations, unless terminated sooner
as provided in this Section 11.1. 
Borrower may terminate this Agreement at any time upon not less than
sixty (60) calendar days’ prior written notice to Lender and upon full
performance and indefeasible payment in full in cash of all Obligations on or
prior to such 60th calendar day after Receipt by Lender of such
written notice.  All of the Obligations
shall be immediately due and payable upon any such termination on the
termination date stated in any notice of termination (the “Termination Date”); provided that,
notwithstanding any other provision of any Loan Document, the Termination Date
shall be effective no earlier than the first Business Day of the month
following the expiration of the sixty (60) calendar days’ prior written notice
period.  Notwithstanding any other
provision of any Loan Document, no termination of this Agreement shall affect
Lender’s rights or any of the Obligations existing as of the effective date of
such termination, and the provisions of the Loan Documents shall continue to be
fully operative until the Obligations have been fully performed and
indefeasibly paid in cash in full.  The
Liens granted to Lender under the Security Documents and the financing
statements filed pursuant thereto and the rights and powers of Lender shall
continue in full force and effect notwithstanding

 

 

the fact that
Borrower’s borrowings hereunder may from time to time be in a zero or credit
position until all of the Obligations have been fully performed and
indefeasibly paid in full in cash.

 

(b)           If (i) Borrower terminates the
Revolving Facility under this Section 11.1, (ii) Borrower
voluntarily or involuntarily repays the Obligations (other than reductions to
zero of the outstanding balance of the Revolving Facility resulting from the
ordinary course operation of the provisions of Section 2.5), whether by
virtue of Lender’s exercising its right of set off or otherwise; (iii)  the Obligations are accelerated by Lender
(each of the events described in (i), (ii) and (iii) above being hereinafter
referred to as, a “Revolver Termination”), then at the
effective date of any such Revolver Termination, Borrower shall pay Lender (in
addition to the then outstanding principal, accrued interest  and other Obligations relating to the
Revolving Facility pursuant to the terms of this Agreement and any other Loan
Document), to compensate Lender for the loss of bargain and not as a penalty,
an amount equal to the applicable Minimum Termination Fee.

 

11.2        Survival

 

All obligations,
covenants, agreements, representations, warranties, waivers and indemnities
made by Borrower in any Loan Document shall survive the execution and delivery
of the Loan Documents, the Closing, the making of the Advances and any
termination of this Agreement until all Obligations are fully performed and
indefeasibly paid in full in cash.  The
obligations and provisions of Sections 3.4, 3.5, 6.13, 10.1, 10.3, 11.1,
11.2, 12.4, 12.7 and 12.10 shall survive termination of the Loan Documents
and any payment, in full or in part, of the Obligations.

 

XII.         MISCELLANEOUS

 

12.1        Governing Law; Jurisdiction; Service of
Process; Venue

 

The Loan Documents
shall be governed by and construed in accordance with the internal laws of the
State of Maryland without giving effect to its choice of law provisions.  Any judicial proceeding against Borrower
with respect to the Obligations, any Loan Document or any related agreement may
be brought in any federal or state court of competent jurisdiction located in
the State of Maryland.  By execution and
delivery of each Loan Document to which it is a party, Borrower (i) accepts the
non-exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby, (ii) waives personal service of
process, (iii) agrees that service of process upon it may be made by certified
or registered mail, return receipt requested, pursuant to Section 12.5
hereof, (iv) waives any objection to jurisdiction and venue of any action
instituted hereunder and agrees not to assert any defense based on lack of
jurisdiction, venue or convenience,
and (v) agrees that this loan was made in Maryland, that Lender has accepted in
Maryland Loan Documents executed by Borrower and has disbursed Advances under
the Loan Documents in Maryland. 
Nothing shall affect the right of Lender to serve process in any manner
permitted by law or shall limit the right of Lender to bring proceedings
against Borrower in the courts of any other jurisdiction having
jurisdiction.  Any judicial proceedings
against Lender involving, directly or indirectly, the Obligations, any Loan
Document or any related agreement shall be brought only in a federal or state
court located in the State of Maryland. 
All parties acknowledge that they participated in the negotiation and
drafting of this Agreement and that, accordingly, no party shall move or
petition a court construing this Agreement to construe it more stringently
against one party than against any other.

 

 

12.2        Successors and Assigns; Participations;
New Lenders

 

The Loan Documents
shall inure to the benefit of Lender, Transferees and all future holders of any
Note, the Obligations and/or any of the Collateral, and each of their
respective successors and assigns.  Each
Loan Document shall be binding upon the Persons’ other than Lender that are
parties thereto and their respective successors and assigns, and no such Person
may assign, delegate or transfer any Loan Document or any of its rights or
obligations thereunder without the prior written consent of Lender.  No rights are intended to be created under
any Loan Document for the benefit of any third party donee, creditor or
incidental beneficiary of any Borrower or Guarantor.  Nothing contained in any Loan Document shall be construed as a
delegation to Lender of any other Person’s duty of performance.  BORROWER ACKNOWLEDGES AND AGREES THAT LENDER
AT ANY TIME AND FROM TIME TO TIME MAY (I) DIVIDE AND RESTATE ANY NOTE, AND/OR
(II) SELL, ASSIGN OR GRANT PARTICIPATING INTERESTS IN OR TRANSFER ALL OR ANY
PART OF ITS RIGHTS OR OBLIGATIONS UNDER ANY LOAN DOCUMENT, NOTE, THE
OBLIGATIONS AND/OR THE COLLATERAL TO OTHER PERSONS (EACH SUCH TRANSFEREE,
ASSIGNEE OR PURCHASER, A “TRANSFEREE”).  Each Transferee shall have all of the rights and benefits with
respect to the Obligations, Notes, Collateral and/or Loan Documents held by it
as fully as if the original holder thereof, and either Lender or any Transferee
may be designated as the sole agent to manage the transactions and obligations
contemplated therein; provided that, notwithstanding anything to the
contrary in any Loan Document, Borrower shall not be obligated to pay under
this Agreement to any Transferee any sum in excess of the sum which Borrower
would have been obligated to pay to Lender had such participation not been
effected.  Notwithstanding any other
provision of any Loan Document, Lender may disclose to any Transferee all
information, reports, financial statements, certificates and documents obtained
under any provision of any Loan Document.

 

12.3        Application of Payments

 

To the extent that
any payment made or received with respect to the Obligations is subsequently
invalidated, determined to be fraudulent or preferential, set aside or required
to be repaid to a trustee, debtor in possession, receiver, custodian or any
other Person under any Debtor Relief Law, common law or equitable cause or any
other law, then the Obligations intended to be satisfied by such payment shall
be revived and shall continue as if such payment had not been received by
Lender.  Any payments with respect to
the Obligations received shall be credited and applied in such manner and order
as Lender shall decide in its Permitted Discretion.

 

12.4        Indemnity

 

Each Borrower
jointly and severally shall indemnify Lender, its Affiliates and its and their
respective managers, members, officers, employees, Affiliates, agents,
representatives, successors, assigns, accountants and attorneys (collectively,
the “Indemnified
Persons”) from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
reasonable fees and disbursements of counsel and in-house documentation and
diligence fees and legal expenses) which may be imposed on, incurred by or
asserted against any Indemnified Person with respect to or arising out of, or
in any litigation, proceeding or investigation instituted or conducted by any
Person with respect to any aspect of, or any transaction contemplated by or
referred to in, or any matter related to, any Loan Document or any agreement,
document or transaction contemplated thereby, whether or not such Indemnified
Person is a party thereto, except to the extent that any of the foregoing
arises out of the gross

 

 

negligence or
willful misconduct of such Indemnified Person. 
If any Indemnified Person uses in-house counsel for any purpose for
which any Borrower is responsible to pay or indemnify, each Borrower expressly
agrees that its indemnification obligations include reasonable charges for such
work commensurate with the fees that would otherwise be charged by outside
legal counsel selected by such Indemnified Person in its sole discretion for
the work performed.  Lender agrees to
give Borrower reasonable notice of any event of which Lender becomes aware for
which indemnification may be required under this Section 12.4, and
Lender may elect (but is not obligated) to direct the defense thereof, provided
that the selection of counsel shall be subject to Borrower’s consent, which
consent shall not be unreasonably withheld or delayed.  Any Indemnified Person may, in its
reasonable discretion, take such actions as it deems necessary and appropriate
to investigate, defend or settle any event or take other remedial or corrective
actions with respect thereto as may be necessary for the protection of such
Indemnified Person or the Collateral. 
Notwithstanding the foregoing, if any insurer agrees to undertake the
defense of an event (an “Insured Event”), Lender agrees not to
exercise its right to select counsel to defend the event if that would cause
any Borrower’s insurer to deny coverage; provided, however, that
Lender reserves the right to retain counsel to represent any Indemnified Person
with respect to an Insured Event at Lender’s sole cost and expense.  To the extent that Lender obtains recovery
from a third party other than an Indemnified Person of any of the amounts that any
Borrower has paid to Lender pursuant to the indemnity set forth in this Section
12.4, then Lender shall promptly pay to such Borrower the amount of such
recovery.

 

12.5        Notice

 

Any notice or
request under any Loan Document shall be given to any party to this Agreement
at such party’s address set forth beneath its signature on the signature page
to this Agreement, or at such other address as such party may hereafter specify
in a notice given in the manner required under this Section 12.5.  Any notice or request hereunder shall be
given only by, and shall be deemed to have been received upon (each, a “Receipt”):  (i) registered or certified mail, return receipt requested,
on the date on which received as indicated in such return receipt,
(ii) delivery by a nationally recognized overnight courier, one (1)
Business Day after deposit with such courier, or (iii) facsimile transmission,
upon telephone or further electronic communication from the recipient
acknowledging receipt (whether automatic or manual from recipient), as
applicable.

 

12.6        Severability; Captions; Counterparts;
Facsimile Signatures

 

If any provision
of any Loan Document is adjudicated to be invalid under applicable laws or
regulations, such provision shall be inapplicable to the extent of such
invalidity without affecting the validity or enforceability of the remainder of
the Loan Documents which shall be given effect so far as possible.  The captions in the Loan Documents are
intended for convenience and reference only and shall not affect the meaning or
interpretation of the Loan Documents. 
The Loan Documents may be executed in one or more counterparts (which
taken together, as applicable, shall constitute one and the same instrument)
and by facsimile transmission, which facsimile signatures shall be considered
original executed counterparts.  Each
party to this Agreement agrees that it will be bound by its own facsimile
signature and that it accepts the facsimile signature of each other party.

 

12.7        Expenses

 

Borrower shall
pay, whether or not the Closing occurs, all costs and expenses incurred by
Lender and/or its Affiliates, including, without limitation, documentation and

 

 

diligence fees and
expenses, all search, audit, appraisal, recording, professional and filing fees
and expenses and all other out-of-pocket charges and expenses (including,
without limitation, UCC and judgment and tax lien searches and UCC filings and
fees for post-Closing UCC and judgment and tax lien searches and wire transfer
fees and audit expenses), and reasonable attorneys’ fees and expenses, (i) in
any effort to enforce, protect or collect payment of any Obligation or to
enforce any Loan Document or any related agreement, document or instrument,
(ii) in connection with entering into, negotiating, preparing, reviewing and
executing the Loan Documents and/or any related agreements, documents or
instruments, (iii) arising in any way out of administration of the Obligations,
(iv) in connection with instituting, maintaining, preserving, enforcing and/or
foreclosing on Lender’s Liens in any of the Collateral or securities pledged
under the Loan Documents, whether through judicial proceedings or otherwise,
(v) in defending or prosecuting any actions, claims or proceedings arising out
of or relating to Lender’s transactions with Borrower, (vi) in seeking, obtaining
or receiving any advice with respect to its rights and obligations under any
Loan Document and any related agreement, document or instrument, and/or (vii)
in connection with any modification, restatement, supplement, amendment, waiver
or extension of any Loan Document and/or any related agreement, document or
instrument.  All of the foregoing shall
be charged to Borrower’s account and shall be part of the Obligations.  If Lender or any of its Affiliates uses
in-house counsel for any purpose under any Loan Document for which Borrower is
responsible to pay or indemnify, Borrower expressly agrees that its Obligations
include reasonable charges for such work commensurate with the fees that would
otherwise be charged by outside legal counsel selected by Lender or such
Affiliate in its sole discretion for the work performed.  Without limiting the foregoing, Borrower
shall pay all taxes (other than taxes based upon or measured by Lender’s income
or revenues or any personal property tax), if any, in connection with the
issuance of any Note and the filing and/or recording of any documents and/or
financing statements.

 

12.8        Entire Agreement

 

This Agreement
and the other Loan Documents to which Borrower is a party constitute the entire
agreement between Borrower and Lender with respect to the subject matter hereof
and thereof, and supersede all prior agreements and understandings, if any,
relating to the subject matter hereof or thereof.  Any promises, representations, warranties or guarantees not
herein contained and hereinafter made shall have no force and effect unless in
writing signed by Borrower and Lender. 
No provision of this Agreement may be changed, modified, amended,
restated, waived, supplemented, discharged, canceled or terminated orally or by
any course of dealing or in any other manner other than by an agreement in
writing signed by Lender and Borrower. 
Each party hereto acknowledges that it has been advised by counsel in
connection with the negotiation and execution of this Agreement and is not
relying upon oral representations or statements inconsistent with the terms and
provisions hereof.

 

12.9        Lender Approvals

 

Unless expressly
provided herein to the contrary, any approval, consent, waiver or satisfaction
of Lender with respect to any matter that is subject of any Loan Document may
be granted or withheld by Lender in its sole and absolute discretion.

 

12.10      Publicity

 

Borrower hereby
agrees that Lender or any Affiliate of Lender may (i) disclose a general
description of transactions arising under the Loan Documents for advertising,
marketing

 

 

or other similar
purposes and (ii) use Borrower’s or any Guarantor’s name, logo or other indicia
germane to such party in connection with such advertising, marketing or other
similar purposes.

 

12.11  
Agent

 

Lender and its successors and assigns hereby (i) designate and appoint
CapitalSource Finance LLC, a Delaware limited liability company, and its
successors and assigns (“CapitalSource”), to act as agent for Lender and its
successors and assigns under this Agreement and all other Loan Documents, (ii)
irrevocably authorize CapitalSource to take all actions on its behalf under the
provision of this Loan Agreement and all other Loan Documents, and (iii) to
exercise all such powers and rights, and to perform all such duties and
obligations hereunder and thereunder.  CapitalSource, on behalf of Lender,
shall hold all Collateral, payments of principal and interest, fees, charges
and collections received pursuant to this Agreement and all other Loan
Documents.  Borrower acknowledges that Lender and its successors and
assigns transfer and assign to CapitalSource the right to act as Lender’s agent
to enforce all rights and perform all obligations of Lender contained herein
and in all of the other Loan Documents.  Borrower shall within ten (10)
Business Days after Lender’s reasonable request, take such further actions,
obtain such consents and approvals and duly execute and deliver such further
agreements, amendments, assignments, instructions or documents as Lender may request
to evidence the appointment and designation of CapitalSource as agent for
Lender and other financial institutions from time to time party hereto and to
the other Loan Documents.

 

12.12  
Confidentiality/ Restrictions on Securities Transactions

 

Lender agrees to keep all non-public information confidential and not
to disclose or make available any such information to any third parties other
than to parties who agree to keep it confidential. 
Lender acknowledges that the United States securities laws prohibit any
person who has material non-public information about a company from purchasing
or selling securities of such company or from communicating such information to
any other person under circumstances in which it is reasonably foreseeable that
such person is likely to purchase or sell securities.  Lender will not
purchase or sell securities of Borrower during any period when Lender possesses
material non-public information.

 

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

 

 

IN WITNESS
WHEREOF, each of the parties has duly executed this Revolving Credit and
Security Agreement as of the date first written above.

 

 

	
   

  	
  BOSTON BIOMEDICA,
  INC.

  	
   

  
	
   

  	
  BBI BIOTECH
  RESEARCH LABORATORIES, INC.

  	
   

  
	
   

  	
  BBI SOURCE
  SCIENTIFIC, INC.

  	
   

  
	
   

  	
  BBI BIOSEQ, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kevin W. Quinlan

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Kevin W. Quinlan

  	
   

  	
   

  
	
   

  	
  Its:

  	
  President & Chief Operating Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for Notices:

  	
   

  
	
   

  	
  Boston Biomedica, Inc.

  	
   

  
	
   

  	
  375 West Street

  	
   

  
	
   

  	
  West Bridgewater, MN 02379

  	
   

  
	
   

  	
  Attention:

  	
  President

  	
   

  
	
   

  	
  Telephone:

  	
  (508) 580-1980

  	
   

  
	
   

  	
  FAX:

  	
  (508) 580-1110

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CAPITALSOURCE
  FINANCE LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven A. Museles

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Steven A. Museles

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Secretary

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for Notices:

  	
   

  
	
   

  	
  CapitalSource Finance LLC

  	
   

  
	
   

  	
  4445 Willard Avenue, 12th Floor

  	
   

  
	
   

  	
  Chevy Chase, MD  20815

  	
   

  
	
   

  	
  Attention:  Healthcare Finance
  Group, Portfolio Manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Telephone:  (301) 841-2700

  	
   

  
	
   

  	
  FAX:  (301) 841-2340

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